The Promise of Value-based Journal Prices and Negotiation
The University of California libraries have tested the case that a journal’s institutional price can and should be related to its value to the academic enterprise.
Abstract
In pursuit of their scholarly communication agenda, the University of California ten-campus libraries have posited and tested the case that a journal’s institutional price can and should be related to its value to the academic enterprise. We developed and tested a set of metrics that comprise “value-based pricing” of scholarly journals. The metrics are the measurable impact of the journal, the transparent measures of production costs, the institutionally-based contributions to the journal, such as editorial labor, and the transaction efficiencies from consortial purchases. Initial modeling and use of the approaches are promising, leading the libraries to employ and further develop the approaches and share their work to date with the larger community.
Exceprts:
Our model of value-based pricing assumes that prices could and should be set, or negotiated, not solely through an arbitrary producer-set price point (in which little is known to the library about publisher assumptions and expectations for generating revenue above operational costs), but rather, in relation to four key elements:
* measures of scholarly value and impact;
* transparent and explicit indexes for changes in production costs;
* value-adding contributions from the purchasing/leasing institution (e.g. for original content, editorial labor, editorial overhead such as office space);
* transaction efficiencies (e.g. through business negotiations with a library consortium; through near-zero marginal costs for an additional user). [p. 3]
… Our modeling of value-based prices used Bergstrom-McAfee’s work to progressively “discount” list prices for journals with high RCI scores, i.e. to calculate a discount from the institutional list price when their combined costs per-citation and per-article were significantly higher than the median non-profit journal in the same discipline. Higher Relative Cost Index scores, indicating a journal further from the median price/article and price/citation of non-profit journals in the same discipline, were more heavily discounted…In two test cases of commercial publishers with large title lists, this yielded list price discounts in the range of 40% and 50% for the entire list of journals for which RCI data was available. If successfully employed in a purchase or license negotiation, these base prices would very likely yield larger and more defensible discounts than ad hoc “better than list price” negotiations. [p. 5]
… In UC’s experience, while annual price caps that are negotiated over the life of a multi-year contract add predictability, they are often arbitrarily proposed and negotiated with anecdotal evidence to find a compromise between what the publisher wants and what is reasonable or affordable to the library. To remove this arbitrary aspect, we wanted to tie annual price increases to actual increases in publisher production costs. UC has limited experience in negotiating price increases tied to the Consumer Price Index (CPI), under the rationale that CPI is an actual measure of inflation. However, we speculated that the Producer Price Index (PPI), specifically the PPI’s “Commodity Finished Goods Less Food and Energy” (which removes the two most volatile components), is a more appropriate metric for changes in production costs. We calculated a 3-year (2003-2005) average for PPI of 1.36% which compared quite favorably to extant price caps. [p. 6]
… Our report…brings several “big questions” to the foreground and further emphasizes the importance of community engagement in the debate. For example, is it possible for for-profit publishing to maintain an acceptable margin of profit in a “value-based” pricing system? How can we meaningfully assess value as publishers begin to move away from (historically print-based) institutional list price pricing models, a model we can all agree is untenable? Can we effectively shape those new pricing models? How do we factor in usage data? What other potential measures of value are there? How do we quantify the academy’s contribution to the publishing/scholarly communication process? Can and should value-based pricing be developed for the article as opposed to the journal? [p. 9]
Read the full report: http://libraries.universityofcalifornia.edu/cdc/valuebasedprices.pdf
