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Services Services Services
You know that an organization has committed to a strategy when they have instantiated it in the org chart. And so it was notable, if not surprising, that Wiley announced last month the creation of its new “Partner Solutions” group. By “partner solutions” Wiley means “services” (paid for on a fee-for-service basis) as opposed to “licensing deals” (paid for on a royalty basis). Historically, most commercial journal publishers, including Wiley, have worked with (and continue to work with) societies via licensing agreements. While these are often referred to as “publishing services agreements,” they are not usually fee-for-service arrangements. Rather, the society grants the publisher an exclusive license to their content in exchange for a royalty on sales.
Wiley has been assembling their “services” for some time via a series of acquisitions, starting with Atypon in 2016. Following Atypon, Wiley services-related acquisitions have included Manuscripts, Authorea, J&J Editorial, eJournalPress (EJP), Inera, Knowledge Unlatched, and (sort of) Hindawi, among others.
The question is, why is Wiley pursuing a services business? As we wrote about in the January issue of The Brief, there are a few reasons:
Wiley believes that the world is shifting to an OA paradigm where revenue per article is sharply reduced relative to the subscription model. The result is downward pressure on the costs associated with producing an article. Wiley is therefore investing in infrastructure to reduce that cost structure and is taking a page from Amazon’s playbook and turning their investment in infrastructure into a revenue stream (Amazon, for example, developed low-cost server capacity for its own needs, which it then offered to other companies by launching AWS). Jay Flynn, Wiley’s Executive Vice President of Wiley Research, recently stated that over 50% of peer reviewed research flows through Wiley’s systems—that provides Wiley with substantial economies of scale. The great advantage of turning infrastructure into revenue is that not only does it produce revenue, but it lowers the infrastructure costs for Wiley. In other words, Wiley’s clients subsidize Wiley’s infrastructure development and lower Wiley’s costs on a unit basis.
The services model also provides an element of risk reduction for Wiley. If another publisher or a society contracts with Wiley for services (journal hosting, editorial services, peer review hosting), Wiley gets paid the same amount regardless of what revenue the journal brings in. If revenue per article for the journal drops because the publisher shifts to OA models, Wiley’s revenue remains stable. What’s more, services like journal hosting, editorial services, and peer review hosting typically charge more for greater volumes of articles. In a shift to high-throughput, low cost journal publishing, Wiley’s services division will likely do quite well — revenues are likely to go up for Wiley even as revenue per article is going down for Wiley’s services clients (and for Wiley’s own publications).
And finally, it is worth remembering that Wiley is the largest publisher of society journals. Having offerings like Atypon, J&J Editorial, Knowledge Unlatched, and EJP in their portfolio gives them greater flexibility and more levers to pull to win (or retain) society business. Want a customized website for your journals? No problem. Need help with managing the peer review process? Got you covered. Need a highly customized peer review workflow? We’ll take care of it. Wiley can offer flexibility and customized services and make money doing it.
A key question is how much services business is out there for Wiley? It is one thing to offer some ancillary services based on stuff you are doing anyway; you have some technology or editorial services for your own journals, so why not offer it to other publishers too? It is another thing to set up a whole division with dedicated staff and accounting (profit and loss statements, budget books, and so on). At that point it ceases to be a side hustle and becomes a business of its own. This distinction is important when you are a publicly traded company with quarterly earnings calls in which analysts will inevitably ask you things like, “How is the new services business doing?” If you are going to set up such a business, it is important to have an addressable market of customers.
One of the challenges for Wiley is that the licensing model has proven quite successful for commercial publishers. Twenty years ago there were a lot more independent society publishers in the world. As publishing has become more technologically complex and the market has rewarded ever larger packages and portfolios, many more societies have signed licensing deals with publishers. The independent society market, therefore, is unlikely to be of sufficient size to support Wiley’s services business. At the same time, societies with licensing deals are, for the most part, unlikely clients for a services business. They are already receiving services under their licensing deals and are unlikely to want to switch to a fee-for-service arrangement, which is a riskier model for them.
It is possible that other commercial publishers could be clients of Wiley’s services—indeed, some are already. Informa and SAGE, for example, are longstanding Atypon customers. Such publishers, however, will be wary of turning over too many of their operations to a competitor. It is also possible that Wiley will find new clients in the form of funders, library publishers, and others new to scholarly and professional publishing, but these currently represent very small market niches with seemingly limited scale and publishing budgets. Additionally, Wiley could develop entirely new services where they do not have to compete with other industry providers or their own licensing business.
Speaking of other industry providers, Wiley’s new division is certain to bring more competitive pressure to the existing publishing services market by being able to bundle services in ways that competitors cannot. A package including both Atypon’s Literatum platform and EJP, for example, could be compelling and would be hard for stand-alone service providers to match. For instance, Silverchair does not offer a manuscript submission system whereas ScholarOne (owned by Clarivate) and Aries (owned by Elsevier) do not offer publishing platforms. But it remains to be seen whether Wiley will find enough business, even with creative combinations of offerings, to support the appetite it appears to have for services.
MDPI’s relentless optimization to market conditions continues, as was noted by two analyses this month. Christos Petrou looked at changes in publication speed across the market, and, notably, found that peer review speeds have improved overall due solely to increases by MDPI, which now averages 36 days from paper submission to acceptance and five subsequent days to publishing. Meanwhile Dan Brockington has added to his review of MDPI data over time and concludes that the company continues to grow at a remarkable rate—publishing 44% more papers in 2021 than in 2020 at a time when many journals saw a post-pandemic slump in submissions. Brockington estimates that MDPI’s revenues grew by 53% year on year, an extraordinary jump, and only a slight drop from 2020’s even more impressive 56% growth rate.
Brockington attributes much of this growth to falling rejection rates for MDPI’s journals, with the proportion of submissions that are published going from around 44% 2 years ago to 55% in 2021. This marks a shift for MDPI, which had kept its overall rejection rates fairly steady from 2015 to 2019.
This rapid growth and raising of acceptance rates fits well with the current zeitgeist, wherein, between preprints and eLife’s new policies, we’re seeing more and more research added to the literature that might not have previously passed the bar for significance. Although MDPI’s rationale is likely more business focused than the communicative revolutions sought by eLife or bioRxiv, the resulting convergent evolution brings readers to the same place. While eLife has eliminated the gatekeeping accept/reject decision function of a journal, its output is still predicated on prescreening and desk-rejecting 70% of submissions before offering review. What would that approach look like for an organization that is primarily driven by growth and publication volume?
If the journal’s sole function is to provide peer review services, then why bother with desk rejection at all? Why settle for earning revenue from 55% of papers when one could bring in revenues from 75% or even 100%? High-output publishers have long struggled with community perceptions of predation and exploitation. Eliminating the accept/reject decision might actually reduce those perceptions as the publisher would no longer appear to be endorsing false or poor-quality papers. As merely peer review facilitators (“a service that reviews preprints,” as eLife frames it), high-output publishers might shed all responsibility for journal content.
This raises several questions. In an OA market that is largely shifting to meet the needs of authors and funders as the primary customers of journals, is there still a role for editorial curation? Do the needs of readers (remember them?) matter any more? Do busy professionals have the time (and expertise) to wade through reviewers’ reports? Does this model ultimately plant the seeds of destruction for journals? If the journal is no longer a filter and imprimatur, why bother with journals at all? Despite seemingly converging in a similar place, MDPI and eLife may wish to answer these questions very differently.
Growth in SDG Papers
The United Nations Millennium Development Goals (MDGs) ran from 2000 to 2015 and, during that time, few journals published research related to MDG topics, according to a Brookings report. The UN Sustainable Development Goals (SDGs) cover the period 2015–2030 and, now at the half-way point, the publishing landscape is very different. Publishers are embracing sustainability topics like never before, partly for corporate social responsibility reasons, but mostly because scientific output in SDG-related topics is rapidly increasing, which means there is money to be made, especially for OA journals.
Last month, Cambridge University Press (CUP) announced that it is launching a new series of OA journals, under the brand “Cambridge Prisms”, covering topics related to global society’s greatest challenges. CUP hopes to convene researchers from various disciplines and nations, and to create six new journals that can publish this interdisciplinary research.
CUP is not the first publisher to expand its portfolio in this way. Over the past decade, Nature has launched eight affiliated “thematic” journals on SDG-related topics. Their competitor, Cell Press, is also positioning itself as a sustainability publisher, with a sustainability landing page containing articles from One Earth, Joule, Matter, Patterns, and Med. Furthermore, Cell Press has started recruiting for an Editor in Chief for its new journal Cell Reports Sustainability.
Born OA publishers are also launching new journals on sustainability topics. Last year, PLOS announced five new journals—their first launches in 14 years—covering climate change, sustainability, water, digital health, and global health. Frontiers also has a sustainability landing page that hosts content from nine journals. On the university press front, Oxford University Press’s new line of branded OA journals includes titles on climate change, energy, digital health, and infrastructure and health. Bibliometric tools, such as Digital Science’s Dimensions software, provide publishers with mechanisms to track publication output for each SDG.
However, MDPI (not surprisingly) has the fastest growing volume of SDG content in this space. In 2022 (as of November 22), Sustainability had published 15,055 articles and International Journal of Environmental Research and Public Health had published 14,986 articles (all article types). To put those numbers into context, PLOS ONE has published 18,423 articles year to date, while Scientific Reports has published 20,009 articles. Given the rapid rate of growth of the MDPI journals, it is possible that the world’s largest journal will be published by MDPI in the next year or two, knocking PLOS ONE and Scientific Reports off the top spot for the first time in a decade.
Earlier this month, RELX held an investor seminar with a focus on Elsevier, its STM business. Elsevier represents 34% of RELX revenues and 40% of its profits; the forum gave investors a chance to quiz Kumsal Bayazit, the CEO of Elsevier, about how OA is likely to impact the journals business and to hear about Elsevier’s strategy to drive growth through its databases, tools, and reference products and services.
In the first half of 2022, Elsevier revenues grew by 4% to $3.6 billion and operating profit increased by 6%. Bayazit presented an illustrative slide that showed that revenue growth rates have been highest for “databases, tools and electronic reference”, with more modest growth rates for academic and government primary research. Print, unsurprisingly, continues to decline, which Bayazit positioned as a good thing as it reduces the organization’s “print drag” (meaning their profit margin on print is less than that of digital). Of Elsevier’s revenues, 75% are from subscriptions and 25% are from transactions, with 11% of revenues coming from print products and 89% from digital products and services.
Elsevier has 2,800 journals, which receive 2.6 million submissions per year, which result in more than 600,000 published papers. Bayazit emphasized that Elsevier has the highest share of high-impact papers, with around 30% market share of papers in the top 25% of the Field-Weighted Citation Index (FWCI); by contrast, the company has a 4% share of articles in the bottom 50% journal FWCI tier.
The high ranking of Elsevier’s content is both a blessing and a curse, in our opinion. As the industry transitions to OA, transfer cascades will become increasingly important. Elsevier seems well placed to benefit by transferring large numbers of high-quality papers “downstream.” However, it needs suitable recipient journals for transferred papers and currently publishes relatively few lower-impact papers. Furthermore, transitioning highly selective journals to an OA model is challenging, for all the reasons with which readers of The Brief will be only too familiar.
One investor asked whether the profit margins under subscription and OA business models are the same. Bayazit claimed that margins don’t have anything to do with the payment model, but more with the tier of the journal, a statement we don’t follow. Highly selective journals (top tier) tend to do very well margin-wise under a subscription model but fare comparatively poorly under an OA model because there is only so much that can be charged for article processing and there are relatively few papers to spread such charges across. We struggle to understand how journals such as The Lancet or Cell could make the same margins (or even be profitable at all) under an OA model. Such journals, however, attract many submissions and, via a well-orchestrated transfer desk, can act as a loss leader for the portfolio.
Elsevier’s portfolio and the company’s market position remain enviable. While transitioning a large portfolio of selective journals to an OA model will be difficult, transformative agreements, which need large sales teams to negotiate, will play to Elsevier’s strengths and will likely be key to making the OA transition work financially. And while certain journals may be more or less profitable under OA, the portfolio is strong and broad enough to give Elsevier room to maneuver.
A federal judge has blocked the sale of Simon & Schuster to Penguin Random House, and it appears that rather than appeal the decision, the deal will collapse. Mike Shatzkin suggests that this marks the end of mergers and acquisitions as a strategy for growth for the biggest publishers, leaving them, “in a currently profitable but increasingly difficult spot.” Franklin Foer in The Atlantic notes that the decision marks a shift in antitrust enforcement from the US Government, where previously consumer welfare was the standard, and the size of a company didn’t matter as long as prices remained low for their products. Here the Department of Justice successfully argued that the merger would harm content producers, resulting in lower earnings for authors.
Wolters Kluwer and the NEJM Group have entered into a partnership making Ovid the exclusive digital source for the New England Journal of Medicine and its affiliated titles.
The Crimson Group (Enago) has acquired the Charlesworth Group.
The Chan Zuckerberg Initiative (CZI) continues its investment in funding development of preprints with $6.1M in new grants to Cold Spring Harbor Laboratory to further fund bioRxiv and medRxiv, as well as supporting preprint review efforts from PREreview and eLife.
Last month, we wondered how many publishers would invest the time and effort into compiling their data for the Plan S Journal Comparison Service, and now we have the answer: 27. Wiley is the only major commercial publishing house to participate. Wiley and their subsidiary Hindawi’s titles make up almost 80% of the 2,130 journals listed at last check.
Eric Schares at Iowa State University has created a tremendously useful set of data visualizations for understanding the impact of the 2022 OSTP Memo on increasing access to US federally funded publications.
Clarivate and OCLC have settled their lawsuit over the use of machine-readable cataloging records (MARCs) by Clarivate in its record-exchange system.
In a sign of the changing times, both Springer Nature and ACS announced new analytics services, as publishers look to diversify their businesses to offset potential shifts in revenue as the market evolves.
While still lagging the progress that has been made toward open data, improving the reporting of research methodologies is likely the next policy frontier for open science. This month, PLOS offered a survey of researchers that explains why this remains important.
Emerald Publishing released the results of their annual global survey on academic culture, this year showing increased interest from researchers in open research and stagnation in research evaluation (still largely based on citations and impact factors).
Last month saw both good news and bad news for academic institutions. After severe downturns in international student enrollment during the pandemic, US institutions saw a 4% increase over the past year, hopefully the first signs of a rebound. It is worth noting, however, that enrollments from China, the country that has sent the most students to the US in recent years, continue to decline. Meanwhile the exodus from graduate school continues, as the academic career path struggles to compete with more compelling options.
The Royal Society of Chemistry (RSC) announces that it intends to flip its entire portfolio to OA within 5 years. Relatedly, “RSC will shortly submit its portfolio of hybrid journals to the Transformative Journal Programme of cOAlition S.”
A group of editors of a Frontiers special issue voiced their concerns over the company’s editorial processes.
Hum offers a useful overview of customer data that publishers should (or shouldn’t) be collecting and how to leverage it.
We were happy to see the General Conference on Weights and Measures introduce four new prefixes to the International System of Units, and look forward to complaining about being buried under quettagrams of work.
If you are looking for a new spirit animal, might we suggest the gloomy octopus?
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