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Home > Vol 22, No 3 (1997) > Ludwig

An Evaluation for Scholarly Societies and Non-profit Associations: Self-publish or Go Commercial--Critical Issues for Boards and Managers

Walter Ludwig (The Prospect Group)

Abstract: The historical relationship between societies and commercial publishers is coming under increasing scrutiny, and for good reason. This paper discusses the issues of branding, content, finances, and stewardship in the context of non-profit-organization publishing. The arguments and tactics of commercial publishers in securing societies' publishing business are dissected, and the economics of commercial versus self-publishing are presented. A strong case is made that scholarly societies have both market and legal reasons to examine closely the blandishments of commercial publishers.

Résumé: Le rapport historique entre société et éditeurs commerciaux suscite un examen de plus en plus attentif, et pour cause. Cet article discute des questions de marques de commerce, de contenu, de financement, et de responsabilité dans l'édition à but non lucratif. Il examine les raisonnements et les tactiques des éditeurs commerciaux qui accaparent la charge d'éditer la grande part des publications dans notre société, et compare le financement de l'édition commerciale à celui de l'édition à but non lucratif. L'article soutient fortement que les sociétés savantes ont de bonnes raisons autant commerciales que légales de mettre en question les cajoleries des éditeurs commerciaux.

Introduction

It is no longer news that the governing boards and professional managers of non-profit organizations, even the most prosperous ones, are under increasing pressure to increase non-dues income. Demand for member services is constant, often coupled with vehement resistance to higher membership fees. Not surprisingly, boards and managers often look to the organization's publishing program as a potential source of relief. In the majority of non-profit groups, publishing is the second-largest source of revenues behind dues, and for many scientific, technical, and medical (STM) societies, journals, books, and other media provide over half of the organization's income.

However, despite the obvious possibilities, many organizations continue to assign their potentially lucrative publishing operations to commercial companies. In doing so, they often needlessly deprive themselves of hundreds of thousands of dollars in revenue they could retain by asserting direct control over their publishing programs. The reasons for such decisions can vary from inertia to ignorance to fear. As well, commercial publishers use pressure tactics, play on the valid concerns of boards and managers, and have even used money to suborn editors of journals, undermining legitimate governance roles.

In this paper, I intend to examine the broad state of scholarly publishing today, discuss the issues involved in strategic management of publishing in non-profit organizations, and provide a rational framework that boards and managers of non-profits can use in making decisions about their publishing programs.

Publishing versus publishers

Since the Enlightenment, the system of reviewed publication to ratify information has evolved. Through the exposure of ideas to comment and response and eventual consensus, publication is the gold standard for data and the gateway for intellectual debate -- and it will likely remain so.

Regardless of evolution in methods, modalities, and media, it is the information transmitted -- the content -- that is primal in the advance of ideas. In the face of Mr. McLuhan's thesis, in scholarly publishing the message is the message, and the medium really is just a delivery system.

Content is king

In 1997, scholarly publishing -- really, all publishing -- is in a situation much like that of commercial broadcasting 15 years ago. According to the Nielsen ratings, in 1980, the aggregate viewership of the big three U.S. networks -- NBC, CBS, and ABC -- was around 800 million people a week. At the same time, the new cable networks had a weekly viewership of just under 900,000. Less than two decades later, in a population about 15% larger, the Big Three's weekly aggregate viewership is down, around 740 million, and the cable companies draw around 400 million. Overall, more people are watching TV, and they have apparently become easily accustomed to the concept that the big providers are not necessarily the best judges of what they want to see. They want what they want, and it does not matter to them whether it is on Channel 4 or Channel 84.

As this model teaches us, content is king: the intrinsic value of an intellectual property is the information /content inside. (An example is David Letterman's television show, whose fans switched viewership allegiance in the millions from NBC to CBS without any consideration except that of content.) No one says, "Let's go see the new Paramount movie." People say instead, "Let's go see the new Stallone flick" or "I want to catch Woody Allen's new movie."

In its own way, the same is true for scholarly works. The non-profit society provides the brand name -- and its journals and books provide the information value. Just as with movies, no one ever says, "I've gotta get the library to order that new Elsevier journal." They say, "I need the Journal of Elbow Reconstruction." More to the point, quick, can you name the publisher of JAMA? Science? The New England Journal? Whether you can or not, do you care? (All three are self-published.) The fact is that if your society, your journal, or your books have sufficiently important information, then a commercial publisher needs you a lot more than you need them.

Commercial scholarly publishing today

Today, commercial scholarly publishers ignore the above truth and operate on the premise that it is their imprint that confers credibility on the information they publish, rather than the other way around. This conceit embodies the outdated business model of current commercial scholarly publishing, and that antiquated model informs such companies' "pitch" to non-profit organizations.

Any nineteenth-century economist would recognize scholarly publishing as practised by commercial publishers today -- Karl Marx could make it a case study. It is premised on, and hard-sells to, non-profits, a nineteenth-century version of the world. This version says that scholarly publishing requires huge amounts of capital, first and foremost to create and maintain facilities for physical production and, second, for the establishment and maintenance of elaborate distribution infrastructures.

These maxims may well have been true in 1792, when Lippincott was established; or in 1807, when Wiley was founded; or even as late as 1901, when Mosby began, but they are no longer true in the 1990s.

(The commercial companies are still competent at production and distribution -- I have no arguments with them over methods of publishing. The Lippincotts, Wileys, and Mosbys do make the trains run on time, but the cost of their expertise is dear, as will be shown below.)

One might quibble over this or that mechanical aspect on this or that journal. But those are the legitimate kinds of differences that professionals might have over approaches. That is the point -- that despite the impression commercial publishers try to leave, for many years now publishing professionals in all disciplines have existed, even flourished, outside commercial publishing companies.

Harbour no illusions that commercial publishers own plants full of third-generation employee-craftsmen wearing company patches on their shirts. Like everyone today, these publishers buy services on the outside -- copy editing, typesetting, printing, mailing, warehousing -- from companies and free-lance individuals who specialize in such services. Why? Because they have, internally and consequent to consciousness of their own bottom lines, realized that the physical part of publishing -- the services part -- is available on a competitive, global basis.

At the end of the day in 1997, all a commercial publisher provides is a clearing-house method to procure a variety of services -- editorial office management, redaction, pre-press, printing, all the way to list maintenance, and marketing -- which they buy on the open market, at open market prices.

Under this model, commercial publishers act as banks with Yellow Pages. They flip though the phone book, find the right vendors for this and that and the other, and front the money to the vendors for each service. What is that extension of credit worth?

The commercial publisher as bank: A metaphor

Suppose you had a credit card, and it offered what the bank called a "telepathic" shopping service. For a fee, the bank would do all your shopping and remembering and make all your payments for you -- house, clothes, food, transportation -- and everything would be delivered to your house. No trips to the mall. No remembering in August that school is going to start in a week and that you have to buy crayons and book bags. This credit card requires no payments; there are no monthly statements; and there is no nagging balance. But the bank gets your whole annual pay cheque, directly, at the beginning of the year, as well as the money that your mother pays you to do her taxes, and the Christmas bonus, and the kids' lawn-mowing money. Everything goes straight to the bank. Certainly this is an uncomplicated financial situation. The bank takes all your income, but they do all the shopping and pay for everything. All just for a fee.

If the bank is a commercial publisher, that fee is going to be around 65% on top of the real price of the goods or services. A typical commercial publishing contract provides for an extra "overhead" fee of $65 for every $100 of actual purchases. In terms of that magic credit card, your $1,000 house payment turns into $1,650; food is $250 a week instead of $150; and the car costs around $6,000 a year, not $3,500. But you worked hard all year, and you make a lot of money; even with these fees, surely there is something left from all those pay cheques and all those lawn-mowing fees. However, the fine print says that the bank gets to keep most of the money left over after all the bills are paid. Typically, commercial publishing deals split profits -- money left over after expenses (plus overhead) -- 60% to the publisher, the balance to the sponsoring society.

An example

This typical structure of a deal between a commercial publishing company and a society can have dramatic effects on the finances of even a modest journal, as you will see below. Table 1 shows the actual financial analysis of a real journal we have worked with, fictionalized here as The Journal of Elbow Reconstruction.

With revenues of nearly $350,000, this journal should be profitable to the society. But Table 2 shows the numbers for the commercial publishing deal previously agreed to by the society.

Under this arrangement, the sponsoring society actually lost money on its own journal when editorial costs were included, while the publisher had revenues above direct expenses of over $150,000. But, as Table 3 shows, when the journal was society-published, there was a dramatic difference, even after factoring in significant one-time costs.

Over five years -- the typical length of a contract with a commercial publisher -- self-publishing the Journal of Elbow Reconstruction will positively affect the society's "bottom line" by over $580,000, even if circulation and subscription rates remain static. Most important, it will do so without increasing dues or decreasing member services.

Given numbers like these, which again are strongly typical, why do societies with clearly valuable publishing properties and defined audiences give them away to commercial publishers? Unfortunately, publishers use a number of scary arguments and questionable tactics to frighten societies and, in some cases, undermine their legitimate interests in order to make these deals.

Fear, uncertainty, and doubt: How publishers scare societies

1. The value-added argument

Publishers routinely tell renewing or prospective non-profit clients that it is only the intrinsic value that the publisher has added or will add that makes the society's journal worth anything at all, and that, without this publisher-added value, subscription rates will dwindle, advertising will evaporate, and contributions wither.

It is continually surprising to me that societies accept this absurd argument. A commercial publishing company does not take on a society's publishing program as a charitable act. Commercials only go after programs with either a well-established audience or clear potential.

2. The distribution argument: Only big guys have access

Physical distribution channels are well established and generally separate from the publishers themselves. There are no fleets of Elsevier planes, boats, and trucks speeding journals and books around the globe. Over half of journal subscriptions -- more in the library market -- are delivered by subscription agencies, who really do not care where the journal comes from as long as it comes on time. Besides this, the inevitable trend is toward electronic distribution. It is by no means clear how long that will take to happen, or in what form or forms it will happen, but the fact is inescapable. However it happens, electronic distribution will be cheaper and more democratic. As Nicholas Negroponte (1995) says in Being Digital:

Most media companies... add most of their value to... content in one way: distribution.... The distribution of atoms [for which read journals] is far more complex than that of bits and requires the force of an enormous company. Moving bits, by contrast, is far simpler, and, in principle, precludes the need for these giant corporations. (p. 83)

On this same theme, I have heard the argument made by commercial publishers that only they will be able to harness new technology in the service of scholarly information. Based on the efforts I have seen so far, I am reminded of the joke told during the gas shortage of the 1970s that if there was money to be made from solar power, Exxon would buy the entire state of Arizona, cover it with mirrors, and figure out a way to blow it up.

3. The marketing argument: Yet another "size counts" approach

To market the next John Grisham book requires nothing more than the money to buy the ads announcing its publication date; to market the next John Irving book probably requires a lot more -- review copies, author tour, and thoughtful placement. Despite the differences, each of these projects is well suited to a large, multinational company with large amounts of capital and a savvy publicity staff with good media contacts.

But do those strengths translate into superior marketing power for The Journal of Elbow Reconstruction? Marketing STM journals is micro-marketing -- finding and talking intensely to the 300 or so American Medical Association members who reconstruct elbows, and spending as little as possible on the other tens of thousands who do not. The information playing field is level today. Thanks to the advance of commerce and technology, any of us can have access to the same sliced-fine lists of prospective subscribers (and contributors) to our journals that the big guys have.

You will hear from time to time about cross-marketing -- another size-counts argument. When publishers talk about cross-marketing, they are often talking about spending your money -- as always multiplied by that overhead factor -- to cross-market their journal on wrist reconstruction to the audience created by your journal and your content. (And no doubt in reverse, which is probably futile, unless you are collecting a premium on both ends of such a cross-marketing effort, as they are.)

4. The prestige argument

Commercial publishers will often talk to a society about their prestige -- their lengthy corporate history, the well-reputed journals they publish, even the number of Nobel Prize-winners whose articles "their" journals have published (as though the publisher conveyed some Nobel halo effect). What they do not like to talk about is the considerable "negative charisma" effect that conglomerate publishing companies, especially those whose ultimate parent company is based outside North America, are experiencing in the marketplace.

Scholarly publishing divisions of several foreign-owned companies have instituted repeated and significant year-to-year price increases mandated by their home offices -- sometimes on the order of 40% a year. These companies have been publicly targeted by librarian groups and buying consortia for across-the-board reductions in subscriptions, regardless of the merits of individual journals.

If I owned a valuable publishing property today, I would be more concerned with the notoriety of a given commercial publisher than their prestige.

5. The infrastructure argument

The argument is frequently made that if a society takes on its own publishing, it will have to add staff and even whole departments. This has not been my experience. Some societies choose to add new staff members in order to exert better control over a given function. One society found that it needed to increase its accounting staff because of large amounts of additional revenues. But most societies elect to do exactly what commercial publishers do -- buy services outside. Certainly this may cost a little bit more than if the same service was performed by a staff member, but not 65% more.

6. The risk argument

The most insidious and unfair argument made by publishers has to do with risk and financial liability. This argument posits that the society will find itself with large exposure and liability if the publishing program loses subscribers or buyers. However, it is far more likely that a society in such a situation would respond just as a commercial house would, by adjusting print runs, refining marketing plans, and restructuring content. There is no intrinsic reason why a society would be more exposed financially, and it is safe to assume that if a property became permanently moribund, a commercial publisher would shed it as fast as it could.

Stewardship: Why boards and management
must consider self-publishing

I do not intend to suggest that the decision to undertake self-publication is one to be taken lightly by a society. It requires realistic research, careful planning, and organizational will. Nonetheless, it is an option that must be examined by almost any non-profit that is not already doing so.

There is an ethical consideration involved, that of stewardship. A society's board and management are stewards of the properties of the organizations, its assets. A healthy publishing program is one of the most tangible assets such an organization can own. As well, it serves the outreach and education mandates all scholarly societies were originally formed around more fully and clearly than almost any of its other assets. It is plainly an open question whether such stewardship can be adequately maintained by a commercial publisher whose management has, as its duties, the maximization of profit, generally in the shortest time possible.

From this ethical framework grows a legal consideration as well. Managers, and boards in particular, all have legal responsibilities as fiduciaries to husband the real assets of their organizations. I think it is only a matter of time before a suit is brought by the members of a society charging breach of such duties over the management of publishing by a commercial house. While such a charge might or might not be sustained, the fall-out either way would be devastating to such an organization.

References

Negroponte, Nicholas. (1995). Being digital. New York: Alfred A. Knopf.