21 Elservier Case Study

              Femke Van der Berg, is the Executive Vice President, Strategy for Elsevier. She is responsible for developing and enabling the execution of the overall strategic direction for Elsevier and managing Elsevier’s sales effectiveness, marketing effectiveness and pricing centres of excellence. In Europe, since the summer of 2018, an important number of high -profile customers have decided to not renew their contracts with the publishing giant. Instead, many have already secured agreements with competitors such as Wiley, while others are at the negotiation stage. These customers are claiming that access to research is inaccessible and unsustainable under Elsevier’s existing business model, the Paywall and are joining the Open Access initiative. Customers in North America are also following this trend. Femke needs to make strategic decisions that involve deciding whether to fully adopt this Open Access model customers are calling for, continue with the Paywall structure with some space for Open Access or adopt the Publish and Read model. She also needs to evaluate if they should modify their value proposition. The board of directors has given her 3 months to recommend the position the company will adopt. Having been in academia and R&D, Femka can understand where some customers are coming from, this makes her decision-making process more challenging.

             Elsevier has a rich history of publishing that dates centuries back to before it was founded as a small Dutch publisher 1880. On its journey through to what it is today, a modern-day global information and analytics company it has collaborated with many scientific groups and personalities such as Julio Verne and Stephen Hawking, it has evolved with the ways humans exchange information and it has positioned itself as one of the world’s leading providers of technical, scientific and medical information business. They actively leverage technology to help science and health professionals make critical decisions in all facets of their work. (1) – Europe and North America represent its largest markets with 25% and 42% of revenue, respectively. In 2018 the company published over 470,000 articles in 2500 journals. Elsevier accounts for 16% of the world’s scientific market and is part of the RELX group, bringing in 33% of its revenue. In 2018, Elsevier’s net profit margins reached 37%. In the global scientific, technical and medical market segment it held the #1 position, grossing €m 2.5 with 3% growth from the previous year -See Exhibit 1. Revenue from electronic format accounts for 81% and North America makes up 44% of its market and Europe 24%, rest of the world 32%. Almost two-thirds of revenues, 74% come in the form of subscriptions -See Exhibit 2 (2). When we compare the market shares to 2017, we can see a slight shift. It grew by 2% (from 42%) in North America and decreased by 1% in Europe from25%, and the world from 33% (19).

              Elsevier operates on a paywall system- where science and medical research is disseminated on a paid subscription basis (scope of access, time frame and fees all vary by contracts) to the research facilities of academic institutions, governments and corporations and, in the case of medical and healthcare journals, to individual practitioners and medical society members. For several journals, advertising and promotional income represent a small proportion of revenues, predominantly from pharmaceutical companies in healthcare titles. Elsevier reports to also have offered alternative open access publishing over 27,000 of such in 2018 (from 470,000 publications a year). Over 1,890 (out of 2500) of Elsevier’s journals now offer the option of funding publication and distribution via a sponsored article fee. Elsevier offers SSRN is an open-access online preprint community where researchers post early-stage research, prior to publication in academic journals. As part of Elsevier, Mendeley data facilitates researchers to make their research data publicly available by providing an open research data repository. Newly joined Bepress, enables academic libraries to showcase and share their institutions’ research via institutional repositories. Direct sales are made of electronic products such as ScienceDirect, Scopus and ClinicalKey. Some subscription agents are used. Reference and educational content are sold directly to institutions and individuals and accessed on Elsevier platforms. A small portion is sold in printed book form through retailers, wholesalers or directly to end users.

        Its article publishing charges vary widely anywhere from over US$ 5000 to under US$ 1000 per journal. The fees are subject to change and depend on several criteria such as market conditions, competitive considerations and quality (the complete pdf price list can be found on their website- (20).

             Elsevier services to the scientific, technical and medical markets are organizing the review, editing and disseminating of primary research, providing reference and professional education content, and providing database and decision tools. Alongside journal publications, Elsevier offers reference publications, abstract and citation databases of peer-reviewed literature as well as medical education textbooks an e-book. For engineers, there’s materials selection tool. They also provide Research Intelligence suite of products that include bibliometric data and other data types such as patent citations and usage data. They provide decision tools for establishing, executing and evaluating research strategies. Enterprise research management solutions that groups a firm’s research information from numerous internal and external sources into a single platform to ensure the data that drives strategic decisions is trusted, comprehensive and accessible in one place. Elsevier has an Analytical Services team that provides accurate, unbiased analysis on research performance by combining high-quality data sources with technical and research metrics expertise. Also, online tools that help funding bodies find the best peer reviewers for evaluating grant applications. They also have a clinical reference platform and patient-specific point of care solution tools (2). Elsevier affirms that their publishing charges (APCs) are comparable with other publishers and that they provide the best quality open access articles for both open access and hybrid titles and that their APCs are at or below the industry average (4). See Exhibit 4.

              Competition within science and medical reference content is generally on a title-by-title and product-by-product basis. Competition in research and reference products is typical with learned societies and professional information providers, such as Springer Nature, Clarivate Analytics and Wolters Kluwer. Decision tools face similar competition, as well as from software companies and internal solutions developed by customers. Springer has already agreed to adopt the publish and read model which combines reading and publishing into one combined fee, with some European institutions (6). Springer Nature made US$1.9 billion in revenue in 2017 (18). Springer has bought BioMed Central and is now the biggest open-access journal publisher in the world (19). John Wiley and Sons Inc., better known as Wiley made around US $1.8 Billion in revenue in 2017 and 2018 (15) and has offered alternatives to the traditional business model and with that has managed to secure deals with institutions that had otherwise negotiated with Elsevier.

             Elsevier has been criticized on its business model-mainly on their pricing and profit margins.  Traditional publishers cover many costs such as paying writers, employs editors, pay for distribution to subscribers and retailers. These expenses bring successful magazines profits of 12-15%. In contrast, Elsevier manages to duck most of the cost in the following way: scientist create their work under their own direction-funded largely by governments – and give it to Elsevier for free; who then use scientific editors who judge whether the work is worth publishing and check its grammar, but the bulk of the editorial burden – checking the scientific validity and evaluating the experiments (the peer review), by working scientists (over 800000 of them) on a volunteer basis. Then the finished product is sold back to government-funded institutional and university libraries, to be read by scientists. This approach has been referred to as “bizarre” and “triple play” by some experts such as the Deutsche Bank in 2004 (5). Critics go on to say that this type of system also holds back scientific progress due to the influence the publishing industry has on what scientist chose to study-looking for that wow and new results that journals most appreciate.

           In a statement to The Guardian, Alicia Wise, senior vice president of global strategic networks at Elsevier said, “We help researchers be more productive and efficient,”. “And that’s a win for research institutions, and for research funders like governments.” This benefit may not be the case for all customers when Ursula Flitner the head of the medical library at Charité–Berlin University of Medicine commented: “Nobody wants Elsevier to starve—they should be paid fairly for their good service,”. “The problem is, we no longer see what their good service is.” (6). Although there are many opponents to the paywall system it does have it, supporter. Many scholars and researchers fear their work will be gravely affected if they have limited or no access to recent publications and would like to see a solution that does not inhibit progress as they know it.

             Since over a decade, scientists have defended an alternative to the paywall system named “open access”. By eliminating the commercial element, this solves the difficulty of balancing scientific and commercial imperatives. This largely applies to online journals, to which scientists pay an upfront fee to cover editing costs, which then ensure the work is available free to access for anyone without time restrictions. This idea is a challenge to the current structure that would threaten the publisher’s ability to restrict access to literature and therefore maintain the wide margins of profitability we see today.

           Another form of access is the Read and Publish model. This allows institutions to pay both costs at once. This would make their papers freely available immediately upon publication, unlike the current model that, unless authors pay extra, may only provide open access to journal articles after some time.

            Project DEAL, an alliance of German institutions led by the Hochschulrektorenkonferenz (German Rectors’ Conference), has three key demands: fair pricing based on the number of publications, open access to all publications by scientists at German institutions, and permanent access to Elsevier’s electronic journals for scientific bodies represented by the DEAL project (6).

               With PLAN S, now founders have joined the movement to eradicate paywalls. cOAlition S is formed by 11 national funding agencies across Europe (UK, France, Netherlands).  Their main mandate states that starting in 2020, academics receiving grants from participating agencies must make all scientific articles open access immediately upon publication (11, 13). The Wellcome Trust in the UK, the Bill & Melinda Gates Foundation in the US, and Riksbankens Jubileumsfond in Sweden are also part of the coalition. This policy change will prevent research funded by the Gates Foundation or the Wellcome Trust from being published in any journal that charges subscriptions or fees to view articles. The two organizations will no longer cover the fees that hybrid open-access journals charge researchers to make their content open access (12).

          Elsevier’s business reports published for 2017 and 2018 contained a figure for open access publications. However, those same years, several major academic institutions in Berlin announced they would not renew subscriptions with the publisher when their contract ended in December 2017. Following suit, another nine universities in Baden-Württemberg declared they would do the same. They were joining at least 60 other institutions that had already made the same decision and they are doing so in support of Project Deal (6).

          The Finnish library consortium (FinElib), which represents universities, research institutes, and public libraries in Finland, is negotiating with Elsevier (and other publishers) to increase open access and to make pricing more affordable.

         Outside of Europe, the Consortium on Core Electronic Resources in Taiwan (CONCERT), representing more than 140 Taiwanese institutions, cancelled Elsevier’s services due to high fees, but then some institutions moved on to reach an agreement. However, almost 20% have not due to “budget constraints” said Meng-ling Lin, the project lead of CONCERT.

           By July 2018, it was reported that over 300 academic institutions in Germany and Sweden had lost access to newly published papers in Elsevier journals   because of the standstill in negotiations (7) and in December of the same year, the Max Planck Society ends its subscription with Elsevier, after unsuccessful attempts to negotiate open access agreements and in support of Project DEAL and (8). That same month, The University of California, one of the most influential in North America announced it was pushing back against Elsevier over fees and access to research papers. The UC’s five-year contract was reaching expiry and it had prepared for faculty and students to lose access to Elsevier’s journals if they don’t reach an agreement in time (9). More recently, in February of 2019, UC announced the ten-campus system would cancel their subscriptions with the company. The system’s prior five-year contract with Elsevier had cost about $50 million. Again, in North America, Florida State University said it would not subscribe to Elsevier’s s journals in one bulk deal and instead it chose to maintain subscriptions to individual journals at around $1 million (10).

            The most recent developments report that Project DEAL reached an agreement with the scholarly publisher Wiley moving the publishing industry towards more open access. The contract signed January 15, 2019, allows German researchers at these organizations to read Wiley’s online content for a yearly fee while making their papers published through Wiley free for all. “We have achieved a core goal: a fair pricing model, which will allow us to make research accessible in an affordable and sustainable manner,” says DEAL head Horst Hippler in a statement (11).

           In March 2019, Wiley announced it secured negotiations with Unit – The Norwegian Directorate for ICT and Joint Services in Higher Education and Research – for a combined open access and subscription agreement effective March 14, 2019. This three-year agreement will provide 33 Norwegian institutions with continued access to Wiley’s subscription journals and enables their affiliated authors to publish open access articles in Wiley titles. This partnership will advance open science and discovery to create more impact on scholarly research (16). In the same month John Wiley & Sons, Inc also announced an Open Access and subscription agreement with the Hungarian Electronic Information Service National Programme (EISZ). This three-year transformative agreement provides researchers in 13 EISZ-affiliated institutions with access to read journals published by Wiley, and the ability to publish open access with Wiley (17).

            It is worth highlighting that many prestigious journals, such as Science and Cell, would not accept articles that had already been published in a free repository. The National Institutes of Health (NIH) is the -world’s biggest funder of medical research- has fought back by insisting that all those who receive their grants submit their manuscripts after they are accepted by other journals, which they would post in the PubMed repository the following year. Harvard’s Faculty of Arts and Sciences created a similar rule but also gave authors the right to waive the requirement. Although Elsevier and others attempted to block the NIH rules, some publishers are finding a middle ground (19).

            The strategic priorities of the company have always been to continue to increase content volume and quality; expand content coverage. In the primary research market, Elsevier aims to deliver journal and article quality above the industry average at below average cost, leveraging the scale of its platform. The company’s aim has always been to work directly with customers to understand their objectives and help them reach their research their goals in a way that is satisfactory from a content, service and economic perspective.

           While some researchers may continue to prefer paid subscription as the primary distribution model, alternative payment models for the dissemination of research have evolved over the past twenty years, as proof goes to show with the recent events.  Elsevier has long invested in all business models to serve researchers and research institutions. Recently, Elsevier has made some expansion of open access journals. The author pays open access is one example, with over 1,900 of Elsevier’s journals now offering the option of funding publication and distribution via a sponsored article fee. In addition, Elsevier now publishes around 250 gold open access titles. What some might not know is that for over a decade, content has been provided free or at very low cost in more than 100 countries and territories in the developing world through Research4Life, a United Nations partnership initiative.

             Next to journals, Elsevier has also invested in other solutions to serve the needs of the research community. SSRN is an open-access online preprint community where researchers post early-stage research, prior to publication in academic journals. Mendeley data enables researchers to make their research data publicly available by providing an open research data repository, while Bepress helps academic libraries showcase and share their institutions’ research via institutional repositories for greatest impact.

            The uncertainty is, will it be enough to add more value to the core platforms by implementing new capabilities such as advanced recommendations on ScienceDirect and social collaboration through reference manager and collaboration tool Mendeley? Markets and preferences are defiantly shifting. If the trend towards open access continues, should there be more profound changes to the business model? What other services of value can the company bring forward? These are some of the questions Femke will have to answer to decide what the next steps should be in preventing loss of market share and keeping customers satisfied.

Exhibit1: Elsevier Financial Performance 2108

Exhibit 2: Segment Scientific, Technical and Medical  Revenue distribution by format, market and type

Exhibit 3 RELEX  Revenue distribution by format, market and type

Exhibit 4 APCs Value for Money

(1) https://www.elsevier.com/about/history

(2) -RELEX Group Annual Report and Financial Statements 2018

(3) https://www.theguardian.com/science/2017/jun/27/profitable-business-scientific-publishing-bad-for-science

(4) https://www.elsevier.com/about/open-science/open-access/surprising-facts

(5) https://www.theguardian.com/science/2017/jun/27/profitable-business-scientific-publishing-bad-for-science

(6) Major German Universities Cancel Elsevier Contracts

(7) https://www.the-scientist.com/news-opinion/universities-in-germany-and-sweden-lose-access-to-elsevier-journals–64522

(8) https://www.the-scientist.com/news-opinion/max-planck-society-ends-elsevier-subscription-65258

(9) https://www.the-scientist.com/news-opinion/university-of-california-and-elsevier-locked-in-negotiations–65209

(10) https://www.chronicle.com/article/U-of-California-System/245798?cid=at&utm_source=at&utm_medium=en&elqTrackId=6db6bb261670412eba3760a583941227&elq=19f016c9ae2846b99612a4b179c4922a&elqaid=22387&elqat=1&elqCampaignId=11030

(11) https://www.the-scientist.com/news-opinion/german-institutions-and-wiley-reach-open-access-publishing-deal-65327

(12) https://www.the-scientist.com/news-opinion/plan-s–the-ambitious-initiative-to-end-the-reign-of-paywalls-65231

(13) https://www.the-scientist.com/news-opinion/two-big-funders-join-open-access-movement-65046

(14) https://www.the-scientist.com/news-opinion/open-access-plan-in-europe-bans-publishing-in-paywalled-journals-64748

(15) https://www.statista.com/statistics/692252/revenue-wiley-inc/

(16) https://finance.yahoo.com/news/wiley-norwegian-directorate-ict-joint-080000385.html

(17) https://finance.yahoo.com/news/wiley-hungarian-electronic-information-national-090000895.html

(18) https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/78036-pearson-is-still-the-world-s-largest-publisher.html

(19) https://www.enago.com/academy/the-world-of-academic-publishing/

https://www.relx.com/~/media/Files/R/RELX-Group/documents/reports/annual-reports/2017-annual-report.pdf

(20) https://www.elsevier.com/__data/promis_misc/j.custom97.pdf)