Puzzling over the economics of academic journals

Oliver Marc Hartwich of the Centre for Independent Studies wrote in the Australian about the academic journal industry. He was just as puzzled about it as Fourcultures has been.

The case study he used to illustrate the point was the Australian Economic Review (but any journal from the Elsevier, Springer, Wiley-Blackwell, Taylor & Francis, and Sage stable would be similar).

And here’s the point:

  • the article writers all work for no direct pay (they are academics writing to disseminate their work and to secure non-financial prestige for their output);
  • the three editors are employed as professors by the University of Melbourne (again, editorship of an academic journal confers a certain amount of kudos, not cash) and
  • the sub-editing and layout work is performed by the publications manager of the excellent  Melbourne Institute of Applied Economic and Social Research. Peer review of articles is also, by almost universal convention, performed for free as part of the reviewers’ professional academic activity.

The end result of all this ‘free’ work is that the subscription for the Australian Economic Review costs $507 a year, payable to the publisher Wiley-Blackwell.

The conclusion to be drawn from this is that private publishers are making a large profit by exploiting a culture of free academic labour, while simultaneously limiting the distribution of research to those who can afford to pay a large amount of money for it. If the editors of the AER were to cost the labour required to produce the journal and set it against the income derived from Wiley-Blackwell, I suggest they would quickly see that the whole enterprise is deeply inefficient.

But then they are economists, and might see things differently.

John Willinsky (2009:67) put the matter this way:

“The need for a formal reckoning, at this moment of digital transformation, could not be clearer, given the tug between publishers wishing to sustain an economy that the academic community finds unsustainable, on the one hand, the commonly recognized potential for far greater access, on the other. There is a sense that the academic community has accumulated the resources and capacities, in cooperation with commercial ventures, to greatly reduce the restrictions in who has access to what knowledge, and to approach universal access to this body of research and scholarship.”

The editor of the AER, Prof Ross Williams, wrote a reply to Oliver Hartwich’s article, making a couple of interesting counter-claims.

First he said:

“The Melbourne Institute is dependent on outside funds and without income earned from worldwide distribution by Wiley-Blackwell, the journal would cease to exist.”

Perhaps we could be told just how much income is earned and how the Institute’s accounts set this against staffing costs. If the journal ceased to exist, either the publications manager and many academics would have more time or the institute would have a lower payroll cost. Without knowing the figures it’s hard to say (see below), but my bet is that if subsidised labour was accounted for, the ‘income’ would cease to look quite so attractive. For an editor concerned that a journal might ‘cease to exist’, perhaps broader models of publishing could be investigated. A start might be to encourage the self-archiving of accepted journal articles.

Second, he said:

“By using a publisher with an excellent distribution network, Australian research is disseminated internationally. The Review is available for download in thousands of libraries, with these downloads running at an annual rate of nearly 50,000.”

Here lies a fundamental problem of perception. Those not born digital just cannot and perhaps will not get their heads around the way the Internet has disrupted ‘traditional’ concepts of distribution. As Willinsky (2009:67) puts it:

“A change of publishing mediums [sic] on this historical scale typically alters the communication economy, changing production modes, audience profile, and content form.”

To be clear: the World Wide Web is the best (fastest, most accurate and least labour-intensive), not to mention the most ubiquitous distribution system in the entire history of writing. Those who regard such a claim as hyperbole just haven’t grasped it.

Through the Internet, much Australian research is already disseminated internationally, at a fraction of the cost charged to users and providers by academic publishers. Documents uploaded to the Internet are available for download not ‘in thousands of libraries’ but on tens or even hundreds of millions of desktops and laptops (and increasingly mobile phones), with almost no constraint. To set a download rate of nearly 50,000 in some sort of perspective, Fourcultures, this very website, hardly less obscure or specialist than the AER already achieves a download rate of 24,000 a year and growing. Total cost: $15US per annum. Note that the total cost of a distribution of 50,000 or 1000,000 per year would be… exactly the same.

Figures Derived from the Annual Report 2008, Finance and Performance Indicators

total income 2008: $13,784,277

income from subscription services: $266,726

income from Melbourne University: $1,412,222 (Faculty of Economics and Commerce) plus $652,928.

There were 239 subscriptions to products other than the AER, and these cost a minimum of $506 (these are 2010 charges applied to 2008 subscription numbers, but I have taken the lowest cost for a 2010 subscription, not the most usual cost, which is $715, so hopefully this estimate is reasonable).

I estimate the income to the Institute from subscriptions to the AER is no more than $145,792 per year (total subscription services income of $266,726, minus estimated income from non AER subscriptions of $120,934 (made up of 239 subscriptions @ $506).

This seems reasonable and might notionally pay the wages of the subsidised editing, proofreading and type-setting. But…

Assuming Ross Williams’ claim is correct, that the journal is ‘available for download in thousands of libraries’: availability in 2,000 libraries times a subscription rate of $462 (cheapest institutional subscription for online only in Australia only, so most likely an under-estimate) equals a minimum revenue to Wiley-Blackwell of $924,000.

It would be interesting to know whether the University regards publication costs for the AER as an allowable use of its financial allocations, or whether the journal is ring-fenced and must be self-supporting. The Annual reports don’t make these kinds of distinctions. It might be reasonable not to, were it not for the fact that the revenue gained by commercial publishers seems so large and the cost of commercial  journals to libraries and and public also seems large.


John Willinsky (2009) The Stratified Economics of Open Access. Economic Analysis & Policy, Vol. 39 No. 1 (March): 53-70. Accessed at http://www.eap-journal.com.au/download.php?file=691

See also:

Open access to publicly funded knowledge

More on open access journals


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