This Section Contains the Following Headings
To begin the discussion at each session, the attached outline of cost categories (identifying every sector in the value chain’s primary value-added activities) was displayed for comment.
Jane Ellen Long, Electronic Publishing Manager, University of California at Berkeley. The SCAN project (a partnership between the UC Berkeley, Irvine libraries and UC Office of the President) seeks to publish books and journals online.
Chuck Cressey, Director of Computing and Publishing Technologies, Princeton University Press. Involved in the online catalog project for the AAUP. They are attempting to place a complete catalog of their books on the Internet. Princeton University Press is involved in “Project Unbound,” collaborating with several other university presses.
Janet Fisher, Journals Manager, MIT Press. MIT Press publishes approximately thirty print journals and are now starting work on two electronic journals and are planning two more.
Tim Clancy, Editorial Director and Associate Director, University of Pennsylvania Press. He has worked in the journals division of the University of Chicago Press (and the American Psychiatric Association). The University of Pennsylvania Press is planning several electronic products although currently all of their products are books.
Kate Wittenberg, Editor-in-Chief, Columbia University Press. Now developing several new electronic products (both CD-ROM and online). They will be publishing two books online with the Columbia University library and two more online products next year.
Bob Kelley, Director of Journal Information Systems, American Physical Society (who now publish seven physics journals). Physical Review Letters Online was recently released through OCLC and the APS is developing a WEB version of Physical Letters Online. The APS is planning to move all their journals online in the future.
Ali Houssaini, Acquisitions Editor, University of Texas Press. Coordinating efforts to mount scholarly monographs and journals online in addition to undertaking several CD-ROM projects.
Susan Seiden, CD-ROM Products Manager, Association for Computing Machinery. Part of the ACM joint project (with Stanford University) to restructure all ACM publications (journals, magazines, and conference proceedings) into SGML format for online delivery.
Liz Pope, Electronic Publishing Developer, Academic Press. Two CD-ROM products have been released (a serial and a journal), and in 1996 Academic Press will offer all journal titles online.
Steven Haynes, Manager of Research and Development, West Publishing Company. West has mounted over 6,000 databases on Westlaw in the last 11 years.
Colin Day, Director, University of Michigan Press. Has ten electronic projects under development (although none are yet up and running–except for the journal of electronic publishing which is an experimental testbed). Also a “Project Unbound” member.
To begin the session, the group viewed the preliminary list of functions that “Publishers” (as a group) perform in the value chain. These included: Conducting Business, Quality Control, Enhancing Presentation, Production, Distribution, Marketing, Leveraging, and Enforcing/Protecting Rights. The group was asked to add new functions, remove those functions or activities they no longer perform (or for which they do not have a corresponding cost), and define the list of functions and activities into terms they commonly use (and will be able to assign costs to).
Publishers identified the following areas as important cost centers that should be considered. For example, the moderator indicated that the function “selecting” was present in the other groups studied (buyers and intermediaries), yet it doesn’t seem to be indicated among the publisher cost centers–at least initially.
As one publisher noted, whether a function is performed internally or under contract by an outside vendor, it remains a “cost” to the publisher (although it was argued that it makes a significant difference as to how a particular function is budgeted by the publisher). It is important that everyone expresses and thinks in these terms.
Selection was immediately identified as its own cost center as publishers agreed it was different from quality control–mostly because all books are different and so must be evaluated individually. Some publishers felt that peer-review costs should be included in this area of publisher functions.
Acquisitions is an important publisher function and (some publishers argued) should be included under quality control (as editors go into the field to find material). This was not universally accepted as several publishers indicated that acquisitions is a separate function from quality control.
Several publishers included costs associated with the peer-review process here, while others moved those costs to the “selection” function. However, all agreed that there should be another element in this “cost matrix” called acquisition.
Quality control is different from “peer-review” and should be considered a separate cost category. Peer-review is essentially the selection process, while quality control is editing. Editing improves upon what the authors have created and in the process checks the accuracy of the work. Peer-review and quality control are two separate values that publishers add.
Enhancing presentation is basically copy-editing and design. However publishers also have a manufacturing cost which includes a large portion of this cost. In the “historical model” publishers traditionally count manufacturing and production as separate cost centers under “enhancing presentation.”
Some publishers argued that “quality control” and “enhancing presentation” were qualities imbedded into the entire publishing process while others felt they were tools that could even be negotiated during the acquisitions process.
Finally, publishers agreed that “quality control” and “enhancing presentation” should be included on the publisher functions list as separate elements as they were both needed to measure overall costs (identifying all the publishing elements was important).
Manufacturing or production/design could become separate cost centers–unless either or both are included under “enhancing presentation.”
Conducting business is a co-ordination function. Most of the publishers indicated that their administrative costs and costs associated with many other administrative duties belong here. Publishers indicated that the greatest costs associated with their journals are the journal editors.
Acquisition functions and costs associated with acquisitions include: Peer review; Selection; Acquiring rights; Editors and support staff; Travel and entertainment; Telephone; Readers’ fees; Telecommunication; Postage; Dues and subscriptions; Staff development; Translator fees; Outside editorial support; Contracting. Should “peer-review” not appear in quality control, publishers indicated those costs would be placed here. Editorial support payments are not considered royalties (outside editorial support payments for peer-review activities).
“Editing” can be placed in with “enhancing presentation”–although this could present some problems since enhancing presentation is normally associated with visuals (and not the enhancement of content)–which is how this particular group described editing.
Manufacturing functions and costs associated with manufacturing include: Plant costs; First copy costs; Printing, paper, and binding; Additional copies; Printing presses; Permissions; and Off-print production.
Participants agreed to separate “graphic presentation” from “text presentation.” As each is distinct from acquisitions–and indeed are often the next stages after materials have been acquired. Once a product has been accepted for publication, it is developed and enhanced both graphically and textually (in the traditional model, works move from copy editing to the design department). As both “graphic” and “text” presentation are very different functions–and are handled by different staff (with different skills)–it is impractical from a cost standpoint to combine them.
Distribution functions and costs associated with distribution include: Fulfillment; Storage; Freight; Shipping to warehouse; Shipping to outlets; Postage; Business computing; Bad debt and collections; Damaged copies and returns; Space and warehousing; Packaging and recycling; and List maintenance.
There was some debate among publishers about the placement of shipping costs (both in and out), postage, and the (distribution) computing system. Some felt these cost and functions were better identified under “General and Administrative” (G&A) while others were more comfortable including them under distribution. In the end, they were placed with distribution.
Copy editing/Design functions and costs associated with copy editing and design include: Proof reading; Editing; Mechanical validation; Line editing; Indexing; Text design; Jacket design; Art program; Proof handling (comparing reader proofs to author proofs or keying second versions for comparison); Coordination (a.k.a. production editing); Penalties and damages; Telecommunications and postage.
Marketing/Sales/Promotion In terms of the size of the category, this function is ranked either first or second for commercial publishers. Functions and costs associated with marketing, sales, and promotions include: Sales force; Direct mail; Catalogs; Exhibits; Samples; Travel and entertainment; Advertising; Public Relations; Image building; Telemarketing; 800 telephone numbers; and Customer service/Technical support.
Financing functions and costs associated with financing include: Risk absorption; Inventory right-down; Taxes; Interest; A/R; New product development (investment); Capital equipment and facilities; Royalty advances; Recruitment; Research and Development; Bank debt (interest); and Acquiring capital/Fund raising.
Publishers felt that financing is a significant cost area to them–which is often overlooked or lost while discussing the publishers contribution to the value chain. Interest costs to publishers are a significant dynamic in the publishing process. The “cost of acquiring capital” is yet another cost which publishers feel is significant–and one that publishers identified as very different from interest costs.
General & Administrative (G&A) While this area may take up a very large portion of a publisher’s cost structure, it is mostly a grab-bag of costs. It is difficult to get a clear handle on the “functional aspects” of G&A costs. Often, G&A costs do not receive the same priority as the other cost functions but since salaries and salary fringe benefits are often placed here, it is near the top in terms of category size. Generally speaking, G&A costs are second or third in terms of size and importance to publishers.
Functions and costs associated with general and administrative include: Cost of conducting business (amounts dependant upon salary and benefits); Management; Computers and software; Regulations; Legal; Physical office space; Utilities/general postage; Accounting and auditing services; Salaries and benefits (including fringes, bonuses, etc.); Systems equipment, and its maintenance; Corporate dues, subscriptions, and memberships; Insurance; Travel and Expenses; Human resources; Contracts and contracts staff; and Penalties and damages.
Royalties Publishers often include royalties with marketing (or sales costs on internal budgets). However, in our definition they are separate cost elements. In order to clearly define the publisher cost centers, and compare costs with the other areas of the value chain, this group decided to identify royalties as a separate cost center.
Functions and costs associated with royalties include: Payments to authors; Institutions; Advisors; Editors and Series editors; and Payments to other publishers.
Managing rights/Protections functions and costs associated with the management of rights and protections include: Copyright registration; Permissions; Legal costs and fees; Licensing; and Rights management personnel.
In-house authorship/Works functions and costs associated with in-house authorship/works include: Text-books; Encyclopedias; Developmental editing; Fact checking; Work-for-hire authors; Repacking/compilations of previous works; and Artwork/graphics.
Since the advent of the Local Area Network LAN, publishers feel their productivity has increased by approximately half. Also, they believe that the responsibility for various tasks has moved backwards through the value chain (for example, authors also input or typeset) and with a Wide Area Network the responsibility for archives may shift from library to publisher (or publishers will have an opportunity to become archivers).
In general terms, publishers felt strongly that electronic publishing would most significantly impact the areas of “Manufacturing” and “Distribution” and greatly alter their costs and cost structures. In addition, several felt their in-house author costs would increase significantly. Publishers then proceeded to identify the impacts the emergent model would have on their cost centers.
Since publishers were able to find some production economies even under the historic model, they began to separate their manufacturing cost shifts in order to explain their projected costs in the new model. Most publishers believed their manufacturing “plant costs” would remain stable (or possibly increase) while costs associated with printing, paper, and binding would decline dramatically. All agreed that their capital costs would increase dramatically.
Under “plant costs” publishers included the creation of an image (that image is then distributed in various media). Publishers felt that creation costs were medium independent and would remain unchanged. They have experienced declining composition costs in the emergent model as publishers (newly converted from “cut and paste” methods to SGML-based composition methods) have reduced composition costs by as much as 45%.
The technical advances many publishers perform to lower the cost of producing paper and electronic products must be considered as they have significant influences on the marketplace.
The technology also changes behavior and responsibilities for information. In the flow of information from author to reader some positions and responsibilities will change in the new model. For example, today the act of archiving occurs after the paper product has been produced. A bound or electronic copy is produced and saved somewhere (normally in a library). In the new model, the act of archiving can occur first, at least that one strategy being adopted by a publisher. From that “master” file all spin-off products will be created and subsequently distributed (regardless of format). The “master” is an SGML archive from which a print copy can be produced (or a CD-ROM, etc.).
This way publishers can reduce composition and page-layout costs, archive the source file, and allow for easy and inexpensive format changes. For example, in one publication, the publisher is producing the same journal (in five different formats) from the same SGML file (one in print, on the WEB, a CD-ROM, on GuideOn, etc.) all at minimum cost.
Reliability and confidence checking also fall in the area of manufacturing. Currently, should a user wish to check the authenticity of a page they receive, the best way is to go to the library and check it against a page from the original. A fourth-generation electronic copy is virtually indistinguishable from the first generation–and yet may have been altered several times.
This cost is now borne by the publisher–at present the only “reliable” electronic copy of the information is held by the publisher. In the future, it is not known where that copy will be held or maintained. Who will eventually handle and maintain an electronic archive of files is as of yet, uncertain. Some organizations (Corporation for National Research Initiatives, for example) believe that a central (or regional) area should be allocated for archives, while others feel that individual publishers should be responsible.
While most publishers indicated that SGML tagging will lead to cost declines (since it allows multiple formats to be created from a single source file), many were concerned that repackaging costs would increase because of SGML. They reasoned that publishers, in general, will begin to produce a smaller number of a wider range of products–losing the benefits of economies of scale.
To further illustrate the point, publishers have been approaching SGML cautiously–evaluating if the added cost of SGML-coding (compared to generic-coding or compositor codes) is cost effective in terms of the product’s use. Publishers have found (for technically sophisticated publishers) costs will increase for the initial (or core) product (either print or electronic) and cost savings are only achieved if the information is desired in multiple formats (or if it is necessary to keep the information flexible for different formats for future use). Therefore, it is not only the publisher that needs to be technically sophisticated, a productive and fertile marketplace for SGML-coded information includes technically sophisticated end-users as well. Should the publisher not already be at a high technical level, then the move to invest in SGML-based coding methods becomes a savings (for print production as well as electronic products).
Publishers in many disciplines have experienced increased changes in user behaviors. They believe that the nature of information flow from author to reader may not take the same shape as it has in the past. In the physics world, for example, the existence of pre-prints has dramatically changed the process of information dissemination. If the print model existed because of its value to information transfer and rapid distribution of information, then publishers will find it difficult to keep current with the new marketplace and its use of electronic pre-prints.
Should the role of publishers change, they will seek other ways to add value and remain a significant part of the information chain (retaining market share and brand identity). Publishers are now considering ways to embrace different services and include them in their value-added activities (linking databases and other research, for example).
The journey of a pre-print work from submission through peer-review has been studied and users/authors have found that its readability was improved and its links with other electronic information sources had been enhanced. Publishers and information sources are seeking ways to exploit the available technology and provide the library community with many different types of products (selling SGML files or providing electronic access to archives, for example).
Because of the changing nature of the industry, publishers are seeking alternative ways to transfer information (or adding value to information). While this search may create different costs, the challenge already exists in every area of STM publishing. Each publisher recognizes that, when adding value to information, new costs are added (SGML coding, for example) that must be managed and recovered.
The discussion turned to SGML coding and what explicitly is done to an electronic file to add this value (and at what cost). SGML is content-based coding and the added cost has to do with staff editing the work to embed the codes in the appropriate places in the text. Some publishers equated it to indexing as it requires intellectual organization. Publishers also indicated that staff training costs will increase dramatically because of SGML-based training.
Many publishers feel, that for some applications, the level of SGML coding is not essential and an automation of the print environment is more appropriate (for areas where SGML is a not cost effective). When a file is prepared for mounting on Westlaw, it may have as few as five code–and can be used effectively by thousands of users (including: title, author, citation, content, among others). While it is possible, with the development of sophisticated coding software, that SGML-coding responsibilities could shift to the author, or that it may eventually be possible to convert a wordprocessing file (MS Word, for example) into an SGML-coded document. Publishers, however will still need to intervene to edit and peer-review the work. In addition, many publishers remain unconvinced that software will ever have the ability to perform SGML coding effectively–likening it to the software available which can automatically provide an index. SGML coding, like indexes, requires human intellectual abilities, analysis, discretion, and judgement.
Some publishers felt that leaving “format” choices in the hands of authors was characteristic of the print environment. What publishers want is an environment that is format minimal (or format translatable) by the author. For example, the National Science Foundation is experimenting with Adobe Acrobat as a vehicle allowing an infinite number of ways to create a file and one standard way to present it. While Acrobat may not be the definitive answer, that is the direction they are currently heading.
If a file is presented to the publisher in paper form, then it costs a few dollars (per page) to convert it into machine usable format. Should it arrive in a “WebTeck” file then it is a few dollars less expensive (per page) to convert it into a more flexible electronic format. However, it is important to note that publishers do not want authors formatting documents (as they will change it again anyway).
In either the print or electronic environment (historic or emerging models), having authors provide format minimal electronic content reduces publisher costs. In the past, it was not practical to accept content in any word processing format (the IEEE attempted to but it proved too costly)–in fact most content was re-keyed entirely).
“Format minimal” (at least in the physics community) describes the following structure: an author provides the format of the equation (and tables, etc.) and the text portion of the content is format specific (but not in terms of font size or type, etc.).
Publishers feel that archiving would greatly increase their costs, since they have not performed that function previously in the value chain–at least not such a sophisticated manner that it can be used as a resource by many. Publishers believe that the costs associated with archiving will increase.
Publishers feel that costs will increase in the new environment (while not dramatically) in the following areas: coding; adding value to products and services; and, archiving. Permissions, fees, rights, and new media rights will also have an increased presence in the new environment (also increasing costs).
If the market’s perception is that the value of information will increase because of greater electronic dissemination of information, then there is a good chance that permission fees for information use in other published materials will also increase. If this is not the case, and only the volume of information increases then the cost of permissions and rights will remain the same–actual dollar volume increases yet per unit charges for information will remain the same.
First-copy costs versus overall costs were discussed next. Permission and fees were not considered first-copy costs (so volume per unit of information can be measured). However, it was argued that coding is not discussed in this way–it is considered a first-copy cost, while permissions are allocated for a number of copies (x copies). Coding is an addition cost and is usually charged, based upon the size of the material you request.
Size of print run may be a consideration for permissions, but it is not the only factor to consider (distribution patterns should also be used–worldwide, massmarket, paperback, for example).
In some instances, fees could turn into licenses and publishers also discussed “the Xanadu Factor” (the process of entering a database through another source without a fee). Some users employ a uniform resource locator (URL) and hyperlink to information rather than ask permission first. Some publishers felt that footnotes were also moving in the same direction. If the infrastructure includes a means of charging for information as it is used then it becomes a publisher-independent function (and linking to material can pass fees for permissions on to the ultimate consumer). However, in this scenario, there is a maintenance cost to the publisher (allowing them to capture information at some point) and so costs may increase marginally in the new environment.
Publishers are monitoring new developments in this area. One such innovation is the universal resource number (URN), allowing documents to be traced much more efficiently.
From the publisher’s point of view, printing, paper, and binding will eventually disappear in the new environment. Users will print their own copies at their printer (depending upon volume). For high-volume journals or books, centralized printing makes economic sense.
Publishers have more than just their customers to consider in this model. Should a scholar propose a project (and will be using it as the basis for tenure, promotion, or a better position) then, for at least the foreseeable future, there must be a physical, tangible product as the end result. Most publishers have decided to use the SGML-coded file as the main product and perform short print-runs for the tangible artifact (print copy). Once it is out of print, it would be available as print-on-demand or in an electronic version. Publishers believe that it not as much the tangible object as the end result of the process that is valuable (that it has undergone peer-review and been accepted). Some publishers still believe that the hardcopy “book” is still an important part of the process and remains more significant than anyone in the value chain is willing to admit.
Many publishers held that it is not only (per page) printing costs forcing them to change scholarly publishing. Warehousing, shipping, postage, returns, handling and administrative overheads are all important considerations. While a best-selling book allows a publisher to employ economies (centralized printing and distribution, for example), sales rates of 200 copies of a scholarly monograph over 10 years, does not allow such cost savings.
Tenure decisions (and the need for scholars to attain legitimacy) and for research are two of the many uses for the scholarly monograph. The nature of its use in the scholarly community lends them perfectly for online access, as it is the rare monograph that is read cover to cover. Researchers seek specific information from monographs which is one of the advantages of the networked environment. It is the contention of many publishers that the economics of scholarly publishing should be promoting online information development in areas (like scholarly monographs, for example) which are at present not practical or cost effective to produce in print.
University presses, for example, are seeking to change the perception of their parent institutions by adding liberal arts to the electronic publishing arena and prompting other schools to follow along. Publishers are optimistic that this process will force authors and institutions to become more comfortable with online publishing. Once a critical mass is built and the scholarly community realizes it can search text easily and efficiently–then the economics will become much more clear.
Some publishers believe that while they are trying to change the perception of authors toward electronic products, print publishers are becoming more competitive and will offer competitive (or more favorable terms) for an author’s work in print.
Publishers believe that the cost of each component in their computer system will continue to fall. The amount of equipment necessary for the system to work effectively will continue to increase. Many publishers are caught in transition (that period of time before a new system produces new product). For most publishers, this transition period has been particularly difficult with large capital cost increases, maintenance cost increases, and necessary service upgrade costs–many of which were not in place before.
Publishers attempted to compare capital costs in the historic model to those in the new emergent electronic model. Most projected that (on average) capital costs would decline (and in most instances decline substantially). However, if publishers are forced to maintain an entire list on a server, capital costs will increase as the list increases (as the list will never go out of print). Maintenance, backup, and staff costs will increase (to name just a few).
Typesetting will have a different context in the emergent model–possibly changing into formatting. If typesetting is defined as only the process where materials are prepared for printing, then it will decline and almost disappear. However, typesetting is also the arrangement of words, images, or displays on the page and the taking of one form of input and changing it into another. That process or function will still take place.
For example, one could define typesetting as taking an archive file and creating a World Wide Web page and a CD-ROM–transformations (or repackaging, and reformatting for output). Traditional typesetting was primarily formatting information. The other aspects of the process are actually not in the typesetting area so it would not disappear from the new model. While the word “type” may no longer be appropriate, however, the same process will occur in the new electronic environment.
In comparison, many publishers have programmed SGML-coding costs into their budgets–and in fact they replaced (less expensively) traditional print typesetting. Graphics can be considered cost-neutral, since they must be reformatted in the new arena as compared with color separations in a traditional process.
While SGML allowed progress from the traditional “historic” model, the need to prepare for the “emergent” model strongly motivates publishers to develop entirely new products and services (archiving at the source, deriving alternative formats and products, etc.). While first-copy costs may increase (as composition costs for SGML-coded files increase initially), the SGML-coded result is more flexible and derivative products and services will eventually become less expensive. This cost relationship is also a function of the level of advancement of the publisher (prior to the decision to move to SGML-coding). The more technically advanced, the more expensive it will be for an individual publisher to change to SGML-coding. Also to be considered in this equation of costs, is that the use of electronic file systems have already reduced publisher costs significantly in the historic model–making the leap to SGML-coding more complicated and costly. Some publishers are changing to archival publishing–driven by the need to have the electronic flexibility to develop products which add value to new systems which are based increasingly on the distribution of pre- prints.
These new value-added services also entail new costs to the publisher. The SGML-code is “smarter” than traditional typesetter-based coding–and in that way are more similar to indexing (content- based rather than descriptive coding). Later in the development of electronic information supply, a change to author-supplied coding is imaginable (however, author-supplied SGML coding is now difficult to predict with any certainty). Automated coding features are also predictable, however publishers now fear the system may not work any more efficiently than automated indexing. Another drawback is that author formatting will likely interfere with a publisher’s flexibility, prompting publishers to request format-minimal submissions (software products similar to Adobe Acrobat also address this requirement).
Publishers are attempting to minimize redundancy and the need to create new processes for each derivative product in the electronic publishing marketplace. Archiving, as now performed, is a new and likely significant cost to publishers and end users.
Many publishers feel that fees for permissions will increase because of concerns about network “leaks” (leading to the assumption that the number of distributions will actually be greater than claimed). Some publishers are already charging fees as a function of the number distributions, but not the majority. Several publishers believe that products based currently on “fees” could turn into “licenses,” and that links from one networked resource to another will drive costs down. A maintenance cost for monitoring and updating these links must be created and employed as it is a new cost to publishers–one not previously identified in publisher products or budgets.
Printing, paper, and binding costs to the publisher will decline, yet most likely will increase in a user’s budget (as users print copies for inventory or for on-demand use). It is important to note that user costs for these printed products will be proportionally higher, as they will be proportionally lower in volume. The need for printed versions of a product seems to hinge on the requirements of recognition and reward.
Reliability and confidence checking (authentication) is a new and significant cost to publishers. In law, for example, some judges no longer accept cases printed from computer files (as some attorneys have altered cases). It remains an open question who will pay for this publisher cost. After the transition to digital information has been completed, capital costs will have declined greatly–even under the archival publishing model. While graphic costs will increase, because of the greater variety of display devices involved and their different characteristics (particularly resolution), many publishers felt that (for manufacturing especially) total staff costs will decline. However, the publisher’s need for new specialists implies added expenses. While the number of employees on the manufacturing side may be the same, more have to be in-house (at least for the time being) driving publisher costs up. One method of addressing this cost problem is a trend toward piece-work. Indeed, the industry is moving slowly in that direction. Manufacturing space costs will also decline as a result of more flextime and quality, affordable connections to the office.
- In the emerging technology, coding–(a first-copy cost) will increase the publishers costs incrementally if the publisher handles it and will decrease the publisher’s costs (incrementally) if the author codes the document.
- Added-value products and services–the ability to reformat and transfer the already existing coding into a wide variety of products (print, CD-ROM, etc.) will increase.
- Archiving costs are projected to increase for the publisher since it was not a function previously performed by the publisher.
- Fees for rights and permissions–publishers do not have a strong position just yet. There are many variables to be considered (value, how the products will be used, how transferred, etc.) and publishers remain uncertain.
- Printing, paper, and binding costs will increase for small on-demand printing and will disappear under all other conditions.
- Reliability and authentication are also added costs in the new model. The group was undecided as to who will bear the added costs (publishers, a central storage area or bureau, the user, etc.).
- Capital costs will increase dramatically during the transition period to digital information as a new infrastructure is built. Publisher costs will continue to increase should they be responsible for archiving files. However, when compared to the costs of printing presses, the costs of archiving electronic files are dramatically less.
- Plant costs for typesetting (now described as formatting) are projected to decline. While “graphics” replaces “color separations” costs are anticipated to remain neutral or increase only slightly.
- As the use of graphics is expected to increase–with fewer restrictions in the electronic environment (especially on the use of color, video, audio, etc.) costs will also increase. While each element may cost less on a one-to-one basis (and authors may eventually provide more original material in digital format) these saving are anticipated to be more than offset by the increase in volume.
- Overall, personnel costs in manufacturing are projected to increase as new technologies require greater numbers of technically capable staff members (commanding higher salaries). One result of this trend is that publishers are beginning to keep (in-house) functions that printers and other vendors now perform. Many publishers believe that a highly integrated institution (West Publishing, for example) will limit costs. Other publishers feel that an integrated approach will have the effect of increasing personnel and physical space costs, yet will drive down vendor costs.
- As more and more publishers are returning staff in-house, their physical space costs are increasing. There may be a short-term return to using vendors and outsourcing in a transitional period. Publishers are willing to demand more space for the short term, as they anticipate the virtual electronic environment will assist them in reducing it in the long term.
The process of archiving information electronically should allow publishers to merge manufacturing and distribution functions. While the functions are merged, physically the activities will not be together. (A DocuTech system, for example, will not move to the archive, it will be distributed.) Publishers felt that distribution systems will shift from an “output” system to an “access” system. This distribution shift will also lead to greater customer interaction (and an increased demands for customer and technical support–education, user groups, etc.). Access will shift from the publisher to the buyer and user.
In the new environment, a “product” could be “access” to information, or the actual shipping of electrons to a user (an Email electronic journal, for example). Shipping content electronically will drive the cost of distribution down dramatically.
Several publishers identified an additional capital cost associated with distributing multimedia products electronically. Because multimedia files are large, many publishers develop “mirror” sites which house the information and allow reasonable information transfer times as holding it in one place is inefficient. The cost of mirror sites is not much different from “inventory” in the historic model. Mirror sites may be a short-term fix–until more efficient technology or access methods are developed. Despite some cost increases in the short term for a few functions, when compared to warehousing, overall costs are significantly less expensive.
Physical packaging (and returns for damaged products) would just about disappear. However, there would still be a need for some physical packaging (a “software envelope” for example). Should it be necessary (or other types of similar products), then their development, implementation, and maintenance costs would need to be included in the marketing plan.
User interface costs vary greatly, depending on the type of electronic marketplace–an open system or proprietary one. Many publishers residing in open systems initially placed the development of their user interface with other product design costs–indicating that it was a transitional cost and minimizing its importance (assuming the network interface was mandatory and universal). Publishers of “proprietary” systems feel differently and develop a unique interface designed to appeal to a repetitive user base (which will continue to return for their content) and to stimulate interest from a larger overall community.
Several publishers felt it important to mention that the update frequencies of their products have changed because of electronic information. In the past, a print product was updated annually, an electronic version (of the same product) is updated monthly (with information shipped to subscribers online). While no physical object is shipped each month, their staff gathers, updates, and distributes new information each month. There is a significant difference between the two–electronic products are information-intensive and print products are format-intensive.
Returns will continue, even in the online world, because searches will not always be handled correctly, delivery systems will fail, and credit information will be lost or stolen. The costs associated with credit and credit administration will remain and, in many instances, increase. Additionally, not having a physical object to return has its own set of problems–as publishers cannot simply ask for a return (all a user needed to do historically was send back a copy). Postage involved with shipping actual products to users will virtually disappear, as most electronic products will be shipped electronically.
Many publishers feel that user access costs will be borne by the individual user, department or institution. Most publishers and users accept them as a necessary networked information infrastructure costs (a subscription for access, club fees, dues, or other payments).
Other publishers believe that user interface costs are borne in the cost of manufacturing (and should not be placed in with distribution costs). These publishers are concerned that by placing user interface costs with distribution, they will have difficulty separating out costs associated with distributing product, distribution of marketing materials, customer service correspondence, and other distribution. These publishers would prefer to place user access costs in their G&A costs (or along with manufacturing costs). While all publishers recognize it as a real cost, most publishers allocate it differently.
In an ideal electronic setting, instant approval and debiting on an account prior to the release of information would be automatic. However, in many instances (especially with third-party or library vendors, for example) that is not possible. Credit card vendors (and other middle men) will enter this marketplace to take advantage of opportunities. It is premature, however, to predict how costs associated with debt collection will be affected.
Many publishers could visualize conditions in which costs associated with list maintenance would increase in the future (rather than decline). For example, keeping and maintaining links to other databases and access points is but one form of list maintenance (an infrastructure and/or maintenance cost).
One area where most publishers agreed that their costs should decline significantly would be warehouse space requirements. The physical space necessary for warehousing (and the cost of warehousing) should decline.
The accounting/tracking process to keep up with order processing (and the number of users) will continue to be very complicated–especially with regard to the assignment of royalties. The networked versions of many products will allow pieces of a work to be accessed. This makes each transaction much more complex (and more expensive). Automating the royalty collection system is a new and as yet uncertain area. How it will be managed in the new environment is not clear.
While there may be increased volume, what many publishers are hoping is that there is increased concentration through only a few intermediaries limiting the amount of direct contact and business accounting.
Personnel costs are projected to decline to only a few necessary –and highly skilled members of the staff. The number of warehousing staff (those not technically advanced) will decline while product support personnel will increase. The “personnel” line will not likely decline–while it may be distributed differently as an overall cost–it will not decrease significantly.
Archival publishing changes the cost process as both manufacturing and distribution merge. Education, technical support, and customer service will be very important functions in the new environment. List maintenance will likely take a new form, and a much more significant and strategic place in the business plan.
Distribution costs will also interact with expanding demand. There will be claim costs associated with unwanted information. The cost of maintaining a proprietary interface versus an open one and the cost of supporting either remain undecided. Debt/debt collection costs may decline, should the ability to credit- check in real time prove practical and efficient, also depending upon the willingness of credit agencies to assume risks.
Business systems may disappear with the emergence with a limited number of intermediaries (NetBill, for instance), even though the volume of business may increase significantly. Personnel costs are anticipated to decline as a smaller number more highly paid staff work with fewer traditional “pickers and packers” (many are to be replaced by networked (phone as well as electronic) staff taking orders and offering support. Space requirements for distribution will shrink dramatically.
Several publishers felt that a few of the lessons and methods learned in “distribution” may transfer to marketing. Encouraging the marketplace to access information through other sources (linking) is more effective than the wide-view marketing approaches many now employ. WEB pages are another example. Publishers have learned that name recognition is important in an electronic environment.
Only a minority of publishers felt that direct-mail marketing would be replaced by Email marketing or other services designed to reach subscribers and potential subscribers electronically. While several societies and electronic publications are testing response rates for users contacted electronically, most publishers are wary of such approaches for marketing/sales and instead, will continue to employ proven direct-mail marketing techniques into the near future.
The majority of publishers would prefer a plan that would assist in reducing the waste of current mailings and continue to refine their direct-mail campaigns to traditional subscribers. At the same time, they are exploring costs, response rates, and the effectiveness of marketing electronically. Many felt that international markets may be a good place to begin.
Another possibility that many publishers are investigating closely is that some direct-mail promotions could be replaced by WEB servers (and other links created on the Internet). However, it will take time before this method of electronic marketing becomes the standard and accepted form of subscription generation and promotion. For example, for several years (in the physics community especially) preprints were similar to direct-mail promotions. Each researcher had a “target market” that was sent materials. Over time, it became more expensive to send research in the mail and lists were trimmed to include only important and core colleagues. When wide Internet access became available, physicists applied the technology to their preprint network and created an inexpensive electronic pre-print service. Pre-prints are now available by request and can be sent to a present “list.” This may be an indicator of a new method of electronic marketing on the Internet. It also places a different type of burden on the publisher–as they must create exciting online materials that entice users.
For example, an Email catalog linked with a WEB site will be visited by users searching for material on a particular subject. The question that remains, will users browse, download available electronic files, or purchase entire print or electronic records? While publishers remain unsure, they are confident that a virtual bookstore of some kind would eventually occur. List serves were also discussed as a possible future marketing opportunity.
Selling their “imprint” has become very important to publishers in the electronic environment (contrary to print publishing experiences of the past). Marketing print products was generally by the item–a journal title, monograph, magazine, etc. Now that the marketing focus has shifted to the company, publisher, or location where a particular product can be found (often a publisher’s WEB page), the electronic marketplace places great importance in trusted and reliable information resources. However, publishers remain uncertain as to whether it is more or less costly to market products this way.
There are several considerations to take into account. Most users are unaware who publishes their primary print sources. While it is possible they would seek out publishers directly, it is more likely they will go to an online vendor to search for information. If that is what occurs, then the identity of the publisher is again subsumed into the system (for example, “I just ordered Nature through America Online.”).
To combat this problem, many publishers are seeking additional cooperative ventures–recognizing that buyers do not wish to jump from publisher to publisher seeking information. Cooperative ventures with other publishers and third-party intermediaries as well as a system of electronic links to related information are appropriate in the electronic environment as buyers prefer to enter the Internet from a single source.
Some publishers fear that the distinction between “information” and “publication” may begin to blur in the electronic environment. Publishers wish immediately to establish to the marketplace that they are the source of authentic, up-to-date information. In addition, marketing strategies will need to include methods designed to draw users to a location–and not only to a product. This approach will involve new costs (events featuring an author online and samples of works released without fee, are examples)–in fact “Dial-a-Book, Inc.” is entirely based on providing samples (i.e., tables of contents) without fee.
The majority of publishers felt they required a strong presence at exhibits and trade shows as face-to-face interaction is still and important part of their marketing plan. In addition, since authors are often solicited or discovered at shows, they remain an important acquisitions tool. Exhibit costs continue to increase–especially if demonstrations of new electronic products are included in the future.
While publishers anticipate advertising over the Internet, they do not foresee a significant increase in costs. While budgets may not increase, many believe that new advertising opportunities will become available to them. None of the publishers present were confident that their advertising costs or budgets would either increase or decrease.
Most participants felt that a smaller, but much more technically advanced, sales force would be required to sell their new electronic products. Few publishers have been successful is utilizing their regular exhibit staff and print sales force to demonstrate or sell products available on their WEB sites. It seems (at least at this time) that a more technically knowledgeable staff and sales force may be necessary to sell electronic products and services effectively.
Publisher costs are projected to increase in terms of staff and time required to review and develop the necessary licenses and agreements for the sale and licensing of electronic information.
Public relations and company catalogs available electronically may prove important in the future. Publishers were unsure how costs would be effected.
Physical space requirements do not appear to be changing, at least initially. Publishers believe that these costs would remain about the same.
Many of the marketing opportunities in the new online environment seem to be reactive–as the market now accesses the publisher (a store-front model). This is one reason that publisher name recognition and promotion is much more important than with previous direct-mail “title” promotions.
While publishers felt that direct-mail promotions has not been cost-effective for some time, most agree that direct-Email will not generate successful response rates for some time to come either–as the marketplace is not prepared for electronic marketing yet. In addition, new marketing questions come into play, “Who does one market to, and how can you target them?” (intermediaries or intelligent agents, institutions, and/or individuals, for example).
Publisher sales forces must be much more technically and content knowledgeable in the future in order to sell online products. Many publishers also see themselves expanding their involvement in cooperative agreement programs (publisher to publisher, publisher to intermediary, publisher with buyer group, etc.). In terms of staff requirements in the future, most publishers see staff with a greater technical expertise level, or at least, fewer lower-level staff members. In addition, allocation for training will increase greatly as will technical and content support.
Generational Effects in Publishing
Because of the transition from print to electronic publishing, most managers (at traditional publishing houses) are not as technically sophisticated as their product users (marketplace). In the area of product development, STM publishers are not as technically sophisticated as their marketplace. In the past, a user’s unwillingness to read large files from a computer screen was a limitation. One participant indicated that “While he printed large files onto paper, many of his younger colleagues read vast amounts of material directly from the computer screen.”