Guest Post: CCC’s Roy Kaufman on Growing Your Open Access Business in an Environment of Peak APC Pricing | The Scholarly Kitchen

"In a 2014 post in The Scholarly Kitchen, consultant Michael Clarke talked about expanding the OA business as a response to 'peak subscriptions'— addressing some of the challenges publishers face as they try to increase their subscription-journal businesses. The OA market, too, is challenging for publishers now. 'It’s not a fully-functioning market. For example, publishers can’t count on the ability to raise prices on a regular basis,' said Rob Johnson, director of UK-based Research Consulting, which specializes in the OA marketplace. The prices for article publication charges (APCs) speak for themselves. A recent comparison of APCs by Wellcome Trust shows that average APC fees rose by less than one percent from 2013 to 2014. In this way, the OA market reflects larger trends in journal publishing, and, in particular, the downward pressure on prices. As library budgets have shrunk for the past few years (and profits from subscription journals have shrunk along with them), so-called gold road OA remains a potential growth area for publishers. The gold road is based on the willingness of authors to pay publishing charges — APCs — for which they often use grant money. However, for a variety of reasons, APC prices likely will not be rising any time soon. One reason is that pure OA publishers like PLOS have set the pricing bar relatively low. 'They make it work for them through economies of scale, by having a less labor-intensive standard of peer review, and by avoiding the costs of a legacy print business,' said Johnson. Perhaps even more important, they have set a benchmark for what the market believes APC fees should be ... Funders like the European Union are also constantly keeping an eye on APCs and even capping the fees that can be paid, a practice that makes it tough for publishers of scientific journals to raise prices. Publishers’ costs of publication for single articles in high-impact journals can exceed $10,000. In the traditional revenues-from-subscriptions-plus-rights-plus-reprints model, publishers were able to sustain themselves by keeping revenues above costs. In contrast, with maximum APCs so far below costs (at least for those high-impact journals), sustainable publishing is a challenge for the gold road, especially for hybrid journals. Publishers are going to need something other than price increases if the dominant business model continues to move toward OA.  Fortunately, there are alternatives. In order to grow a business, there are three major components: revenues, costs and price. Taken together, they contribute to overall profitability. Broadly, there are three ways publishers can increase profitability for OA ..."