September 13, 2012

Is Reed Elsevier nearing the iceberg?


Reed Elsevier scored big on Monday when the landmark papers reporting on the Higgs-Boson particle were published in their journal Physics Letters B, where they are freely available online to anyone who wants to read them. But its profits from its journal subscription services may see a significant drop as individuals, academic communities, and, now, governments make the argument that the results of taxpayer-funded research should not sit behind paywalls or be made effectively inaccessible through high costs and outrageous bundling schemes. PaidContent quotes from a research note by Claudio Aspesi for Berstein Research on the projections for the company:

It could drive the profitability of the journal business of Elsevier down by as much as 60%…We think the risk posed to the Elsevier business model is substantial. We believe investors are underestimating the disruption that both the EC and even the UK policies could pose to the business model of Elsevier… A collapse of the profitability of Elsevier would be catastrophic for Reed Elsevier.

Though commenters on the article point out that, since Reed Elsevier has been making pots of cash on their subscriptions, that kind of drop from their current 35%-ish profit margin would still leave the company with a 10-15% profit, which is closer to what the big trade publishing companies make. For a more detailed look at the current state of affairs, the excellently named blog “Sauropod Picture of the Week” breaks down the numbers here.

J.P. Morgan, however, thinks Elsevier is fine — they stood by their current rating of the company on Wednesday, as have a number of other analysts recently.

And in fact, with the Higgs-Boson articles and many others, Elsevier has already entered the open-access game, even touts it in their press release. However, they’re just pushing the costs back on authors. So to publish an article in a Elsevier journal and have it be open-access, authors are charged a fee of $3,000, double the cost of publishing in a venue like PLOS ONE, a highly respected peer-reviewed open-access online journal. And, as the Sauropod guys point out,

What are we actually allowed to do with Elsevier’s open-access articles?  Can we re-use their figures?  Can we extensively quote them?  Can we text-mine them?  Can we mechanically extract taxonomic information and add it to databases?

The answer seems to be that it’s very hard to tell, because the Elsevier licenses make the terms damn near impossible to figure out. Somehow I am not surprised.

Government-mandated use of open access publishing models for publicly funded research moves forward in the UK and the EC, but it remains stalled in the US after the failure of the noxious Research Works Act, covered on MobyLives earlier this year. For the moment, Elsevier sails on, buoyed up by money from authors and universities, but it’s hard to believe that’s really going to last.



Sal Robinson is an editor at Melville House. She's also the co-founder of the Bridge Series, a reading series focused on translation.