Jeffrey MacKie-Mason on Gold Open Access

I've written before about the interesting analysis behind the Max Planck Society's initiative to "flip" the academic publishing system from one based on subscriptions to one based on "gold" open access (article processing charges or APCs). They are asking institutions to sign an "Expression of Interest in the Large-scale Implementation of Open Access to Scholarly Journals". They now have 49 signatures, primarily from European institutions.

The US library community appears generally skeptical or opposed, except for the economist and Librarian of UC Berkeley, Jefferey MacKie-Mason. In response to what he describes as the Association of Research Libraries':

one-sided briefing paper in advance of a discussion during the spring ARL business meeting on 27 January. (I say “one-sided” because support of gold OA was presented, tepidly, in just nine words — “the overall aim of this initiative is highly laudable” — followed by nearly a page of single spaced “concerns and criticisms”.)

he posted Economic Thoughts About Gold Open Access, a detailed and well-argued defense of the initiative. It is well worth reading. Below the fold, some commentary.

He summarizes US research library community's concerns thus:

• Will gold OA further strengthen the monopoly scholarly publishing firms?
• Will there be a change in the current market model?
• Will research-production-intensive institutions be made worse off?
• Will gold OA hurt under-resourced institutions?
• Will flipping to gold OA take too long and cost too much?

He starts by pointing out that although there isn't a monopoly in scholarly publishing there is very significant rent extraction:

articles that people want to read have scarcity value — you can only get them from one publisher, generally (this is why publishers care so much about obtaining and protecting copyrights). Whoever has copyright on an article that readers want to read can charge a scarcity rent (price > cost).

The market for publishing has evolved so that a small number of organizations control copyright on the most valuable articles (e.g., Elsevier, Springer, Wiley, Taylor & Francis, the American Chemical Society). They are able to charge prices well above incremental and average cost, so they are are earning above-competitive profit margins. In recent years the profit margins of the largest for-profit scholarly publishers have been around 35% or higher; a competitive, risk-adjusted profit margin is probably closer to about 10%. ... So, on the order of 25% of what we’re paying is not for the cost of publishing value added, but for excess (above-competitive, or monopolistic) profit.

This rent amounts to several billion dollars per year, which the incumbent publishers will fight tooth and nail to preserve. They have powerful weapons with which to do so, among which are co-opting librarians with slots on "advisory boards", and co-opting faculty with editorial board positions (apparently the care and feeding of the editorial board is the largest single cost at some journals).

MacKie-Mason's analysis of the sources of the publishers' ability to extract rent is acute:

1. They have journals that have a reputation for prestige, and so authors want to submit their articles to be published in those journals, rather than in journals published by less monopolistic organizations.
2. They have many such journals, which they can sell in “big deal” bundles that make it very difficult for purchasers (mostly libraries) to put competitive pressure on the publishers by dropping subscriptions to their weaker journals (that is, those for which there are reasonably good substitutes).
3. (This is a big one, and will come back below.) The decision to commit resources to purchase a journal is for the most part made by someone different (usually a librarian) than the decision about where to submit an article for publication (made by the author). Even if authors realize in the abstract that by submitting to publishers that charge monopoly prices they are reinforcing the power those publishers have, which results in their university or research lab having to spend too much on subscriptions, we have a classic collective action problem: the decision of each individual author about where to publish does not directly affect the amount the author’s institution spends on subscriptions, but does affect his or her readership and prestige, so authors (for the most part) quite rationally ignore the monopoly power of the publishers to whom they submit.

He argues that these factors are greatly diminished in a gold open access world:

When subscription purchasing decisions are made at the level of the journal (bundle of articles) — and increasingly the “big deal” (bundle of journals) — the only possibility for competition is between journals or bundles of journals, and as I pointed out, different articles published in different journals are not very good substitutes for each other. But in a gold OA world there is competition at the level of the article submission, and before the article is accepted for publication, multiple journals can be very good substitutes for each other (for example, an economist generally gets as much readership and prestige whether her article is published in the American Economic Review, the Journal of Political Economy, or the Quarterly Journal of Economics).

Of course, this mechanism only works if the author's choice for a more expensive APC diverts resources from other uses the author values. To the extent that their institution dedicates funds to APCs and thus insulates the author from the consequences of their choice, they disable the mechanism. MacKie-Mason somewhat fudges this aspect:

campuses might offer only a fixed reimbursement, equal say to a reasonable estimate of the current resource cost (not price) of publishing an article — today around, say, $2000 — and if the author wants to publish in a journal with an above-competitive (monopolistic) APC she will have to come up with additional funds herself. (An elegant alternative that may seem less harsh to authors, suggested to me by Mark McCabe via his collaborator Mackenzie Smith, is to give authors a somewhat higher amount — say, average cost plus $1000 — per article, and let the author bank the difference between that amount and the APC in a research account.)

$1000 is not much compared to the perceived difference in value to an author of different journals. The money has to come from somewhere; the only place it can is from library subscription budgets:

central campuses could reduce the budgets of libraries by the amount that we save by not having to pay for journal subscriptions.

and, importantly, these funds would have to become discretionary funds that authors could spend whatever they needed. The publishers need this not to happen, which is why they want to keep subscriptions stable and refund APCs to libraries:

Some advocates for gold OA argue that libraries — especially consortia — will be able to negotiate “offsets”, that is, reducations in subscription payments to offset the amount of revenue the publishers collect in APCs. There has been some progress in this regard, for example in the UK, Austria, and the Netherlands.

I suspect that offsets will only partially cover the costs of transition to a gold OA world. Even where progress is being made, offset savings are lagging behind growing APC payments. And my economic arguments above suggest why offsets are unlikely to fully finance the costs of transition: the dominant publishers have substantial market power, and they are going to use that power to resist the transition to gold OA, trying to make sure we (research-producing institutions) find the transition to be costly.

The priority for both sides of the current system is to prevent the funds currently flowing through their hands from being diverted to other, less worthy hands. This makes what MacKie-Mason refers to as "merely a problem of the distribution of scholarly communication funds" extremely difficult.

It is important to note that the Max Planck initiative is different from the "hybrid" gold open access model behind these offsets. The publishers are happy with subscription journals in which, for an APC, authors can make their work open access. They can refund (later) these APCs but they don't lose the subscription income. The Max Planck proposal is that, instead of article-by-article open access, journals would "flip" to open access. No subscription, just APCs. Neither publishers nor libraries like this, it carries much higher risks for both.