The Risks of Launching a New Services Business — Branding, Cash Flow, and the Fraught Start of PeerJ « The Scholarly Kitchen

“Two weeks ago, we learned of the Fall 2012 launch of PeerJ, a new proposition in the open access (OA) publishing space. Instead of per-article charges as part of an OA business model, PeerJ is proposing to allow researchers to publish as much as they want, all for the low, low price of one $99 lifetime membership.  After scooping my brain back into my skull once I’d absorbed this apparently foolhardy approach to cash flow and sustainability (a topic I’ll return to momentarily), it began to dawn on me that perhaps what PeerJ is headed toward is more akin to a freemium model, like WordPress ... PeerJ is hoping to collect cash up-front with its $99 lifetime membership fee. On the face of it, scalability would seem to be their main challenge... There is already some skepticism that PeerJ, taken at face value, can work. And there are two interesting hedges in PeerJ’s admittedly scant description of its business model: ‘Researchers will be able to purchase Lifetime Memberships, starting at just $99, giving them the rights to publish their articles in our peer reviewed journal.’  The first hedge is ‘starting at,’ a classic indication that up-charges are headed your way. The second hedge is that the Lifetime Membership grants researchers ‘rights to publish,’ but nothing more.  So what could come after the ‘starting at just $99’ price? I could imagine peer-review fees, formatting fees, search engine optimization fees, press release fees, data storage and hosting charges, syndication fees, and so forth. The list could be impressive, and the ala carte final charge could be significant and recurring. As Chris Anderson outlined in 2009, freemium is usually enabled by restrictions... The freemium model only works as well as the balance of free and premium services works. That is, you have to offer enough initially to hook the customer, then hold back enough things — service omission or the prospect of service provision — so that the customer is compelled to pay for more. If I had to bet, I’d wager on PeerJ adopting feature, capacity, or customer class limits in the freemium model I’m imagining... PeerJ has stated that it will not stoop to subscriptions:  ‘Subscription fees made sense in a pre-Internet world, but now they just slow the progress of science.’  Cash flow drives a lot of behaviors in businesses.  For example, when PLoS first emerged, it focused on two high-quality journals possessing familiar peer-review and publication practices — an editor at the helm of each, small issues, selective editorial control, and monthly publication. However, this model didn’t provide sufficient cash flows using OA publication fees, so PLoS created PLoS ONE, a high-volume mega-journal that allowed the organization to publish more papers without singular editorial oversight or a filter that added novelty or interest criteria, allowing the publication to settle for methodological soundness.  Around the same time, BioMed Central fully embraced article-processing charges and began launching dozens of OA journals, creating a high-throughput article publication environment but parceling it out through multiple titles rather than one main mega-journal.  Since then, ‘predatory’ OA publishers have emerged time and again, with a common thread linking them — namely, every one seems to launch dozens or hundreds of journals simultaneously.  There is a reason for OA publishing taking on this high-throughput aspect — namely, cash flow.  For the OA publisher, each article is sold once and only once.  This places significant cash flow restrictions on the OA publisher. For the (dare I say it) traditional OA publisher, the obvious answer to the question of how to increase cash flow and revenues has been and will continue to be, publish more articles more frequently. There is no clear alternative, even with supplemental revenues from institutional memberships and other secondary revenue streams, like ads. The main thrust of the OA model dictates this financial reality.  The side-effects of this simple financial model are legion — the lowering of standards to accommodate bulk publishing practices; an emphasis that publishing is just a technology business in order to strip away the costs of legal, editorial, and custodial work; and advocacy to make OA publishing as prevalent as possible to further increase throughput... PeerJ has an intriguing proposition to steal customers from PLoS and BMC using a