RUK: The Maturing Threat of Open Access - TheStreet

“"We all face the same paradox. We faculty do the research, write the papers, referee papers by other researchers, serve on editorial boards, all of it for free ... and then we buy back the results of our labour at outrageous prices." That sentiment, expressed in April by Robert Darnton, the director of the Harvard library, is the reason why the rich profit margins enjoyed for so long by publishers like Reed Elsevier will prove unsustainable in the face of technological change.  Reed Elsevier (RUK) is the world's largest publisher of academic journals, with more than 1200 scholarly titles. The publishing division operates at a 36% profit margin - an outstanding margin for any business - but the basis for that profitability looks increasingly vulnerable as the open access movement matures and academics become increasingly aware of viable alternatives. Because profits from the Elsevier publishing division accounted for nearly half of the company's adjusted operating profit in 2011, downside risks to margins could have a significant impact on the overall profitability of the company. The analysis of changes in the open access movement, below, explains why the stock can be expected to underperform its peers. In the following section, we explain why RUK is so dependent on revenues from the core Elsevier division and the obstacles to any future margin expansion. Then, we review the ‘old’ open access movement, the recent move to boycott Elsevier journals, and the new threat posed by competing open access publishers...”