Select Committee on Science and Technology Minutes of Evidence

Examination of Witnesses (Questions 64 - 79)



  Q64  Chairman: Welcome, Mr Davis and Mr Jongejan. Thank you very much for coming along to help us. You have been in the first session and I do not want to repeat similar questions, so under the different headings for the questions I wonder if you would like to take maybe five minutes to answer some of the issues on bundling, digitalisation, pricing policy, business models and so on? If you miss out any I am sure my hawk-eyed committee will pick up on it, so please do it your way.

  Mr Davis: On pricing, we have put our prices up over the last five years by between 6.2% and 7.5% a year, so between six and seven and a half% has been the average price increase. During that period the number of new research articles we have published each year has increased by an average of 3 to 5% a year. Last year it went up 5% a year, so it is the same point as was made earlier. On top of that we have increased the number of historic articles available by some 20-30% a year by adding all of our back articles on to ScienceDirect. The number of scientific researchers in this country accessing our content has increased by between 15 and 20% a year over the last five years. Usage, which is measured by librarians by article downloads, has increased by between 50 and 90% each year. All of those have significant costs to us to carry, obviously. Against those kinds of increases we think that the price rises of six to seven and a half% are justified. We also think that the institutional libraries are getting significantly better value for money year on year. They are getting more research papers, new research papers, each year. They are now getting all the archival research papers going back up to 150 years. They are getting massive improvements in functionality through the ScienceDirect platform in which we invest very heavily each year. More and more users are using our content each year. Their cost per article download, which to them is a key criterion, is falling by between 50 and 80% each year. To give you an actual number on that, five years ago the cost per article download was over eight pounds. In 2003 the cost per article download averaged £1.69. We think this it will go down below a pound. On bundling, there are a lot of misunderstandings about bundling. The first is that all our customers, all librarians and institutions, are free to choose whatever they wish. We put in front of them a wide range of options. They can buy a small or a large number of articles that they want. They can buy a small or a large number of journals that they want. They can have those in print, in electronic or both print and electronic. They can buy subject collections, which are groupings. They can buy the whole lot. They can have contracts for one year, three years, five years. We have put the whole range option in front of them, which we then negotiate. We do give discounts. Obviously, if they expand beyond their core collections and take significantly more journals we will give them those at a very significant discount. There is no forcing. It is up to them to decide which they want. We do now make available to every librarian exactly what the usage was for each individual journal they took over the last 12 months or the last three years or whatever the length of the contract was, so they have total visibility and flexibility in terms of what they decide to take.

  Q65  Chairman: Business models?

  Mr Davis: We are, I would say, neutral on open access at the moment. We think that the present business model has served the scientific world very well. People often underestimate, I think, how well it is served. Today you have 1.2 million articles published every year. Every one of them is peer reviewed and every one of them is in a respected journal, distributed to 250 countries round the world, reaching some 12 million scientists, over 90% of all the scientists available in print and on line. I think that is an end result that the industry can be proud of. Perhaps more important than that is that the penetration of scientific research has widened hugely over the last ten or 20 years. We calculate that over 90% of all scientists globally now have access to our content. 97% is the actual number in the UK, and it will be similar in the US, that have access to our content. Productivity in terms of usage has gone up astronomically. It is roughly going up by 50-90% a year. Last year there were 176 million article downloads just on ScienceDirect. I think that the present model is working well and making a real contribution. On open access our position at the moment is that we want to watch and learn and see what happens, as we have done in the past. I say we are neutral because at the moment there are some not insignificant questions being asked, not just by us. We get an awful lot of feedback from authors, from librarians, from researchers, from scientists, who also themselves access all the internet chat rooms, and the kinds of questions that are now being asked, and I do not necessarily think we have answers to them today, are as follows. The first is, will open access increase accessibility? All of us are committed to increasing accessibility of scientific content. I would argue that in the last ten years we have made a huge contribution to that, and I think 90% worldwide of scientists and 97% in the UK are exceptionally good numbers. Incidentally, any member of the public can access any of our content by going into a public library and asking for it. There will be a time gap but they can do that. We make ours available both in print and on line. In fact, open access would today have the result of reducing accessibility to scientific research because it is only available on the internet. In this country that would exclude some 20-25% of scientists; globally it would exclude over 50% of scientists. In factual fact, the business model we have today gives the widest possible access. The second question that increasingly is being asked is the inherent or potential conflict of interest if a publisher is receiving money from the author to publish that article. There is an inherent conflict there in terms of quality, objectivity, refereeing and so on. One of the real strengths of today's model is that there is no conflict there. We reject well over 50% of all articles submitted. Other journals do that or even higher. If you are receiving potential payment for every article submitted there is an inherent conflict of interest that could threaten the quality of the peer review system and so on. Fourthly, people are starting to ask the question, is it actually right that the author or the authoring institutional university should pay to have the article published rather than the end user? There are quite significant implications. One is purely the affordability and the real question is whether third world institutions and authors would have the capability and the funds and whether this would inherently favour wealthier institutions or authors. It also means a very significant transfer of funds from, for example, the commercial sector. Twenty five% of our revenue comes from the commercial sector and this could be companies like the Ford Motor Company or Boeing or Merck Pfizer. Under the open access system they would get all the research free of charge, they would pay nothing, while the producing institutions, whether that is Imperial College or Yale or Oxford, would be the ones who paid or the authors would pay. That is a very debatable shift of funds. As I have said, it has serious implications for research institutions in this country. This country is a producer of research rather than a consumer. You have seen the numbers. We produce 5% of the world's research and we consume 3% of the world's research. These are the kinds of questions that are out there now on open access, and I think that over the next few years we will gradually develop the answers. Some of them may be positive, some of them may be negative, but I think that these are serious questions, important questions, that not just us but the whole scientific research world is asking, and we have got be very careful to develop the right answers.

  Q66  Chairman: Thank you for that. Before I turn you over to the wolves let me ask you a question. I have it from a whistle blower that you think this inquiry we are carrying out will do very little to change policies in the publishing field and that really we are an embittered bunch of old, tired academics. Is that whistle blowing in your view correct?

  Mr Davis: No.

  Q67  Chairman: How would you correct that for the record?

  Mr Davis: I would say that is complete rubbish and just not true at all. Right from the word go we have decided, and I think have tried, to be as co-operative and open as we possibly can be. We have submitted a very full report in answer to your questions. We invited you round to our offices. We are absolutely ready and committed to provide all the help, information and data we can on this.

  Q68  Chairman: So you welcome this inquiry?

  Mr Davis: Absolutely.

  Q69  Chairman: Do you think it is opportune at the minute in this field of scientific publishing?

  Mr Davis: The industry has been going through a period of extraordinary change over the last five to ten years, mainly due to digital technology, and it is quite an exciting time. Business models are changing, access is changing, usage is changing, productivity is changing. My answer is that, if it is an objective, inciteful inquiry, absolutely.

  Q70  Chairman: I think the number of people in the audience reflects the interest.

  Mr Davis: Absolutely.

  Chairman: We do not get it for every inquiry, including renewable energy, I might add.

  Q71  Dr Turner: One of the things which has surfaced in the national press recently has been the practice of some pharmaceutical companies to pay authors to put their names on research which they have not necessarily done. What do you have to say about possible malpractice or fraud of this nature in research publication?

  Mr Davis: That absolutely would be 100% against our policy and our practice. In an industry that publishes over a million articles a year you are always going to get the odd one that slips through, but generally the track record of the industry and ourselves has been, I think, unbelievably high in terms of the monitoring of quality and so on. We absolutely would not for one minute countenance what you have just described.

  Mr Jongejan: That is exactly the reason why we are concerned on the open access model.

  Q72  Dr Turner: Do you think that you have got possibly too big? Is it in the public interest that you command as much of the market of publication of STM titles as you do?

  Mr Davis: I will give the answer in two parts, first just factually. This is an extraordinarily fragmented, diverse industry. There are over 2,000 publishers in this industry. The top six publishers have about 35% of the market, so this is not a consolidated industry per se. There are new journals regularly being launched. There are, as I said, 2,000 by and large flourishing publishers of all sizes and you have got different business models—commercial, university and society. Within that we are the market leader with, depending on how you calculate it, something like 20% of market share. If you ask is this helpful or not, in the last seven years we have led the industry and the scientific publishing world to on-line. I think most people would agree we have pioneered it through ScienceDirect and through the electronic platform. You can ask anyone in this research community has it been massively beneficial in terms of penetration, usage, access and so on, and the numbers I have already given you. That would not have happened if we did not have the scale to invest what turned out to be in excess of £200 million to develop the ScienceDirect on-line platform.

  Q73  Dr Turner: None the less, when you were contemplating a merger with Harcourt, the Competition Commission examined this and one of their analysts came to the conclusion that the merger would be against the public interest. Can you allay his concerns?

  Mr Davis: Yes. First, I ought to point out that the inquiry concluded that it would not be against the public interest and gave the go-ahead for the merger to happen. The one individual was particularly concerned on pricing, that Harcourt and Elsevier together would have excessive pricing power which we would exploit. At the time Harcourt was putting its prices up each year by 8 to 10%. We were putting our prices up, as I said, by 6 to 7%. His concern was, "When this happens I know what is going to happen. You are going to end up putting all the journals up by 8 to 10%". We said, "That is not the case. It will be the opposite. We will move the Harcourt pricing down to our level", and that is what has happened. Since the Harcourt acquisition we have put our prices up in the range of six to seven%. The other point I would add, and we can send you all the data, is that every year we analyse every price increase from every publisher on a graph. This is announced price increases. Every year for the last five years we have been in the bottom quartile or bottom tertile in terms of the level of price increases. That is factual. We can give you the data. I think therefore we have been a moderating influence on pricing in this industry over the last five years.

  Q74  Bob Spink: You have given a very good account of yourself this afternoon, particularly on bundling. You provide flexibility on the packages you offer and customers have a choice of what they take. I just wondered if you could explain why and how you have managed to increase the number of articles by 200 to 300% since 2001.

  Mr Davis: We have increased the number of articles?

  Mr Jongejan: Article downloads?

  Q75  Bob Spink: Yes.

  Mr Davis: The primary driver has been the ScienceDirect on-line platform which gives increasing functionality in lots of areas. Researchers tell us absolutely consistently that it is an enormous boost to their productivity, which is why they are using it more and more. The first reason is that existing users are using it more and more as we add more and more functionality, so there is a cross-reference capability where they can move to other publishers, there is a linkage capability to other articles. They now have access to the world-wide web through our search engine and so on. Secondly, more scientists are using it. There is a 20% increase a year in the number of scientists and, lastly, the number of institutions who are taking it, so more scientists, more institutions, more functionality.

  Q76  Paul Farrelly: Mr Davis, there have recently been examples of your losing editorial boards. People have been setting their own journals up, screening the pricing policy, defecting to rival publishers. Some people might say that that is the market working, but at the same time you began your address by saying that over the last five years you have been able to put through price increases of seven, 7.5%.

  Mr Davis: Between six and seven and a half.

  Q77  Paul Farrelly: Year on year?

  Mr Davis: Yes.

  Q78  Paul Farrelly: I know you have got a background in consumer goods because I remember as a City editor of The Observer reporting on your appointment. Those are price increases that you in your previous life would have given your eye teeth for. What I would like to get to the bottom of is what features of the market you are now operating in allow you to sustain price increases of this order, substantially above inflation, year on year? I am not asking you to justify them, but what features of the market allow you to sustain those price increases?

  Mr Davis: The biggest single factor is usage. That is what librarians look at more than anything else and it is what they determine whether they renew, do not renew and so on. We have usage going up by an average of 75% each year. In other words, the cost per article download is coming down by around 70% each year. That is fantastic value for money in terms of the institution, so I would say that is the single biggest factor. The second factor is ScienceDirect. We are continuing to invest well over £100 million developing new technologies, new features of functionality, and I think those are genuinely appreciated by our end users and allow us to continue to invest but also give them value for money.

  Q79  Paul Farrelly: So it is demand driven?

  Mr Davis: The last factor is that we are publishing three to five% more research articles each year.

  Mr Jongejan: From the consumer's point of view, clearly the functionality we now provide is so increased that to run a library you basically should be able to take advantage of this. You ask how can you sustain that kind of price increase in a market where the budget grows at three%. My response would be by increasing functionality and efficiency at the consumer end. I think every publisher and librarian agrees that what we offer now saves an enormous amount of work walking from A to B and so on.

  Mr Davis: We could position it a different way and if I were in my old consumer business I might by saying that in the last five years the cost per article has come down every single year, the cost per user has come down every single year for the last five years, so there is a different way of looking at it. Our investment has gone up every year and increasingly up every year for the last five years.

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