Economic Models for Open Access Publishing

Open access publishing appears to be a permanent -- and unanticipated -- feature of the Internet. How quality information is made available for everybody to read. Who pays for it? and what are the implications?

William Y. Arms
wya@cs.cornell.edu

William Arms is Professor of Computer Science at Cornell University with research interests in digital libraries and electronic publishing. He is the author of Digital Libraries (MIT, 2000) [http://mitpress.mit.edu/book-home.tcl?isbn=0262011808]. He is President of the Publications Board of the Association for Computing Machinery (ACM) and is also the founder and is presently the Editor-in-Chief of D-Lib Magazine [http://www.dlib.org].

Open access to information

Open access is one of the marvels of the World Wide Web. Vast collections of high-quality information are available for everybody to use without payment. Creating and distributing this information is expensive, yet individuals and organizations provide it freely. What are the incentives that lead people to provide open access to high-quality information? Is this situation stable for the long-term or is it a temporary phenomenon while the web matures?

These questions are a part of the broader question, what economic practices will emerge for the web as a whole. The current situation, where companies such as Amazon.com grow rich and famous while trading at a loss on the Internet, cannot last forever. (Amazon.com lost $390 million in 1999.) Yet open access publishing appears to be permanent.

The abundance of open access information has surprised everybody. Since the 1980s, scientists and librarians have predicted the use of networks to disseminate information (though not the explosive growth), but nobody anticipated the range and quality of information that would be available without payment. Even those pioneers of online information who came from academic backgrounds assumed that restrictions on access were essential for valuable information to be distributed over the Internet [1]. This misunderstanding came from a commercial mindset that the only incentive for creating information is to make money, in the form of royalties to authors and profits for publishers. And indeed, there are major industries predicated on this assumption. According to this school of thought, the early web was a toy because of its weak access controls; only low-grade information would ever be mounted with on such an insecure system.

A glance at the web today shows that this view was completely wrong. To use myself as an example, I read online newspapers, use search engines, study research papers, check the weather forecast, plan travel and consult maps. All are online with open access. I recently completed a book on digital libraries for which I consulted hundreds of works [2]. Of these, less than a dozen were not on the Internet. I am also a creator of open access information. Since 1994, I have distributed all my research papers and reports on the web. Each course that I teach at Cornell has a comprehensive web site, which is open for the world [3].

As a reference library, the open access web gets better every year. Information and services that were previously available only at considerable expense are openly available. Here are just a few examples.

The Internet Archive estimates that 450 million web pages were openly accessible, at the end of 1999 [7]. Many are of little value, but many are excellent. With an open access web search engine and a little ingenuity a user can find high-quality information about almost any topic, from Texan wildlife to international taxation. In some of the cases, the open access service is not as good as the fee-based service, but for many users, they are genuine substitutes.

Costs

High quality information is expensive to create and to manage. There is a fallacy put forward by some academic authors that online information costs nothing to disseminate. They should know better. Digital technology saves some of the production costs, but creating and managing information remain labor-intensive. Good web sites have good design, well-edited text and navigational aids. They are mounted on fast computers with good network connections. They are continually migrated to new technology and do not disappear overnight. These require money and expertise.

There is some truth behind the fallacy, however. The costs of online publishing should be less than conventional publishing. In particular, the marginal costs of distribution are small. To use iMP as an example, the costs lie in the staff, the design work, the computer system and the operational flow of work. These are mainly fixed costs -- or "first copy" costs. The marginal cost of distributing many copies of one article is quite small. Once an article is published, the costs are essentially the same, however many times the article is read. The marginal cost of open access information is not zero -- very large web sites are major computing operations with attendant staff costs -- but the marginal cost remains small.

Furthermore, computer systems for open access have a considerable cost advantage over payment-based systems. Restricting access to information is expensive. Security systems, billing procedures, maintaining databases of authorized users and responding to customer queries add complexity to the simple process of mounting information on a computer and providing access over the Internet. The PubScience service provided by the Department of Energy began as an information system for its own laboratories. The department found that it was cheaper to provide an open access service for the world than to develop an authentication system that would restrict access to the laboratories [8].

In sum, open access information on the web is not free to produce. However, it is considerably cheaper than conventional publishing and almost all costs are fixed costs.

Economic models for networked information

The costs of online information are smaller than conventional publishing, but they are real and somebody has to pay. What are the possible economic models?

This question is not unique to publishing on the web. Parallels are found in many areas including radio, television, telephones and software. (Some people would argue that the evolution of copyright from the chaos faced by Shakespeare, through the plagiarism of the nineteen-century, to today's uncertain balance is also a search for economic models, but that discussion is beyond the scope of this article.)

Consider broadcast television. Four distinct economic models have developed. Two provide open access and two have restricted access. The first method is advertising. Networks pay for the creation of programs, which are broadcast openly. The revenue comes from advertisements inserted into gaps in the programs. The other open access method is external support. Public broadcasting is an example. The costs are paid by the broadcasting organization with funds obtained from external sources. The third economic model is a periodic subscription, usually paid to a cable company with a percentage returned to the creator of the broadcasts. (The British Broadcasting Company relies on fees paid by the owners of television sets.) The fourth model is use-based payment. In television it is known as "pay-by-view." It has become a lucrative model for specialized events, such as boxing championships, but has failed to be accepted more broadly.

All four of these economic models have parallels on the Internet, but the balance is different. This is not surprising because the underlying cost structures are different. Television production is very expensive; public broadcasting has a hard struggle to raise external funding through a series of grants, gifts, sponsorships and thinly veiled advertising. Open access web publishing is much less expensive and external funding has emerged as a very important model.

Restricted access: use-based payment

Use-based payment was widely used for online information even before the Internet and the web. It is the basis of profitable services such as the legal search services Westlaw and Lexis.

It is hard to recall, but in the early 1990s, when the Internet was beginning to blossom, most pundits predicted use-based payments for online information in very small units called "micropayments." Every time anybody used any information, no matter how small the increment, a small sum of money, perhaps a few cents, would be transferred from the user to the supplier of the information. The nearest comparison is with long-distance telephone calls. Telephone companies provide itemized bills for vast numbers of calls in a manner that is unobtrusive to users; these bills are expensive to produce, but the costs are manageable and the costs of very small increments of use are recovered.

Systems such as Cybercash and NetBill were created to manage micropayments. Their design provided very fast response times, complete security and transaction costs so low that it was possible to charge for units of information a few cents at a time. Credit card systems, which now dominate e-commerce, were then seen as too slow and too expensive, requiring a minimum payment of $5 for profitability. But despite the early enthusiasm by suppliers and technologists, the market for micropayments has not emerged. As yet, use-based payments are little used on the web.

Restricted access: subscriptions

Today, when charges are made for information on the web, subscriptions are the most popular method of payment. With periodic subscriptions, the amount paid is independent of use. Technically, subscriptions are much easier to manage than pay-by-use. Consumers and suppliers both like subscriptions because they know in advance how much money will be paid. Consumers also have the psychological benefit of feeling no restraints on use once the subscription has been paid; this is particularly appealing to libraries.

Even subscriptions have faced resistance. Only a few categories of publication have been able to attract large numbers of subscribers. The large numbers of conventional scientific journals that have been put online rely on subscriptions, usually paid by libraries but sometimes by individuals. Some other subscription services that are tailored to the needs of professionals are thriving -- the Wall Street Journal is an example. Products that are marketed directly to consumers have done less well.

Open access: advertising

Consumers will pay for a printed magazine but are reluctant to pay for access to the same information online. The conventional explanation for this behavior is that customers want a tangible product, yet consumers who hesitate to pay for online information pay subscriptions for cable television. Some other explanation is needed. The obvious answer is that it is hard to compete against a free good. When there are several similar information services, if one is available with open access the others have great difficulty in charging for use.

In 1995, the early search engines were seeking for ways to raise money. They all started with open access. This was fine for attracting users, but did not pay the costs. For a short while, Infoseek attempted to charge subscribers a few dollars per month, but Lycos and AltaVista remained open-access. Infoseek was unable to attract many subscribers. It may have provided the best search service at the time, but the difference in quality was not enough to compete with the free services.

The web portals such as Yahoo and Lycos introduced the model of open access paid for by advertising. For the user, this appears to be a free service; the only cost is the intrusion of the advertisements. In the last quarter of 1999, America Online had $352 million revenue from advertising and electronic commerce; Yahoo had $201 million [9]. The web portals augment the advertising revenue in other ways, such as fees from the sites that they link to, but open access for users is fundamental to their business.

Open access: external funding

Since only a few web sites have sufficient advertising to be profitable, most open-access web sites are supported by external funding, usually by the producers of the material on them. This requires a budget. Somebody has to provide the money. Where are these budgets? The answer is that any organization with discretionary funds can choose to use part of its budget to maintain an open-access web site. Many do and many of the sites are excellent.

A great deal of information has always been openly available. Organizations have large budgets for providing information to the public. When the web provides an efficient channel to reach the desired audiences, existing budgets have been transferred from print products to the web. Marketing and promotion are obvious examples. Companies advertise their products and services; they supply press releases and annual reports. Universities mount admissions information and send newsletters to alumni. Candidates for election promote themselves to the voters. None of these is new. The only change is the use of the web.

Government information is another area where open access information is paid for by redeploying existing budgets. Services such as the Internal Revenue Service can save money and provide better service by posting information on the web instead of printing brochures. The National Oceanographic and Atmospheric Administration now distributes weather information openly on the web, rather than relying on distribution by newspapers, television and radio stations.

Most of the open access information on the web, however, is not paid for by redirecting existing budgets. Organizations have developed new budgets to publish open access information on the web. They hire new staff as webmasters, or place contracts with outside agencies. At Cornell University, the aggregate of funds that individual departments spend on their web sites is greater than the library's total budget for acquisitions.

Scientific research: a case study

Scientific research provides an interesting example of the dynamics of open access publishing. Ten years ago, few scientific papers were available free of charge. Today, huge numbers are online with open access. They are supplemented by automatic tools that index and cross-reference them. If anybody doubts the power of such tools, they should look at ResearchIndex, the index to computer science created by researchers at the NEC Research Institute [10]. Research Index excludes papers that have restrictions on access, but so many papers are available openly that its coverage is very good and improving daily.

Open access is a threat to publishers, which they recognize. Some publishers are large commercial companies whose first loyalty is to their shareholders and their profits. Others are scientific societies who rely on surpluses from journal publication. Both have prospered by selling subscriptions of journals to libraries and see no way to achieve comparable revenues unless they charge for access. Moreover, in resisting open access, the publishers have powerful weapons. They have enormous economic power and control the most prestigious publications -- where scientific reputations have traditionally been made. But these are short-term advantages. The publishers cannot succeed in the long-term if their strategies do not support their most important customers, the leading authors.

Scientists have different objectives from the publishers. Authors of scientific papers receive no royalties from their publications, but their reputations and careers depend on their work being widely known, preferably through reputable avenues. Their aim in publishing papers is to disseminate the results of research as broadly as possible. They benefit from open access, so long as open access is respected. Much to everybody's surprise, many forms of open access publishing have become widely respected.

Many people consider that objectives of the publishers and those of the scientists are irreconcilable. They foresee a struggle between scientists and publishers (with libraries playing an ambiguous middle role). Reality is different. While libraries have continued to subscribe to conventional journals -- both print and online versions -- scientists are going their own way, using discretionary money to place their research online with open access.

Many researchers simply mount their own papers on private web sites, for all to read. Others use national archives, such as the Los Alamos physics collections and the recently announced PubMed Central from the National Institutes of Health. Almost every research group has a web site where it posts a broad range of materials, including proposals, reports and papers. In a recent development, several leading universities plan to collect papers by their faculty and students and mount them locally.

Scientific publication requires skilled professionals, who have to be paid. In the conventional model, publishers employed these professionals and the money to pay them came from library subscriptions. In the new economic model, the professionals are likely to be associated with the research. While individuals have modest resources, they belong to organizations that have large budgets and are willing to use them to publish research. Initially, researchers maintained their own web sites and the results often showed their lack of expertise. Now departments and research organizations are hiring specialists. Most of the costs are met through research grants; they are a small proportion of research budgets. The sponsoring agencies consider that the money is well spent because it improves communication among researchers across the world. In my own case, I maintain my own web sites for working papers and course materials, but any serious publication is managed by professionals whose salaries are paid by my research grants, by my department, or by government agencies, such as the National Science Foundation.

Scientific papers on open access web sites have tended to be less formal than the conventional, peer-reviewed literature, but this is changing. As the online materials and services get better, a cycle develops. More people read online materials, which encourages the leading researchers to provide open access to their work. When the overall quality of material improves, the professionalism of open access web publishing follows.

As the volume of science available on the web with open access grows, the collections of the university library decline in importance. This is a period of plenty for research universities (though few will admit it). They have been able to build their budgets for web publishing while absorbing large increases in journal prices. The test will come at the next recession when choices have to be made. Scientists with their research grants and professional schools are the economic strength of universities. When universities are faced with the need to trim their budgets, the scientists will vote for the services that they see as being most valuable. Rather than support the library's journal budget, many will give priority to the staff who edit, design and publish their research on the web.

Final thoughts

The inter-relationship between technology and artifacts is well known. The standard forms of printed material -- such as books, journals and brochures -- are beautifully adapted to the technology of print and paper. New technology produces new artifacts, such as web sites.

Economic and social practices are also tied to technology. Publishing, libraries, royalties, subscriptions, even copyright developed their present forms in response to the introduction of printing. As the technology changes, their future becomes uncertain. For broad categories of information, open access paid for by the suppliers appears to be the permanent economic model.

Notes and references

[1] See, for example: William Y. Arms, Thomas Dopirak, Parviz Dousti, Joseph Rafail, and Arthur W. Wetzel, "The design of the Mercury Electronic Library." EDUCOM Review 27(6): 38-41, 1992.

[2] The book is: William Y. Arms, Digital Libraries. MIT Press, ISBN 0-262-01180-8, 2000. This semester, I am teaching a course that relies heavily on recent research papers. The reading list is restricted to open access materials. Apart from not being able to recommend my own book, every paper that I wanted is available.

[3] See, for example, CS 502 Computing Methods for Digital Libraries. http://www.cs.cornell.edu/cs502-sp00/.

[4] PubMed is at: http://www.ncbi.nlm.nih.gov/PubMed/.

[5] The Los Alamos ePrint archives are officially known as the "arXiv.org e-Print archive." They are at: http://xxx.lanl.gov/.

[6] The Legal Information Institute is at: http://www.law.cornell.edu/.

[7] Brewster Kahle of the Internet Archive provided this figure for the end of 1999. He estimates that the web is growing by ten per cent per month.

[8] Reported by Walt Warnick during a panel at the Association of American Publishers, February 7, 2000.

[9] Reported in the New York Times, January 31, 2000.

[10] ResearchIndex is at: http://researchindex.com/. This site also has links to papers that describe the research program behind the service. All are provided with open access.

Released: March 22, 2000
iMP Magazine: http://www.cisp.org/imp/march_2000/03_00arms.htm

© Copyright 2000. William Y. Arms. All rights reserved.