Wednesday, August 13, 2008

Elsevier Profits: $1,750 per minute - and growing?

Mike Dunford on The Questionable Authority has calculated Elsevier profits (STM and Health & Sciences Division) at $1,750 per minute.

This is based on the Reed Elsevier 2007 Annual Report.

According to the Reed Elsevier 2008 Interim Report, downloadable from the Reed Elsevier website, Elsevier is working to cut costs. Elsevier also has an optional open access program, charging $3,000 per article; one assumes at least some authors must be taking advantage of this.

Comments and speculation

If costs are cut, there is a new growing revenue stream, and prices are still going up - does this mean profits will continue to increase? An increase from a 31% profit margin (for 2007), would be a very healthy profit indeed.

Moving to cut costs when the company's profits are this healthy is certainly an interesting move. If a company thought open access was the way to go, but did a little number-crunching and figure that costs would prohibit a shift to OA via article processing fees, then cutting a few costs here and there would make sense, wouldn't it?

What would make even more sense from a business perspective for both the short and the long term: cut costs, but also cut prices by at least as much as you're saving from cost-cutting, and from author's fees. Even without cost-cutting, or factoring in author fees, a 10% decrease for all library subscribers still leaves a far-above-average 21% profit rate. Plus, library subscribers would have some cash to pay those author's fees; this approach could greatly facilitate a gradual transition to open access. (Use author fees to offset subscription prices; next year, libraries have more funds to contribute to author fees, etc., essential a reversal of the pricing spiral of the serials crisis). STM journal prices for the past few decades have rised far beyond inflation, and far beyond the ability of libraries to keep up. For long-term success, a business needs healthy, happy customers. This would also be a good success item to report, for Elsevier's new Corporate Responsibility Division.