How publishers feather their nests on open access to public money

Not a peep from Finch as scholarly journal firms fly off to tax havens and grow ever more profitable. Simon Lilley does the sorry sums

November 1, 2012

Credit: Miles Cole

The debate over open access to research has dominated headlines in Times Higher Education and elsewhere. But despite the focus on the issue, including the review led by Dame Janet Finch that reported in June, one crucial question has not yet been fully addressed: how have we reached a situation in which university libraries up and down the country are cancelling journal subscriptions?

Clearly it has to do with the rapidly rising price of academic journals, but why do academic publishers feel the need to charge such exorbitant prices for the results of research that was publicly funded in the first place?

The big publishing houses dominating the industry have been noticeably coy over their costs and unforthcoming with information about their business models. But new research at the University of Leicester School of Management casts some light on the issue. The study, which analyses published balance sheets, confirms that academic publishing is a veritable gold mine.

Moreover, it is also an industry that may well attract the attention of Danny Alexander, the chief secretary to the Treasury, who has pledged to wage war on tax avoidance.

Informa plc, for example, the multinational that owns the Taylor & Francis and Routledge imprints, became a Jersey company in 2009, formally domiciled in Zug, the canton with the lowest tax rates in Switzerland.

Of course, there may have been compelling commercial reasons for the company to spend, according to its accounts, £4.3 million on the move, largely on relocating its senior executives, but its shareholders certainly benefited from a reduction in the company’s tax bill.

So how much do academic publishers make from their journals? It is a crucial issue that appears not to have been explored by the Finch working group on open access.

No doubt the several publishers in the group were pleased with the unambiguous statement buried in its 140-page report: “Publishers - whether commercial or not-for-profit - should be able to generate revenues to meet the costs of those services they provide that are valued by researchers and their readers.”

Few would disagree that commercial publishers should be able to cover their costs and reap some profit from their investment. The figures in their accounts, however, give pause for thought. We found companies enjoying profit margins as high as 53 per cent on academic publishing. That compares with 6.9 per cent for electricity utilities, 5.2 per cent for food suppliers and 2.5 per cent for newspapers.

More than half of Informa’s total annual operating profit was derived from academic publishing - £85.8 million in 2010.

Looking further into the figures, it appears that academic publishing produced a net operating profit margin for the company of more than per cent, compared with less than 5 per cent derived from its “events” division.

Comparison with other publishers’ public accounts suggests that journals themselves provide a gross profit margin of around 70 per cent.

This is all very relevant to the debate on open access, not least because the Finch Review’s central recommendation is that even more public funds should be handed to the publishers. It suggests that the amount the state pays for research should increase to allow researchers to pay for dissemination of their work. This in essence relieves the publishers of the need to bother to market their journals - they will get paid whether or not they have any subscribers.

Another big flaw here is that only a small proportion of published research is funded directly through specific government grants. Much more is funded by university cross-subsidisation of income streams. Surpluses earned through teaching are being used to free up staff for research. Should students paying tuition fees of as much as £9,000 a year be the ones to help relieve the publishers of the cost of research dissemination?

The Finch report is also weak on detail about the costs incurred by publishers. As is often pointed out, papers are submitted by researchers free of charge to journals who select those to send out for peer review, and the reviewers - academics working in the field - are not paid for their time in the vast majority of cases. Each journal has an editor, usually working for nothing and receiving a pitifully small sum to cover administration costs.

So what should be done? Our view is that publishers should be more open about their balance sheets and agree to bring down subscription prices to a more acceptable level. If they refuse, academics should boycott their journals and start up alternative and more affordable ones.

This is already happening in the US: Harvard University recently told faculty members to make their research freely available and to consider resigning from publications that keep articles behind paywalls.

Affordability has a major impact on accessibility. Before the debate on open access goes any further, the publishing houses must come clean about their costs and the huge subscription rises that are forcing universities to cut down on what they buy.

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