Are ‘Big Deals’ Actually Good Deals?

A growing number of U.S. institutions are not renewing their bundled journal subscriptions with big publishers, citing rising costs that have made these deals unsustainable.

Louisiana State University recently said that it could no longer afford its $2 million annual comprehensive journal subscription deal with publisher Elsevier. By unbundling its "big deal" and subscribing to only the most essential journals, the institution's administrators hope to save the library $1 million a year. LSU is far from the first institution to complain that publishers’ subscription costs are too high. The University of California system, Temple University, West Virginia University, the University of Oklahoma and Florida State University all announced this year that they are dropping big deal contracts with various publishers, including Elsevier, Wiley and Springer Nature.

But one skeptic is challenging the conventional wisdom about high subscription rates and raising doubts about big deals not being good deals.

Kent Anderson, CEO of publishing and data analytics company RedLink, has argued that the subscription model is actually “pretty efficient” for institutions.

"It’s actually pretty amazing that thousands of students at colleges and universities -- as well as instructors and researchers -- can in most cases get access to much of the world’s developing knowledge for less than a penny on every dollar spent by institutions of higher learning," he wrote on The Scholarly Kitchen, a blog of the Society for Scholarly Publishing.

Anderson knows about the costs because earlier this year he conducted an analysis that determined that academic libraries generally devote about one-third of their budgets to subscription purchases, with an average cost per title of $23.48 for public universities and colleges and $18.74 for private institutions.

Looking at subscription costs as a percentage of total institutional budget, Anderson found that universities spend approximately 0.5 percent of their total budget on subscriptions.

At the University of Michigan at Ann Arbor, for example, it would cost each in-state undergraduate student $26 a year to gain access to all the journals to which the university subscribes. Anderson's analysis determined that 99.81 percent of students' tuition payments go elsewhere.

For public institutions, the highest share of their budgets applied to journal subscriptions was 1.4 percent, and the lowest share was 0.19 percent. At private institutions, the highest share was 1.56 percent and the lowest was 0.09 percent.

“Rather than blaming publishers for budget woes as they themselves deal with unprecedented volumes of submissions, higher technology and infrastructure demands, these data to me hint that we might want to celebrate the fact that such vast amounts of knowledge are so affordable. From these data, it looks like site licenses are raindrops in the rivers of institutional spending,” Anderson wrote.

The percentage spent on subscription costs may sound insignificant as a portion of the total university budget, but it can still represent millions of dollars, said Ted Bergstrom, the Aaron and Cherie Raznick Chair of Economics at the University of California, Santa Barbara.

“If an embezzler embezzles less than 1 percent of a company’s revenue, does that mean we shouldn’t worry about the embezzler?” he said. “We are still talking about serious money. It’s not going to kill the universities to pay off these monopolists, but it doesn’t make sense to submit to them.”

Anderson acknowledged in his article that library budgets are tight, but he wrote that it “doesn’t look like subscription costs are stressing institutions themselves.”

Camille Veillette Péclet, collections director at Université de Montréal Libraries, disagreed with Anderson’s assertion that subscription costs place a “surprisingly low burden” on institutions.

“Any subscription cost or cost increase for an institution is accounted for in its budget and has a financial impact on other institutional expenditures, such as book purchases, new resources, scholarships, etc.,” she said.

Anderson said in an email that he was not in a position to label any part of a university budget as superfluous. He said he was surprised to learn, however, that many smaller institutions didn’t have budgets of millions of dollars, but tens or even hundreds of millions.

“Universities have been asked to do a lot more for students, parents and communities. Their budgets have grown commensurate with these demands,” he said. Libraries, on the other hand, may still be suffering from an old image problem and may be seen as “musty, dusty places rather than the digital hubs of knowledge for their institution.”

“Recast and updated, the mental model of the library as the conduit to reliable new information might help libraries retain and even increase their budgets so that they aren’t forced to make draconian cuts or difficult choices,” said Anderson.

Many librarians argue it is not necessarily the cost of journal subscriptions that is the problem, but the fact that their pricing is increasing rapidly and at above the rate of inflation. At Louisiana State, for example, the institution has a $6 million annual serials budget. With price increases of 5 percent, the library must find $300,000 in new funding each year.

For members of the Association of Research Libraries, expenditures for subscriptions increased 521 percent from 1986 to 2015, said Péclet. She noted that five academic publishers maintain profit margins of 40 percent annually.

“By paying their subscription costs, institutions inevitably contribute to these profit margins,” she said.

Anderson noted that publishers are producing 4 percent more articles each year but making only 2 percent more in revenue.

“The growth of article outputs is above inflation, and article review, rejection, editing, product and publication drives costs,” he said. “More articles are being generated because there are more scientists and scholars producing work. This hits everyone.”

Lisa Hinchliffe, professor and coordinator of information literacy services at the University of Illinois at Urbana-Champaign, said the percentage of total institutional budget is not a particularly useful frame for examining the cost, or the value, of subscriptions.

Librarians often determine the value of a journal by balancing its cost against the need it meets, said Hinchliffe. "Spending even $1 for something that is not needed is a waste. Spending $10,000 that meets $1 million in need is probably a pretty good deal."

Libraries tend to use cost per use as a metric of value for journal subscriptions, but Hinchliffe has argued that even this metric can overstate value, because libraries may be paying for content that is available for free.

The rise in open-access publishing has decreased the value of subscription deals as more content is available for free, said Roger Schonfeld, director of the libraries, scholarly communication and museums program at Ithaka S+R.

Schonfeld says the main reason the value of the big deal is in decline is because of something he calls “leakage,” the availability of journal content through channels not controlled by publishers.

Piracy site Sci-Hub is one service through which content is “leaking,” he said. But there are other sources of content leaks that are not illicit. Institutional repositories, for example, are an accepted part of the scholarly publishing ecosystem.

“The big deal as a bundled subscription model is definitely under threat,” said Schonfeld. “Most of all from the fact that the libraries are less interested in just subscriptions -- they want read-and-publish or publish-and-read agreements that capture the full stack of publishing services.”