Tag: elsevier

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A tale of two analysts

Understanding how a process looks from outside our own echo chamber can be useful. It helps to calibrate and sanity check our own responses. It adds an external perspective and at its best can save us from our own overly fixed ideas. In the case of the ongoing Elsevier Boycott we even have a perspective that comes from two opposed directions. The two analyst/brokerage firms Bernstein and Exane Paribas have recently published reports on their view of how recent events should effect the view of those investing in Reed Elsevier. In the weeks following the start of the boycott Elsevier’s stock price dropped – was this an indication of a serious structural problems in the business revealed by the boycott (the Bernstein view) or just a short term over reaction that provides an opportunity for a quick profit (the Exane view)?

Claudio Aspesi from Bernstein has been negative on Elsevier stock for sometime [see Stephen Curry’s post for links and the most recent report], citing the structural problem that the company is stuck in a cycle of publishing more, losing subscriptions, charging more, and managing to squeeze out a little more profit for shareholders in each cycle. Aspesi has been stating for some time that this simply can’t go on. He also makes the link between the boycott and a potentially increased willingness of libraries to drop subscriptions or abandon big deals altogether. He is particularly scathing about the response to the boycott arguing that Elsevier is continuing to estrange the researcher community and that this must ultimately be disastrous. In particular the report focuses on the claims management have made of their ability to shift the cost base away from libraries and onto researchers based on “excellent relations with researchers”.

The Exane view on the other hand is that this is a storm in a teacup [summary at John Baez’s G+]. They point to the relatively small number of researchers signing up to the boycott, particularly in the context of the much larger numbers involved in similar pledges in 2001 and 2007. In doing this I feel they are missing the point – that the environment of those boycotts was entirely different both in terms of disciplines and targeting but an objective observer might well view me as biased.

I do however find this report complacent on details – claiming as it does that the “low take-up of this petition is a sign of the scientific community’s improving perception of Elsevier”, an indication of a lack of real data on researcher sentiment. They appear to have bought the Elsevier line on “excellent relations” uncritically – and what I see on the ground is barely suppressed fury that is increasingly boiling over. It also focuses on OA as a threat – not an opportunity – for Elsevier, a view which would certainly lead me to discount their long term views on the company’s stock price. Their judgement for me is brought even further into question by the following:

“In our DCF terminal value, we capture the Open Access risk by assuming the pricing models flip to Gold Open Access with average revenue per article of USD3,000. Even on that assumption, we find value in the shares.”

Pricing the risk at this level is risible. The notion that Elsevier could flip to an author pays model by charging $US3000 an article is absurd. The poor take up of the current Elsevier options and the massive growth of PLoS ONE and clones at half this price sets a clear price point, and one that is likely a high water mark for journal APCs. If there is value in the shares at $3000 then I can’t help but feel there won’t be very much at a likely end point price well below $1000.

However both reports appear to me to fail to recognize one very important aspect of the situation – its volatility. As I understand it these firms make their names by being right when they take positions away from the consensus. Thus they have a tendency to report their views as certainties. In this case I think the situation could swing either way very suddenly. As the Bernstein report notes, the defection of editorial staff from Elsevier journals is the most significant risk. A single board defection from a middle to high ranking journal – or a signal from a major society journal that they will not renew an Elsevier contract – could very easily start a landslide that ends Elsevier’s dominance as the largest research publisher. Equally, nothing much could happen which would certainly likely lead to a short term rally in stock prices. But no-one is in a position to guess how this is going to play out.

In the long term I side with Aspesi – I see nothing in the overall tenor of Elsevier’s position statements that suggests to me that they really understand either the research community, the environment, or how it is changing. Their pricing model for hybrid options seems almost designed to fail. As mandates strengthen it appears the company is likely to continue to fight them rather than adapt. But to accept my analysis you need to be believe my view that the subscription business model is no longer fit for purpose.

What this shows, more than anything else, is that the place where the battle for change will ultimately be fought out is in stock market. While Elsevier continues to tell its shareholders that it can deliver continuing profit growth from scholarly publishing with a subscription business model – it will be trapped into defending that business model against all threats. The Research Works Act is a part of that fight – as will be attempts to block simple and global mandates by funders on researchers in other places. While the shareholders believe that the status quo can continue the senior management of the company is trapped by a legacy mindset. Until shareholders accept that the company needs to take a short-term haircut the real investment required for change seems unlikely. And I don’t meant a few million here or there. I mean a full year’s profits ploughed back into the company over a few years to allow for root and branch change.

The irony seems that large-scale change requires that the investors get spooked. For that to happen something has to go very publicly wrong. The uproar over the support of SOPA and RWA is not, yet, enough to convince the analysts beyond Aspesi that something is seriously wrong. It is an interesting question what would be. My sense is that nothing big enough will come along soon enough and that those structural issues will gradually come into play leading to a long term decline. It may be that we are very near “Peak Elsevier”. Your mileage, of course, may vary.

In case it is not obvious I am not competent to offer financial or investment advice and no-one should view the proceeding as any form of such. 

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The Research Works Act and the breakdown of mutual incomprehension

Man's face screaming/shouting. Stubbly wearing...
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When the history of the Research Works Act, and the reaction against it, is written that history will point at the factors that allowed smart people with significant marketing experience to walk with their eyes wide open into the teeth of a storm that thousands of people would have predicted with complete confidence. That story will detail two utterly incompatible world views of scholarly communication. The interesting thing is that with the benefit of hindsight both will be totally incomprehensible to the observer from five or ten years in the future. It seems worthwhile therefore to try and detail those world views as I understand them.

The scholarly publisher

The publisher world view places them as the owner and guardian of scholarly communications. While publishers recognise that researchers provide the majority of the intellectual property in scholarly communication, their view is that researchers willingly and knowingly gift that property to the publishers in exchange for a set of services that they appreciate and value. In this view everyone is happy as a trade is carried out in which everyone gets what they want. The publisher is free to invest in the service they provide and has the necessary rights to look after and curate the content. The authors are happy because they can obtain the services they require without having to pay cash up front.

Crucial to this world view is a belief that research communication, the process of writing and publishing papers, is separate to the research itself. This is important because otherwise it would be clear that, at least in an ethical sense, that the writing of papers would be work for hire for the funders – and part and parcel of the contract of research. For the publishers the fact that no funding contract specifies that “papers must be published” is the primary evidence of this.

The researcher

The researcher’s perspective is entirely different. Researchers view their outputs as their own property, both the ideas, the physical outputs, and the communications. Within institutions you see this in the uneasy relationship between researchers and research translation and IP exploitation offices. Institutions try to avoid inflaming this issue by ensuring that economic returns on IP go largely to the researcher, at least until there is real money involved. But at that stage the issue is usually fudged as extra investment is required which dilutes ownership. But scratch a researcher who has gone down the exploitation path and then pushed gently aside and you’ll get a feel for the sense of personal ownership involved.

Researchers have a love-hate relationship with papers. Some people enjoy writing them, although I suspect this is rare. I’ve never met any researcher who did anything but hate the process of shepherding a paper through the review process. The service, as provided by the publisher, is viewed with deep suspicion. The resentment that is often expressed by researchers for professional editors is primarily a result of a loss of control over the process for the researcher and a sense of powerlessness at the hands of people they don’t trust. The truth is that researchers actually feel exactly the same resentment for academic editors and reviewers. They just don’t often admit it in public.

So from a researcher’s perspective, they have spent an inordinate amount of effort on a great paper. This is their work, their property. They are now obliged to hand over control of this to people they don’t trust to run a process they are unconvinced by. Somewhere along the line they sign something. Mostly they’re not too sure what that means, but they don’t give it much thought, let alone read it. But the idea that they are making a gift of that property to the publisher is absolute anathema to most researchers.

To be honest researchers don’t care that much about a paper once its out. It caused enough pain and they don’t ever want to see it again. This may change over time if people start to cite it and refer to it in supportive terms but most people won’t really look at a paper again. It’s a line on a CV, a notch on the bedpost. What they do notice is the cost, or lack of access, to other people’s papers. Library budgets are shrinking, subscriptions are being chopped, personal subscriptions don’t seem to be affordable any more.

The first response to this when researchers meet is “why can’t we afford access to our work?” The second is, given the general lack of respect for the work that publishers do, is to start down the process of claiming that they could do it better. Much of the rhetoric around eLife as a journal “led by scientists” is built around this view. And a lot of it is pure arrogance. Researchers neither understand, nor appreciate for the most part, the work of copyediting and curation, layout and presentation. While there are tools today that can do many of these things more cheaply there are very few researchers who could use them effectively.

The result…kaboom!

So the environment that set the scene for the Research Works Act revolt was a combination of simmering resentment amongst researchers for the cost of accessing the literature, combined with a lack of understanding of what it is publishers actually do. The spark that set it off was the publisher rhetoric about ownership of the work. This was always going to happen one day. The mutually incompatible world views could co-exist while there was still enough money to go around. While librarians felt trapped between researchers who demanded access to everything and publishers offering deals that just about meant they could scrape by things could continue.

Fundamentally once publishers started publicly using the term “appropriation of our property” the spark had flown. From the publisher perspective this makes perfect sense. The NIH mandate is a unilateral appropriation of their property. From the researcher perspective it is a system that essentially adds a bit of pressure to do something that they know is right, promote access, without causing them too much additional pain. Researchers feel they ought to be doing something to improve acccess to research output but for the most part they’re not too sure what, because they sure as hell aren’t in a position to change the journals they publish in. That would be (perceived to be) career suicide.

The elephant in the room

But it is of course the funder perspective that we haven’t yet discussed and looking forward, in my view it is the action of funders that will render both the publisher and researcher perspective incomprehensible in ten years time. The NIH view, similar to that of the Wellcome Trust, and indeed every funder I have spoken to, is that research communication is an intrinsic part of the research they fund. Funders take a close interest in the outputs that their research generates. One might say a proprietorial interest because again, there is a strong sense of ownership. The NIH Mandate language expresses this through the grant contract. Researchers are required to grant to the NIH a license to hold a copy of their research work.

In my view it is through research communication that research has outcomes and impact. From the perspective of a funder their main interest is that the research they fund generates those outcomes and impacts. For a mission driven funder the current situation signals one thing and it signals it very strongly. Neither publishers, nor researchers can be trusted to do this properly. What funders will do is move to stronger mandates, more along the Wellcome Trust lines than the NIH lines, and that this will expand. At the end of the day, the funders hold all the cards. Publishers never really did have a business model, they had a public subsidy. The holders of those subsidies can only really draw one conclusion from current events. That they are going to have to be much more active in where they spend it to successfully perform their mission.

The smart funders will work with the pre-existing prejudice of researchers, probably granting copyright and IP rights to the researchers, but placing tighter constraints on the terms of forward licensing. That funders don’t really need the publishers has been made clear by HHMI, Wellcome Trust, and the MPI. Publishing costs are a small proportion of their total expenditure. If necessary they have the resources and will to take that in house. The NIH has taken a similar route though technically implemented in a different way. Other funders will allow these experiments to run, but ultimately they will adopt the approaches that appear to work.

Bottom line: Within ten years all major funders will mandate CC-BY Open Access on publication arising from work they fund immediately on publication. Several major publishers will not survive the transition. A few will and a whole set of new players will spring up to fill the spaces. The next ten years look to be very interesting.

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What would you say to Elsevier?

In a week or so’s time I have been invited to speak as part of a forward planning exercise at Elsevier. To some this may seem like an opportunity to go in for an all guns blazing OA rant or perhaps to plant some incendiary device but I see it more as opportunity to nudge, perhaps cajole, a big player in the area of scholarly publishing in the right direction. After all if we are right about the efficiency gains for authors and readers that will be created by Open Access publication and we are right about the way that web based systems utterly changes the rules of scholarly communication then even an organization of the size of Elsevier has to adapt or wither away. Persuading them to move in right direction because it is in their own interests would be an effective way of speeding up the process of positive change.

My plan is to focus less on the arguments for making more research output Open Access and more on what happens as a greater proportion of those outputs become freely available, something that I see as increasingly inevitable. Where that proportion may finally be is anyone’s guess but it is going to be a much bigger proportion than it is now. What will authors and funders want and need from their publication infrastructure and what are the business opportunities that arise from those. For me these fall into four main themes:

  • Tracking via aggregation. Funders and institutions want more and more to track the outputs of their research investment. Providing tools and functionality that will enable them to automatically aggregate and slice and dice these outputs is a big business opportunity. The data themselves will be free but providing it in the form that people need it rapidly and effectively will add value that they will be prepared to pay for.
  • Speed to publish as a market differentiator. Authors will want their content out and available and being acted on fast. Speed to publication is potentially the biggest remaining area for competition between journals. This is important because there will almost certainly be less journals with greater “quality” or “brand” differentiation. There is a plausible future in which there are only two journals, Nature and PLoS ONE.
  • Data publication, serving, and archival. There may be less journals but there will be much greater diversity of materials being published through a larger number of mechanisms. There are massive opportunities in providing high quality infrastructure and services to funders and institutions to aggregate, publish, and archive the full set of research outputs. I intend to draw heavily on Dorothea Salo‘s wonderful slideset on data publication for this part.
  • Social search. Literature searching is the main area where there are plausible efficiency gains to be made in the current scholarly publications cycle. According to the Research Information Network‘s model of costs search accounts for a very significant proportion of the non-research costs of  publishing. Building the personal networks (Bill Hooker‘s, Distributed Wetware Online Information Filter [down in the comments] or DWOIF) that make this feasible may well be the new research skill of the 21st century. Tools that make this work effectively are going to be very popular. What will they look like?

But what have I missed? What (constructive!) ideas and thoughts would you want to place in the minds of the people thinking about where to take one of the world’s largest scholarly publication companies and its online information and collaboration infrastructure.?

Full disclosure: Part of the reason for writing this post is to disclose publicly that I am doing this gig. Elsevier are covering my travel and accommodation costs but are not paying any fee.