In 2007, academic libraries saw overall journal price increases of just under eight percent for the second year in a row. U.S. titles rose nine percent on average; non-U.S., 7.3 percent. (Source: Library Journal). Journal inflation has led to continued journal cancellations, and fewer journals being purchased by libraries. While a growing number of journals are now available online, this access often comes at an extra cost. And despite cuts in subscriptions, a few publishers continue to post large profits - up to 40% in some cases.
 
According to Outsell, a market intelligence service, the top ten Science, Technology and Medical (STM) publishers pulled in 53 percent of the revenue in the $16.1 billion periodicals market in 2006. In the same time period, five of the six journal publishers in the top ten—Elsevier, Springer, ACS, Wiley, and Blackwell—showed growth only in the single digits, ranging from 0.5 percent to 7.6 percent. The slow growth reflects a fairly stagnant and saturated market. Elsevier is the dominant player in the STM world, with market share about three times that of its nearest competitor. (Source: Library Journal)
 
In 2006 two academic economists, Professor Preston McAfee at Caltech and Professor Ted Bergstrom at UC Santa Barbara developed an online tool to compare journal pricing with cost effectiveness measures (http://www.journalprices.com). Significantly, the data, updated in 2008, indicate that the for-profit journals are priced 10 to 15 times higher than non-profit publisher titles. Libraries have needed such data in order to work with their administrations and their faculty to make the best use of funds available. Bergstrom and his son co-authored a paper illustrating the pricing ranges in the fields of ecology and economics: “The economics of scholarly journal publishing”. (See also “The economics of ecology journals,” Carl T. Bergstrom and Theodore C. Bergstrom, Front Ecol Environ 2006; 4(9): 488-495.)
 
Some analysts have described a new wrinkle in journal economics called the “dual-media transition zone.” (See “Are Journal Publishers Trapped in the Dual-Media Transition Zone?” by Richard K. Johnson and Judy Luther, ARL Bimonthly Report, no. 257 [April 2008]). This is described as journal publishers’ inability to switch completely over to electronic publication from print, though the initial transition to electronic publication may have been successful. This impacts library budgets because the availability of dual formats leads to an “opportunity cost of supporting dual-format publication.” Other research, such as a study on the operational costs of refereed journal publishing models (“The Cost Profiles of Alternative Approaches to Journal Publishing” First Monday, 12/3/07.) confirms that the cost of publishing an open access e-journal is inherently less than the cost of publishing a subscription-based e-journal.
 
The wealth of data pointing to the super-inflationary rate of price increases in scholarly publishing is indicative of an inelastic demand market. In other words, a scholar or serious reader must review all results, regardless of publisher, in order to evaluate a condition, fact, or circumstance. The articles or books on a topic relate to each other as complements in the scholarship marketplace, not as substitutes. As a consequence, academic libraries have shown themselves to be largely price insensitive and have continued to pay high prices because, as we know, the faculty, researchers, and graduate students cannot succeed without that access. Even as prices go up, demand remains largely the same; it does not respond to the high price by dropping off through cancellations. Publishers beholden to investors could not overlook this reality in developing their business plans.
 
By contrast, consider the market for author’s manuscripts, a market of substitutes. Publishers and their journals compete for the best papers. An author can submit her manuscript to any of a number of titles depending on her objectives. Overall this side of the scholarly publishing model has worked competitively resulting in a variety of venues offering a range of services and outcomes for the author.
 
The economics of journal publishing in the last quarter of the 20th century is the story of these two markets, one governed by the investor’s welfare and the other by the scholar’s. The need for change is to bring the dynamics of the author’s and the reader’s needs into alignment for the benefit of scholarship.