Pricing has always been a sensitive topic for publishers and libraries, dating back to the advent of “big deal” style e-journal packages and the so-called serials crisis. And though the rhetoric has died down some after years of unrest in the e-journal marketplace, library pricing is once again in the news, this time for e-books, after a recent decision by at least 17 commercial and university press publishers to increase e-book fees for academic libraries and consortia.

One library consortium, the Boston Library Consortium (BLC), went so far as to label the increases an “experiment in predatory pricing.” The publishers, however, counter that the increased fees are simply a response to market realities.

Steep Hikes

Specifically, the higher fees in question are being levied for “short-term loans” (STL) of scholarly e-books associated with “demand-driven acquisition” (DDA) programs. They were announced in mid-May by the aggregators ebrary and EBL, units of ProQuest, and went into effect June 1 and July 1, respectively.

ProQuest officials could not provide an exact number of academic libraries and consortia subject to the fee increase, but the Colorado Alliance of Research Libraries, the University of California libraries, and the University of Texas at Austin are among prominent organizations affected, along with the 37-member Orbis Cascade Alliance in the Northwest, the 140-member CARLI consortium in Illinois, and the 17-member BLC.

Officials at Orbis Cascade and CARLI told PW they have been stunned not only by the price increases but also by their timing, given that budgets were already in place when the fees were announced. CARLI launched its DDA project with EBL in May, but, now, just months into the program, it will have to trim the number of titles in its consortial pool, as will Orbis Cascade and BLC.

How much are prices going up? To cite a few examples: A one-day e-book loan from New York University Press rose from 5% of the list price to 25% (an increase of 400%); A seven-day loan from Princeton University Press went from 15% to 50% (an increase of 333%); A 28-day loan from the Royal Society of Chemistry went from 20% to 95% (a 375% increase), and a one-day fee rose from 5% to 50% (a 900% increase).

In response to the price hikes, the BLC’s Board of Directors, which includes the deans of all 17 BLC member libraries, endorsed the publication of a May 27 letter in the Chronicle of Higher Education that characterized the new fee structure as “price gouging” reminiscent of the serials crisis, during which the digital pricing of scientific journals skyrocketed. The growth of e-journal bundles led to, among other things, the erosion of libraries’ buying power on the monograph side, as research conducted by the Association of Research Libraries has demonstrated. Librarians fear this latest price increase for e-books will exacerbate the problem.

“We’ve seen it before,” the BLC letter reads, “and we should not stand for it again.”

Pilot Programs

After getting feedback from the community, at least one publisher has said they will reconsider the scale of their increases. Dan Dyer, head of sales at the Royal Society of Chemistry, said the company has decided to scale back to a “more financially sustainable model,” although at press time no new figures were available. No other publisher, however, has adjusted the announced increases, according to Kari Paulson, the vice president and general manager for e-books at ProQuest.

What’s driving the latest battle over price hikes? In a word, as Dyer suggests, sustainability. The DDA model was designed to offer library users a free glimpse at e-book content as well as a certain number of fee-based STLs before triggering an automatic purchase at full list price. But the STLs were part of a pilot program, the publishers explain. And now that enough data has been collected to make informed pricing decisions, the original fees in those pilots are simply not viable. What the publishers say they have found is that the program seldom produces a purchase, even though the content is viewed more often.

“I think it’s important to remember that this is about adjusting what were very deep discounts now that we have evidence that indicates that these models are not about realizing incremental revenue from backlist titles, but have become the de facto method for purchasing all digital books for many libraries,” said Lisa Nachtigall, the director of sales development for digital books at John Wiley & Sons. Wiley’s one-day STL rate has changed from 15% to 25% of the digital list price, she said.

“We are changing the discounts on books that are getting read, while still making available a large pool of titles which might get accessed without ever actually triggering a financial transaction,” she added. “That means we are publishing many books which might get looked at for 5 minutes—sometimes allowing a reader to get just the right piece of data or a reference that they needed—but that use doesn’t actually result in any kind of sale.”

At the NYU Press, outright purchases have fallen 7% in the last two years, says Carol Mandel, Dean of the Division of Libraries at New York University (which includes the NYU Press). Although DDA purchases (which pay the full digital price of a book) are growing, STLs are growing much more quickly, she says, and cutting into revenues. “STLs have been returning only about 11% of the full digital price after all the fees and commissions are calculated,” Mandel says.

Indeed, as an example, the Novanet consortium in Nova Scotia, Canada, reported in February that its 15-month DDA pilot program resulted in 4,152 fee-based transactions but just 47 purchases. Still, libraries are balking at the steep rate of the increases.

Orbis Cascade officials calculated that had this new fee structure been in place for fiscal year 2014 (July 2013–June 2014) it would have cost them an additional $443,000 for the first 10 months, with increases from Wiley, Taylor & Francis, Cambridge University Press, Oxford University Press and others. Fearful that it could not absorb such a cost in its $1 million budget for the coming fiscal year, the consortium decided in June to remove 4,976 e-books from its original pool of 18,500 titles.

The nine members of the BLC that participate in that consortium’s DDA program have also decided to shrink their pool of titles by 40%. In addition, the BLC has also lowered the price ceiling for titles eligible for the e-book program from $200 to $150.

Linda Teresa DiBiase, chair of the Orbis Cascade’s E-book Working Group and a collection development librarian at the University of Washington Libraries, said calling the price hikes “predatory” was going a bit too far. But, for libraries, the increases are unsustainable, she says.

“The loss of access is not something trivial,” DiBiase says. “But again, publishers shouldn’t expect that libraries will automatically buy the titles we are cutting from the program. We just can’t afford it.” The publishers, she says, must understand that there are simply no more funds for libraries to tap: “So raising prices, especially in such a precipitous way, will not automatically translate to more revenue.”

Losses

Susan Stearns, executive director of the Boston Library Consortium and a coauthor of the BLC letter, said more title reductions are likely if the current price hikes hold, and that those cuts would further reduce discoverability and the likelihood of a library purchase. Stearns said publishers should evaluate the growth of short-term loan revenue over a long tail. “Using a metric that may have worked well for evaluating the success of sales of print titles may not be the most effective way of analyzing e-book revenue,” she said.

Some publishers, however, say this puts an unfair burden on them. “The bills we need to pay for the books we create today won’t wait until maybe a future use will pay for them,” said Tony Sanfilippo, the assistant director of the Penn State University Press. “In the meantime, participating libraries have far greater access for a fraction of a sustainable cost. The scales aren’t fairly balanced.”

Sanfilippo said his press is “showing exponential growth in the number of libraries who used to acquire our books, but now instead simply choose to put records for our books in their catalogs leaving us to hope that use triggers a sale.” He added that publishers have no way of knowing if the triggers are fair. As a result, Penn State University Press has withdrawn from its STL agreements.

Paulson, meanwhile, dismissed speculation (sparked by the simultaneous price hikes by many presses) that the publishers had colluded on the increases, noting that ProQuest helped plan the timing to include as many publishers at once in order “to make [the process] a little more organized.”

“Publishers don’t talk to each other about prices, and we don’t talk to them about what other publishers say,” Paulson said. “They are painfully aware of and sensitive to the issue of price fixing.”

For now, libraries and publishers find themselves in a painfully familiar battle over digital prices. The hope, however, is that the two sides can remain engaged and find a workable solution.

“Librarians and publishers need to continue to work together in developing new models and adjusting them so that library dollars are used most effectively, the costs of scholarly publishing are covered, and quality scholarship is available to the people who want and need to read it,” Mandel says. “This is not an adversarial relationship."

STLs are “potentially a great option for both libraries and publishers,” Mandel adds. But, the two sides must work together to find a successful model.

ProQuest's Paulson agrees. “This isn’t about the publishers being bad guys or about libraries not understanding,” she says. “It’s part of a process as a market matures. Everyone needs to have faith that it will come to the right point where everyone involved will have a sustainable program.”