Study on the economic and technical evolution of the scientific ...

Some publishers (Elsevier, Blackwell, Springer,
Oxford University Press) have recently presented
the main features of their big deal contracts
and their thoughts for future pricing schemes. 59
Initially, the main contract was “print+electronic”,
that is the library committed to continue
spending on printed journals what they spent
in the past, and the full access to the electronic
collection was offered at a surcharge.
More recently, both “Electronic+print” and
“Electronic only” contracts are offered.
There have been in the US and in Europe some
voices to complain about such contracts. In the
US, large universities like Harvard, Cornell,
Michigan have decided not to sign such
contracts and rather pay journals on an
individual basis.
Potential worries that big deal contracts raise
are as follows:
(a) If the contract is long term (three-year
durations seem typical) 60 the library has
little room to re-adjust its expenses. This
reduces the flexibility for libraries to
respond to new offerings on the market,
which is regrettable in a world with a
rapidly changing technology and evolving
business models.
(b) The commitment to spend the historical
amount on printed copies makes
cancellations less attractive; this is
amplified when the savings for canceling
a subscription are inferior to the price of
an individual subscription.
(c) Both effects make entry by competitors or
new business models more difficult.
The cost of serials and the strong desire of
libraries to benefit from full access to the
electronic collection has led libraries in Europe
(and elsewhere) to organize in consortia, which
has also made the pricing of contracts quite
complicated, since while all members of a
consortium have access to the full electronic
collection, they differ in their (historical)
purchases of printed journals. An illustration
of some of the features of big deal contracts is
offered in Edlin and Rubinfeld (2004).
They analyze contracts negotiated with Elsevier
in 2002 by individual libraries and consortia in
the US. There were three options offered.
(a) With “Limited collection”, the library
chooses for which print journal there will
also be electronic access (at a surcharge
of 25% of the printing fee).
(b) With “Complete collection” the library
commits to continue purchasing printed
journals in the future, the library obtains
the access to an electronic version at a
12.5% additional fee for any title and
benefits from a price protection (a bound
on future price increases), swapping of
similarly priced titles is allowed, and
cancellations are allowed, but at a cost.
(c) With “ScienceDirect E-Choice,” the library
gets full access to all titles for which the
library subscribes at a price equal to 90%
of the total print subscriptions, print
journals are available at 25% of the base
print list price.
Options (b) and (c) are examples of big deals,
(b) being “Print+Electronic”, while (c) being
“Electronic+Print”. A contract like (b) creates an
incentive for a library to keep its preexisting
journal portfolio since it is ensured of a price
increase lower than 7.5% per year for the
length of the contract while prices for
individually purchased subscriptions increase
at a faster pace. Contracts (b) and (c) also
enable the library to expand its electronic
access, either to cover a subject area or the full
ScienceDirect database.
As Edlin and Rubinfeld (2004) argue correctly
such options make it less costly for libraries
with a small historical expense to have full
electronic access. 61 Hence big deal contracts
offer the possibility to discriminate and allow
the publisher to extract more surplus from
each library. The literature on third degree price
discrimination points out the potential
efficiency gains from third degree price
discrimination, but it also shows that this
discrimination will enable the monopolist to
extract most of the surplus from the consumers.
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