Publishing cooperatives — owned, controlled, and benefiting nonprofit publishers would provide an organizational and financial structure well suited to balancing society publishers’ twin imperatives of financial sustainability and mission fulfillment. Market challenges and structural constraints often render it difficult for small society publishers to compete individually. Publishing cooperatives would allow society publishers to remain independent while operating collectively to overcome both structural and strategic disadvantages and to address the inefficiencies in the market for academic journals. Publishing cooperatives can provide a scaleable publishing model that aligns with the values of the academy while providing a practical financial framework capable of sustaining society publishing programs.
Nonprofit publishers in a mixed market
The market context for society publishers
Structural constraints of society publishers
Benefits of publishing cooperatives
Basic cooperative principles
Cooperative publishing services
Publishing cooperative structures
Financial issues for publishing cooperatives
Nonprofit publishers in a mixed market
Nonprofit publishers that compete effectively in the mixed market for academic journals typically display the same traits of effective business operation as forprofit publishers. These include an entrepreneurial approach, strategic awareness, competitive response, and attention to profitability. However, for society publishers, participating simultaneously in the market economy and the intellectual commons of the academy, profitseeking business imperatives are neither wholly appropriate nor wholly irrelevant.
Society publishers must balance their distinctiveness as nonprofits against the need to survive financially. Pursuit of a profitmaximizing strategy can result in pricing and market practices that compromise the societys mission by limiting its ability to disseminate research broadly in its field. At the same time, competitive market pressures require society publishers to operate efficiently to ensure financial sustainability .
Publishing cooperatives owned, controlled, and benefiting nonprofit publishers would provide an organizational and financial structure well suited to balancing society publishers twin imperatives of financial sustainability and mission fulfillment. Market challenges and structural constraints often render it difficult for small society publishers to compete individually. Publishing cooperatives would allow society publishers to remain independent while operating collectively to overcome both structural and strategic disadvantages and to address the inefficiencies and imperfections in the market for academic journals.
For society publishers, cooperatives can offer significant benefits over conventional business models. While an efficient market would obviate the formation of cooperatives, the market power wielded by large commercial publishers, combined with the structural limitations of nonprofit organizations, hinders nonprofit publisher attempts to sustain their journal publishing programs. The collective power of cooperatives can help nonprofit publishers counter these market constraints and imbalances .
Publishing cooperatives would allow society and other nonprofit publishers to reconcile efficient market performance with serving the organizations missions. Publishing cooperatives assume that nonprofit publishers seek a broad set of benefits, both tangible and intangible, not simply the highest possible return on their investment. These benefits might include production cost reductions, access to otherwise unavailable business management services and resources, increased market presence and greater access to markets, risk sharing and mitigation, and alignment with the societys mission and nonprofit ethos.
The market context for society publishers
Nonprofit publishers operate in an increasingly competitive environment characterized by substantial ownership concentration, dominant commercial publisher market share, flat library acquisitions budgets, and aggressive commercial publisher pricing and demand leverage strategies (for example, bundling). These market factors make it increasingly difficult for small society publishers to compete successfully on their own:
Commercial publishers now play a role in publishing over 60 percent of all peerreviewed journals, owning 45 percent outright and publishing another 17 percent on behalf of nonprofit organizations . Further, commercial publishers control a disproportionate market share in terms of revenue. In the STM (scientific, technical, and medical) market, seven major commercial publishers, responsible for approximately 30 percent of all peerreviewed titles, account for over 60 percent of the markets total revenue .
Commercial publishers now play a role in publishing over 60 percent of all peerreviewed journals, owning 45 percent outright and publishing another 17 percent on behalf of nonprofit organizations.
While the forprofit segment comprises a relatively small number of large commercial publishers, the nonprofit segment represents a large number of mostly small publishers. The consolidation of large commercial publishers, and the cumulative effect of their pricing and bundling practices, has led to decreased market access for small society publishers. Ownership concentration allows large publishers to bundle journals in aggregations that capture a disproportionate share of library budgets and reduce the funds available to purchase journals from smaller publishers with little market power.
Growth in market demand
Fueled by the expansion of scientific research, the number of scientific and scholarly journals continues to grow at a steady rate of approximately 3.25 percent per year . On the current base of some 20,000 active peerreviewed journals, this translates into a doubling in the number of journals approximately every 20 years.
The inability of nonprofit publishers to accommodate the rapid increase in the overall scope and scale of scientific research is one reason behind the increasing participation of commercial publishers in the academic journal market over the past fifty years. Given the financial exposure of launching new journals, only wellfunded societies can readily assume the financial risk. The ability of society publishers to capture a larger proportion of the growing journals market will depend, in part, on societies having access to adequate capital to launch new journals.
The prices for commerciallyowned journals average four to five times higher than for journals published by societies, and the prices for journals published by commercial publishers on behalf of societies average three times those of journals published by the societies themselves .
Flat library budgets
With college and university library serials budgets remaining essentially flat for the past 20 years, the rapid climb in academic journal prices has forced institutions of all types and sizes to cancel existing subscriptions and to forgo new titles . Larger publishers have the market and pricing power to survive these market dynamics, while small nonprofit publishers typically do not.
Migration to online distribution
Approximately 40 percent of peerreviewed journals remain available only inprint editions. As most commercial publishers have already moved to online distribution, this suggests that several thousand society publishers have yet to move to online content distribution . A variety of factors have slowed society publisher migration to online distribution, including cost issues, fear of losing society members by decreasing the perceived value of their publication benefit, and concern for cannibalizing existing print income streams.
Structural constraints of society publishers
Society publishers thus face considerable market hurdles in competing with large commercial publishers for available institutional budgets. Additionally, nonprofit publishers exhibit inherent structural constraints that limit their ability to overcome the strategic market challenges outlined above:
Lack of scale economies and market presence
The vast majority of society and nonprofit publishers run independent and very small journal publishing operations. Over 97 percent of society publishers publish three or fewer journals, with almost 90 percent publishing just one title . The small size and limited capacity of these operations place them at a disadvantage relative to larger publishers, both commercial and nonprofit, in terms of product portfolio, market leverage, business expertise, and access to capital.
Society publishers individually exert slight economic leverage when negotiating for printing and digital distribution services, marketing and sales agency relationships, and other publishing services. Some nonprofit organizations including university presses and society federations provide scale economies for negotiating and purchasing not available to small publishers acting on their own. Other nonprofit initiatives focus solely on providing online distribution services. Despite the best efforts of these current collective purchasing channels, however, many society publishers remain unserved.
Over 97 percent of society publishers publish three or fewer journals, with almost 90 percent publishing just one title.
Individually, small society publishers enjoy little market presence when disseminating their content, rendering it difficult for them to compete effectively in a highly competitive, subscriptiondriven market. A number of nonprofit initiatives have been launched to redress this imbalance including the ALPSP Learned Journals Collection, BioOne, and Project Muse bringing together journals from multiple society publishers to afford a collective market presence. Many society publishers, however, continue to compete on their own or gain only a diluted market presence via large multisubject online aggregations.
Unlike commercial publishers, nonprofits do not have ready access to equity markets and other sources of capital. Although many societies have modest endowments or reserves, these are rarely of a scale sufficient to fund substantial investments in new publications or publishing technologies. Given the difficulties nonprofit publishers face in raising capital, the investments required to meet the market demand for new journals and to keep pace with everevolving publishing technologies put society publishers at a strategic disadvantage relative to forprofit publishers .
The ongoing shift to digital dissemination, valueadded content, and enhanced online service functionality has also put pressure on nonprofit publishers to incorporate new technologies into their operations. Because such publishing technologies are resource intensive they can entail significant initial development or acquisition costs, ongoing operating and staff training requirements, and frequent replacement and upgrade cycles they have also given forprofit publishers another competitive advantage over nonprofits. Large commercial publishers invest considerable sums to develop and maintain their electronic journal systems, and few nonprofit publishers command the capital required to compete with this investment.
Thin staff resources
Publishing societies naturally devote more resources to their core competencies in the publishing value chain acquiring content, certifying quality (typically via peer review), and adding editorial value than to business planning and publishing support activities. This shortage of business management resources becomes especially critical as the transition to electronic dissemination accelerates and the efficacy of traditional subscription models declines for many small publishers.
Further, few small society publishers have the operational resources necessary to migrate confidently to online publishing. Such a transition requires that a society assess the implications of online access for its member base, implement a rational and equitable institutional pricing model, secure an appropriate marketing, sales, and support channel, and understand the direct and indirect returns on the new costs incurred.
Low tolerance for risk
Most societies both by design and necessity act as conservative stewardships, rather than as risktaking entrepreneurial organizations. Due in large part to their nonprofit cultures, volunteer leadership, and lack of capital reserves, publishing societies are often poorly positioned to assume risk, whether real or perceived. Coupled with the lack of business management resources already noted, this often amplifies the risk perceived in implementing change in response to market forces. Yet, a society that manages risk solely by avoiding or minimizing it may forgo opportunities to strengthen its publishing operations in the longterm by better positioning it to serve members, fulfill its mission, and remain financially selfsustaining.
Benefits of publishing cooperatives
The market challenges and structural constraints described above render it difficult for small society publishers to compete individually. Publishing cooperatives can provide society publishers a practical response to their shared set of economic issues, structural constraints, and strategic market challenges.
Federated publishing cooperatives with shared services cooperatives supporting multiple subjectoriented satellite cooperatives offer an alternative operating model for society publishers. Cooperatives can provide a scaleable publishing channel aligned with the ethos of learned societies and providing a financial framework capable of sustaining society publishing programs.
Cooperatives would allow societies to retain control of their respective editorial and publishing operations while benefiting from the reduced costs, greater income stability, and lowered risks attendant to collective action. Specific benefits would include:
- Improved bargaining power and reduced costs
Collective action via publishing cooperatives would give society publishers greater scale economies and market leverage. The cooperative would provide goods and services to members effectively at cost. In practice, this would be effected by setting prices at a level sufficient to cover costs, and then annually refunding to members the net returns in proportion to the volume of business each member has done with the cooperative.
Increased society publisher market presence and visibility
Collective activity and shared marketing support resources would increase the publishers market visibility and allow them to wield greater market leverage than they possess individually. In terms of online distribution, this will often take the form of a cooperative content aggregation.
Although the market appeal of such aggregations has been proven, they must often overcome publisher aversion to financial uncertainty and reluctance to cede control of their content . Given that an online aggregation may provide a ready substitute for the primary journals, member publishers must trust the cooperative to manage and protect the value and income potential of their journals. A cooperatives member ownership should assuage publisher concerns about relinquishing control and jeopardizing income streams. Further, by increasing their control over how their publications reach end users, and allowing them to bypass intermediaries in the market channel, nonprofit publishers can capture more of their returns .
Access to specialized business management expertise
Cooperative participation would allow societies to focus on their core competencies of content creation and quality certification while relying on the cooperative to support aspects of the publishing process not directly related to the societies missions. Through a publishing cooperative, societies can pool their resources to secure access to professional business and publication management services that they could not otherwise afford on their own. These services can include business and financial management, technical expertise, pricing and value management, legal and intellectual property advice, marketing and sales, contract and license negotiating, and other services identified by cooperative members. Access to the cooperatives professional management resources will also promote conformity with industry best practices and promote greater financial and operating efficiency for each participating publisher.
Besides stabilizing journal subscription income, a cooperatives greater marketing and sales resources can also create supplemental income streams, which individual societies would not have the inhouse capacity to pursue effectively. A variety of revenue sources including corporate sponsorships, advertising, and commercial use licenses might reduce the upward pressure on subscription prices or help support alternatives to subscription charging models.
Access to capital to serve growing market demand
Publishing cooperatives can help societies overcome the competitive disadvantages that stem from undercapitalization. Cooperatives can address this issue indirectly by lowering costs and capital requirements through shared services and scale economies and directly through their own capital generation methods.
Publishing cooperatives can obtain equity capital by retaining a portion of the cooperatives operating surplus (e.g., through retained patronage refunds), by retaining a percentage of fees levied on members for cooperative services, through direct member investment (e.g., membership fees, etc.), through net profits from nonmember business, and even through the sale of common or preferred stock to external stakeholders .
Manage and mitigate risk
Society publishers operate in a market environment of considerable uncertainty and risk, including:
- increasing pressure on traditional subscriptionbased income models;
- a rapid rate of change in publishing technologies;
- a decline in the demand for print editions;
- mounting market pressure for lower access barriers to content and a concomitant need for new business models;
- the effects of aggressive competitive behavior by other publishers;
- launching new publications to meet market demand;
- competition from innovative online scholarly communications channels; and,
- changing value perceptions towards the societys publication benefit on the part of members.
Society publishers must be prepared to respond to these issues in an overall environment of change, while reducing the uncertainty associated with any specific publishing decision. The potential losses that societies confront are not limited to financial assets; they can also suffer loss to their reputations, membership bases, external funding sources, and other tangible and intangible assets.
Cooperatives can help society publishers address risk constructively through both risk retention and risk transfer financing methods. With risk retention, the funds needed to offset potential losses would come from the cooperative members themselves. The cooperative could assess the risk profile of any particular activity, line of business, or environmental threat and implement an appropriate retention technique to offset the loss .
Risk transfer would seek funds from beyond the cooperatives membership, with external organizations indemnifying the publishers against loss. Even publishers sympathetic to the concept of open access, for example, might consider the risk inherent in transitioning from subscriptionbased income to a new business model too great to risk unilaterally. Risk transfers could provide a means by which libraries and other stakeholders could indemnify publishers against financial risks incurred in the transition to new funding or content access models.
Basic cooperative principles
Cooperatives, as a special type of corporation owned and controlled by the members that use their services, have existed formally since the industrial revolution . Typically, cooperatives have formed to promote the shared economic welfare of individuals and groups that have determined that they can wield more market influence collectively than individually . Cooperatives differ fundamentally from conventional enterprises in that they exist not to maximize their own profits, but to promote the economic success of their members. This economic linkage creates reciprocal incentives for the cooperative to serve its members and for the members to patronize the cooperative.
Several principles guide virtually all cooperatives :
Member ownership: Members contribute equitably to the capital of the cooperative and finance the cooperative by transacting business with it. The cooperative gets operating capital by retaining a portion of its net income.
Member control: Members exercise collective control over the cooperative via an elected board of directors and democratic participation . The cooperatives board sets policies, manages the distribution of member benefits, and hires and oversees professional management to handle daytoday operations.
Member benefited: Cooperatives provide benefits to members as users, not investors. Unlike investorowned firms, which return net income to investors on the basis of their equity investment, cooperatives distribute financial benefits to members in proportion to their use of the cooperatives services.
Cooperative publishing services
Publishing cooperatives can offer a range of services that address the needs of their members. These functions could include providing shared services; bargaining, negotiating, and purchasing on behalf of members; and, marketing, selling, and distributing publisher content. A federated cooperative structure would allow multiple cooperatives to collaborate to provide a wide range of capital-intensive services cost effectively.
A cooperative can provide shared publishing services at a lower cost than the cooperatives members could achieve themselves, and can also deliver resources that society publishers often cannot afford individually. The services a cooperative might efficiently provide include strategic planning; business and publishing management; capital budgeting support; copyediting and other editorial services; online submission and peer review systems; digital distribution platforms; legal, finance, accounting, and other professional services; marketing and sales; customer service and support; subscription and membership management; and, virtually any other publishing support service that the members may require. Depending on the cost effectiveness and efficiency in each case, these services could be performed by a cooperatives staff, delivered by other cooperatives, or contracted from thirdparty providers. The sourcing of services would be a matter of the cooperatives size and scale and might change over time to serve evolving needs .
Participating publishers would be able to pick and choose the cooperative services they require. This would lower the barriers to publisher participation and help ensure that the cooperatives services remain competitive.
- Bargaining & purchasing
The cooperative can provide bargaining and purchasing assistance for any services that it cannot provide efficiently itself. For example, the cooperative can negotiate for printing and print and digital prepress services, copyediting, retrospective digital conversion, and other publishing services. The cooperative would realize savings for its members through lower administrative costs, volume purchase discounts, and assured levels of business for vendors. Whether a cooperative provides services itself or secures their provision by thirdparties, it would allow publishers to address supply chain issues from a wellcoordinated position of strength.
Publishing cooperatives could also allow society publishers to exercise greater market power in competing for a share of library acquisition budgets. As some nonprofit journal aggregations have already demonstrated, acting collectively increases the visibility of societysponsored journals and allows society publishers to compete more effectively for limited library budgets.
The cooperatives marketing services can offer publisher content to libraries and end users, both as individual print or online journals and as part of an online aggregation. As with all cooperative services, this marketing and sales function can be performed by a cooperatives inhouse staff or negotiated with thirdparty sales agents and distributors. Publisher ownership and control would ensure that the cooperative offers services that serve the society publishers best interests, rather than services that maximize the profit of the cooperative itself.
Publishing cooperative structures
For a cooperative to succeed, its members must perceive it to be committed to their best interests and to be an effective agent acting on their behalf. Therefore, publishing cooperatives with relatively homogenous memberships would be more likely to succeed than cooperatives with heterogeneous memberships. These mutual interests would allow publisher cooperatives to develop strong economic linkages with their members for example, via patronage refunds, crosssubsidies, and risk pooling serving their members collective interests. The more closely coordinated and integrated the economic linkages of the publishers and the cooperative, the more efficient and useful the cooperative relationship would become.
Figure 1: Scalable publishing cooperative model.
This suggests that cooperatives comprising publishers from cognate disciplines, and sharing similar editorial experiences and the same niche publishing environment, would experience greater member cohesion and generate stronger member commitment than cooperatives with members from disparate fields . Defining a cooperatives field of membership to maintain member compatibility would also support the cooperatives marketing function by yielding coherent content aggregations and by supporting the manner in which researchers use online journal collections.
At the same time, individual disciplinespecific cooperatives are unlikely to have sufficient scale to offer shared publishing services as cost effectively as larger organizations comprising multiple affiliated cooperatives. The need to accommodate publishers from multiple fields with discipline or geographicallyspecific needs, to provide a comprehensive suite of publishing services, and to support a scaleable cooperative network, all combine to suggest a federated cooperative structure. Federated cooperatives are organizations whose membership comprises other cooperatives, rather than individual publishers. By supporting multiple affiliated or satellite cooperatives, federated cooperatives can facilitate intercooperative coordination to provide a greater range of services more cost effectively . By providing a model that can be replicated across multiple disciplines, organization types, and geographic regions, federated cooperatives can create a network of publishing cooperatives, with individual satellite cooperatives within the network remaining autonomous.
Figure 1 illustrates how a federated structure can support an extensible network of interrelated cooperatives. Federated cooperatives could be extended by accreting multiple satellite cooperatives for example, clusters of cooperatives representing cognate disciplines further extending scale economies and market power. The satellite cooperatives would also provide a communication channel to the member publishers that would increase the transparency of the federated cooperatives operations. A federated structure can thus support both local accountability and centralized operating efficiency, both of which are important to maintaining member commitment and loyalty.
Financial issues for publishing cooperatives
Depending on the jurisdiction in which it is incorporated, a cooperative can form as virtually any type of legal entity, including a nonprofit corporation, a general business corporation, a limited liability corporation, or a general partnership . In any event, a cooperatives distinctive operating practices are governed by the cooperatives articles of incorporation and by-laws, not the organizations formal corporate structure .
A cooperatives distinctive operating practices which stem from the principles of member ownership and control are intended to provide services to the cooperatives members at the lowest possible cost, not to generate the highest return for the cooperative itself. At the same time, as with any selfsustaining business, a cooperative must generate sufficient revenue to meet its continuing expense and capital needs. To ensure that a cooperative remains sufficiently capitalized, while distributing ownership equitably based on member patronage, a number of cooperative equity generation and allocation models have evolved. These models can be applied to publishing cooperatives to generate capital, allocate equity amongst members, and return equity to participating publishers over time.
Sources of equity capital
Equity capital is that portion of the cooperatives assets owned by the cooperatives members. This equity capital represents a means to an end, rather than an end in itself, as patronage of the cooperative which generates much of the member-publisher equity creates the economic rationale for the cooperatives existence in the first place. Equity capital is risk capital in that all or part of it can be lost if the cooperatives operations are not profitable. Under most cooperative structures, however, member risk would be limited to the amount of capital invested in the cooperative. A publishing cooperative can obtain equity capital by combining any of the following:
Direct investment can include a membership fee or a requirement to purchase one share of voting stock. The size of the initial investment will depend on the particular capital needs of the cooperative. In addition to the initial investment, a cooperative can also levy an annual membership fee, with the fee being either flat or proportional to the publishers usage of the cooperative.
Retained patronage refunds typically provide a cooperatives most common means of acquiring operating capital. A portion of the cooperatives annual net surplus from member patronage would be retained for operating capital, with the remainder refunded to the publishers in cash. The cooperative would accumulate the deferred patronage refunds until it has sufficient capital to finance its operations, then would begin to redeem the equity under a systematic plan.
Retained surplus represents an unallocated portion of the cooperatives profits kept by the organization to offset future development expenses and/or losses. The amount of any retained surplus would be determined by the cooperatives members through the governing board.
Perunit capital retains
If a publishing cooperative offers purchasing, bargaining, or marketing services, it can generate capital through perunit capital retains. Perunit capital retains are member equity investments based on the number of units of goods or services processed (for example, units printed or articles processed) or on a percentage of sales revenue. As perunit retains do not depend on the cooperatives net earnings, the cooperative can use this approach to generate capital from activities that do not produce their own revenues as such (and therefore create no patronage refunds to retain). As with other types of equity capital, capital retains would be allocated to each publisher and redeemed on a revolving basis (see equity distribution, below).
Net profits from nonmember business
A cooperative might elect to do business, at a profit, with publishers that are not members of the cooperative, but wish to purchase services from the cooperative. These profits can be retained by the cooperative as unallocated equity capital .
Sale of common or preferred stock to nonmembers
A publishing cooperative could issue nonvoting preferred or common stock to libraries and other external shareholders. Besides facilitating library risk sharing, stock plans appear compatible with program-related investment programs offered by some foundations . In either case, a preferred stock plan would allow stakeholder communities to support the cooperative while keeping control with the cooperatives publisher members.
A cooperatives equity capital can also be categorized as either allocated or unallocated. The cooperative assigns allocated equity to members in proportion to their use of the cooperative. Allocated equity would include the publishers noncash refunds and other equity assigned to an individual publishers equity account, including any direct investment in the cooperative.
Most of a publishers allocated equity would be generated via retained patronage refunds and/or perunit capital retains. Patronage refunds would be returned to publishers either as cash or as written notices of allocation. Although written notices of allocation can eventually be redeemed by members for cash, redemption is at the boards discretion to ensure that the cooperative remains adequately capitalized .
In contrast to allocated equity, unallocated equity is not credited to a specific publishers account, nor is it returned to the participating publishers unless the cooperative disbands. Because it does not need to be repaid to the publishers following a specific redemption schedule, unallocated equity provides a general capital reserve to fund development and to provide a cushion to offset potential operational exigencies.
The cooperatives board must manage the cooperatives equity to ensure that the business has an adequate supply of capital and remains owned by those publishers patronizing it. A cooperative would be obligated to redeem each publishers allocated equity at some future date. This equity redemption acts as an ownership transfer process that keeps the cooperative financed, owned, and controlled by its current memberusers. A welldesigned equity redemption plan would help keep the interests of participating publishers aligned and strengthen the economic linkage between the cooperative and its members.
A cooperative can use a revolving equity redemption plan to return allocated equity to participating publishers . Under a revolving fund plan, the cooperative holds allocated patronage refunds for a specified number of years, redeeming equity in the order in which it is allocated. The time frame in which the equity is redeemed would be determined by the cooperatives board of directors and would be subject to the cooperatives financial condition and need for operating capital .
In addition to equity redemption, revenue from publisher content would be allocated to publishers in a manner appropriate to the distribution medium and as determined by the cooperatives members. For example, revenue from print subscriptions could be channeled directly to publishers, while revenue from participation in a cooperatives online aggregation might be allocated to publishers based on an equitable valuecontribution formula approved by the cooperatives board.
Most society publishers face structural constraints including insufficient market leverage, low tolerance for risk, undercapitalization, and lack of specialized business expertise that prevent them from sustaining themselves effectively in an increasingly competitive market for academic journals. Publishing cooperatives have the potential with scalable shared services and supporting multiple disciplinespecific affiliates to provide a powerful financial and organizational model that would allow society publishers to serve their dual imperatives of honoring their missions while remaining financially sustainable.
Owned and controlled by the nonprofit publishers themselves, cooperatives would respond to many of the common needs of society publishers. Publishing cooperatives would encourage societies to retain control of their publishing programs while increasing their efficiency, expanding their capacity, and strengthening their financial sustainability.
About the author
Raym Crow has over twenty years experience in academic and business publishing, specializing in strategic business planning, product management, and market development. He is a Senior Consultant for the Scholarly Publishing & Academic Resources Coalition (SPARC) and Managing Partner of Chain Bridge Group, an independent consulting firm providing publishing and business planning services to learned and professional societies, university presses, academic institutions, museums, and other nonprofit and commercial organizations.
Email: crow [at] arl [dot] org
This article summarizes a discussion paper prepared under the auspices of the Scholarly Publishing and Academic Resources Coalition. The author thanks SPARC Director Heather Joseph for funding the research on which this article is based, and Karla Hahn, Howard Goldstein, John Willinsky, David Prosser, Brian Henehan, and Bruce Anderson for their insightful and substantive comments.
1. Weisbrod (1988 and 1998) describes the fundamental distinctions between nonprofit and commercial enterprises and the dangers inherent in nonprofit competition in a mixed market, and Salamon (2002) has emphasized the importance of the nonprofit sector restoring the balance between distinctiveness and survival. With specific reference to journal publishing, Morris (2001) outlines some of the differences between commercial and nonprofit publishers.
2. An efficient market would typically preclude the formation of cooperatives; where market dysfunctions exist, cooperative models emerge. For an introduction to the cooperative model, see Burt (2004). For cooperatives as a response to market dysfunctions, see Fulton (2001), pp. 56.
3. This assessment of the academic journal market used the online version of Ulrichs Periodicals Directory, the most comprehensive single information source on scholarly serials literature and a useful proxy for the academic journals market. This research was performed on the Ulrichs Periodicals Directory (http://www.ulrichsweb.com/ulrichsweb/) between 15 March and 29 April 2005. The author thanks James McGinty of Cambridge Information Group for generously extending access to Ulrichs for the purpose of this analysis and to Laurie Kaplan of R.R. Bowker for providing guidance and support.
4. See House of Commons (2004), Volume 1, pp. 1213.
5. Mabes analysis indicates that the growth rate for peerreviewed journals has been an almost constant 3.46 percent per year for the last three hundred years. The growth rate increased slightly (to 4.35 percent) from 1945 to 1976, but has slowed to 3.26 percent per year since 1977. Mabe (2003), p. 193.
6. Several studies demonstrate the significant price differences between journals published by commercial and nonprofit publishers and between selfpublished society journals and societysponsored journals outsourced to forprofit publishers. See Bergstrom and Bergstrom (2001) and White and Creaser (2004).
7. Kyrillidou and Young (2005). For a review of library budgets and serials pricing, see Edlin and Rubinfeld (2004), pp. 122126.
8. The figures on journal digital availability by field of science cited by Tenopir and King support the assumption that a much higher proportion of science journals are available electronically than for the social sciences and humanities. See Tenopir and King (2004), Table 9.4, p. 117.
9. See note 3 above.
10. See Salamon (2002), pp. 1719.
11. For a discussion of the impact of online aggregations on journal publishers, see Cox (2004), pp. 1118.
12. In the case of journals with publication fees, these savings might also be passed along to authors or their sponsors.
13. Additionally, in the U.S. and several other countries, cooperative banks exist that lend exclusively to cooperative organizations, often at a lower interest rate than charged by commercial banks.
14. For example, current expensing and/or funded or unfunded loss reserves. On risk retention and contractual transfer techniques, see Herman, et al. (2004), pp. 254ff.
15. Schroeder and Siegel (2006) provide an overview of the cooperative movement and its application to the publishing of academic research.
16. For a brief overview of the history of cooperatives, see Fairbairn (2004).
17. For a more detailed description of cooperative principles, see Barton (2000).
18. Most cooperatives operate on a onemember, onevote basis, though some permit a limited proportional vote based on a members patronage level.
19. For sharedservices cooperatives, see Crooks, et al., 1995.
20. Discipline clusters will typically reflect shared scholarly communication practices, common editorial and business policies, and shared niche market environments. Besides subject area or discipline, membership in satellite cooperatives could be defined in a variety of other ways, including national or regional groupings, organization types (e.g., nongovernmental organizations or university presses), or other logical affiliations.
21. Federated publishing cooperatives could also lower operating costs by sharing digital publishing platforms and hosting services. Although a large federated cooperative might find it cost effective to manage its own digital publishing system, often the services would be more economically obtained through a feebased agreement with a universitysponsored system.
22. Cooperative legal and corporate structures are described by Cropp (2002) and Barton (2000).
23. In the U.S., cooperatives typically enjoy a special federal and state tax status, as well. For example, cooperatives do not typically pay taxes on operating surpluses refunded to members, although these refunds represent taxable income to the members.
24. On cooperative capital structures and financing, see Peterson and Cobia (2000); Burt (2004); and, Cropp, et al. (1998). On good capitalization resulting from effective cooperative behavior and strong and transparent economic linkages, see Fairbairn (2003), pp.27 ff.
25. Some foundations make programrelated investments to support nonprofit activities that involve the potential return of capital within an established timeframe. PRIs include financing methods such as loans, loan guarantees, and even equity investments typically associated with private investors.
26. The cash refund is the percentage of allocated patronage refunds distributed to the publishers in cash. U.S. tax regulations require cooperatives to return at least 20 percent of their net income to participating publishers in cash, allowing cooperatives to retain up to 80 percent of their net income. As the members cash and noncash equity allocations represent taxable income, this provides cooperative members with sufficient cash to pay their tax obligations for cooperative equity.
27. A variety of redemption methods exist. For detail on cooperative equity redemption practices and plans, see Cropp, et al. (1998).
28. A revolving fund plan will keep equity in proportion to patronage as long as the revolving period is relatively short. As the revolving period lengthens and equity becomes less proportional to use, the cooperative runs the risk of participating publishers having divergent interests.
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Publishing cooperatives: An alternative for nonprofit publishers by Raym Crow
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