Gold Open Access Mandates May Be Associated with Publisher Revenue Losses and Library Cost Increases

A recent analysis outlining alternative scenarios for the publishing market development in the United Kingdom (UK) suggests a strong likelihood of lose-lose outcomes for publishers and universities for mandate-driven transitions to Open Access.

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According to a report, published by FTI Consulting in February 2021, the implementation of the Open Access policy proposed by the UK Research and Innovation (UKRI) body to take effect after 2021 is likely to have a significant negative impact on UK journal publishers in the following 5-year period, such as estimated yearly industry-wise losses of 292 million GBP. The UKRI Open Access policy is also expected to make scholarly monograph publishing financially unsustainable. Furthermore, per this report, declining revenues and mounting losses shall pose barriers to maintaining quality control mechanisms, as part of journal and book publishing, with a particularly deleterious effect on smaller publishers. In other words, for the UK, a rapid transition to subscription-free Open Access models, e.g., Gold Open Access, can be expected to be associated with export revenue reductions and market positioning deterioration for locally based journals (FTI Consulting, 2021, p. 6).

Conversely, for UK university libraries this Open Access policy was evaluated to entail annual expenditure increases of around 135 million GBP, which indicates that, on average, for the publishing industry the expected yearly losses to subscription models can be pegged at circa 327 million GBP that Open Access revenues can likely offset to the extent of about 30% only. This disbalance between industry losses and university expenses, also leading to the expected lose-lose situation, primarily derives from the continued dominance of subscription models in the journal publishing market worldwide in both absolute and relative terms. The toll-protected sector has demonstrated a sustained output of more than 2 million articles and a relative decline from 89% to 79% of the total output between 2012 and 2019 on the background of a rapid growth of the Open Access sector, across its models, from 10% to 21% of the global output for this period with a slower-paced increase in corresponding absolute numbers over this period and a decline from 22% to 21% between 2018 and 2019 (FTI Consulting, 2021, p. 31).

Furthermore, for UK publishers Open Access mandates can be associated not only with a depressed or stagnant demand for their subscription-based products but also increased costs that their adoption of Open Access models will likely involve internally, to the coverage of which only a limited group of high-output universities will be actively contributing through framework agreements that can also entail flat-rate pricing and cost caps. As around 80% of scholarly content continues to be in closed access, university libraries can also be expected to be renewing the absolute majority of their subscription agreements. This can, thus, involve cost inefficiencies for the library sector regardless of the level of the output that university-affiliated scholars show. This is compounded by the expected decline of 8% in research income that UK higher education institutions can be receiving, as the European Union funding either ceases or decreases post-Brexit (FTI Consulting, 2021, p. 19).

Additionally, whereas the Open Access output of UK researchers is projected to increase in the coming years, for local journals this will likely play out as a zero-sum game between their subscription and Open Access revenue streams eating into each other with a limited growth in overall revenue levels in absolute terms. Past data show that, whereas the share of subscription and Open Access revenues of publishers has remained at 87% between 2016 and 2019, the growth in Open Access income share from 10% to 14% for this period has come at the relative expense of subscription revenues (FTI Consulting, 2021, pp. 50, 52).

By Pablo Markin


Reference

FTI Consulting. (2021). Economic Impact of UKRI Open Access Policy. Research Report, 17 February 2021. London, UK: FTI Consulting LLP. Retrieved from https://www.publishers.org.uk/wp-content/uploads/2021/02/FTI-Report-for-Publishers-Association-1.pdf.

 


Featured Image Credits: Harewood House, The Old Library, Harewood, England, UK, June 29, 2017 | © Courtesy of Michael D. Beckwith/Flickr.

Pablo Markin

Community Manager, Open Research Community

Comments

Go to the profile of Pablo Markin
6 months ago

In the context of the report cited in this blog post, it is important to mention that it has been met with refutations. For instance, the editorial team of PLOS has responded to this report by arguing that Open Access publishing has significant positive effects on associated economic sectors, such as those related to technology, innovation and research: https://theplosblog.plos.org/2021/03/open-response-to-fti-consulting-report/. Whereas it bears mentioning that, either positive or negative, association is not causation and what holds for industries may not necessarily hold for firms or organizations, the larger point the post by the PLOS team makes that Open Access reduces frictions in knowledge-related markets likely holds. On the one hand, access barriers, such as to books and articles, increase transaction costs and can be expected to slow down the speeds of information circulation, which can involve significant, negative, not always quantified economic and social externalities, e.g., the underutilized impact of research results. On the other hand, as the global figures presented in the report also indicate, the rise in the output share of Open Access has already been negatively associated with the output share of closed access for the period 2012-2019. Yet, whereas whether this negative interrelation between these variables also likely translates into a negative impact on publisher profitability can be questioned, given the relatively constant absolute output levels for closed-access articles, which with constant per-unit costs and prices likely leads to non-existent, industry-wide profitability increases, even though it is not necessarily borne out by library-facing subscription cost structures for the researched period, it remains to be empirically established whether the growth in Open Access output can compensate for the lack of growth in the closed-access sector, especially as the former involves greater transparency for pricing arrangements.

Go to the profile of Pablo Markin
6 months ago

Furthermore, as the data- and model-based report by FTI Consulting (2021) has also been criticized by Martin Paul Eve in his February 17, 2021, blog post (https://eve.gd/2021/02/17/the-publishers-associations-impact-assessment-on-oa/), its discussion can be re-framed as follows. Apart from non-crisp, overlapping definitions of different Open Access models and the percentage-wise counter-position of closed access and Open Access, to which it leads (FTI Consulting, 2021, p. 31), and which allows to represent this dynamics in zero-sum game terms, a game theoretical perspective, such as via treating publishers and libraries as collective players operating under Prisoner's dilemma conditions, indicates that, in view of the post above, there is no possibility of the win-win outcome, because, if the lose-lose outcome entails declining revenues for publishers and rising costs for libraries, its opposite situation of rising revenues for publishers and declining costs for libraries is  unlikely to come about. It is mostly since, in the context of publisher-library relations, the revenue streams of publishers are largely derived from budget allocations of libraries, so that in markets where publishers represent the supply side libraries act as the demand side, e.g., for the consumption of research results, and vice versa for the production of research results. In addition, one can argue that the theoretically possible win-lose and lose-win situations, such as of rising revenues for publishers and rising costs for libraries and declining revenues for publishers and declining costs for libraries respectively, by various degrees of cooperation between the players that is likely to be higher for libraries in the first scenario and higher for publishers in the second scenario. In other words, only the lose-lose outcome can be expected to involve comparable degrees of cooperation between the sides. It also seems that in repeated rounds of negotiations, lose-lose outcomes are more likely than either win-lose or lose-win ones, precisely because they do not involve the zero-sum game dynamics. Likewise, once the assumption of constant unit costs and prices is relaxed, which can be described as approximating Open Access situations better than closed access ones for the production of knowledge, in which universities continue to act as the demand side through their funding of article processing charges as product purchases, on the level of individual product-related transactions this can contribute to a transition to plus-sum game dynamics, such as rising sales for publishers and declining article-level costs for libraries. Ultimately, games of this type have also likely led to Open Access becoming the dominant model for scholarly output in the United Kingdom, e.g., over 50%: https://www.researchinformation.info/analysis-opinion/oa-should-be-default.