Chapter 10—
Economics Of Electronic Publishing—Cost Issues
Comments on Part Two

Robert Shirrell

I have a few brief comments on the very interesting and stimulating chapters prepared by Janet Fisher (chapter 5), Malcolm Getz (chapter 6), and Bill Regier (chapter 9). I'll focus on their presentations of publisher costs. I'll add a few words about the electronic publishing efforts we have undertaken at the University of Chicago Press and contrast the model we have adopted with the ones that have been mentioned earlier.

Janet Fisher, from the MIT Press, gave us costs related both to the electronic journals that they are publishing and to two of MIT's print journals. In Table 10.1, I've reworked the numbers and computed "first-copy" costs on a per-page basis. What I mean by first-copy cost is simply the cost for editing, typesetting, and producing materials that can subsequently be duplicated and distributed to several hundred or several thousand subscribers. The total first-copy costs for electronic journals at MIT Press range from approximately $15 to $56 per page, and the total first-copy costs for the print journals are $22 and $24 per page. In computing these costs, I did not include what Janet labeled as the d G&A costs, the general and administrative costs, but I did include the portion of the cost of the Digital Projects Lab (DPL) that is related to first-copy production.

Several things here are important and worth comment. First, the DPL cost, that is, the cost of preparing an electronic edition after editing and typesetting, is a significant portion of the total. Although the percentage varies between 13% and 62% (as indicated in Table 10.1), the cost is close to 50% of the total first-copy costs of publishing these particular electronic journals.

This breakdown raises the questions, why are these costs so high? and, will they decline over time? I think the expense reflects the fact that there are handcrafted aspects of electronic production, which are expensive, and substantial hardware costs that need to be allocated among a relatively small number of publications and pages. As for the future, the per-page costs at the DPL can be expected to go

down as pages increase and new processing techniques are developed, but even if they do go down to 40%, the totals for digital production are going to be a significant portion of the publisher's total cost. This is important.

Another point about these costs. Note that the total first-copy costs of the electronic journals average $40-$43 per page, whereas those for the print journals average about $23 per page-roughly a $20 difference in the costs. For a 200-page issue, that would amount to about $4,000. That is, it is $4,000 more expensive to produce materials for the reproduction and distribution of 200 pages in electronic form than for the reproduction and distribution of 200 pages in hard-copy form.

If $4,000 will pay for printing and distribution of a 200-page issue to 500 subscribers, which is a reasonable estimate, then MIT can produce a print edition less expensively than an electronic edition when the distribution is under 500. That conclusion is important: at this point, for the MIT Press, it's cheaper to produce journals in paper than to do them electronically, if the circulation is small, i.e., less than 500. That situation may evolve over time, but right now, the additional costs of electronic processing are not offset by sufficiently large reductions in printing and distribution costs.

Now let me turn to the paper by Malcolm Getz. Malcolm presented some numbers from the American Economic Association (AEA), and the numbers in Table 10.2 are approximately the same as the ones he presented. I have also presented numbers from the University of Chicago Press for 37 of our titles. That

figure is not the total of our serial publications; we publish 54 in all. The figure excludes The Astrophysical Journal, our largest single title, and a number of journals that we publish in cooperation with other not-for-profit organizations. The journals that are included are principally titles in the humanities and social sciences, with some in medicine and biology.

The breakdown of costs for the Press and for the AEA is quite similar. Editorial costs are 36% for AEA and 32% for the Press. Typesetting is 13% for AEA and 10% at the Press, though it varies substantially by journal. Distribution costs are similar. Overall, these numbers are very close, and they are, it seems to me, reasonable numbers industry-wide.

It is possible to provide a more detailed breakdown of the numbers for the Press, and in Table 10.3, I have broken down the 32% that is related to editorial into the portion that is related to the peer review of manuscripts, which is 22% of the total, and the portion that is related to manuscript editing, which is 10% of the total. Because of the manner in which some of the Press's costs are recorded, the number I have shown for manuscript editing may be somewhat higher, but the breakdown between peer review and manuscript editing is a reasonably accurate division of costs in traditional journal publishing. I think this revised breakdown of costs provides an interesting context for reviewing the way in which costs evolve in an electronic publishing environment, and I would like to turn now to make a few remarks about the possibilities for cost restructuring and cost reduction.

The electronic publishing model we have been discussing is structured so that, basically, electronic costs are add-on costs: you do everything you do in print, and then you do some more. I have outlined the process in Table 10.4. The process includes the traditional functions of peer review, manuscript editing, typesetting, and printing and mailing and adds new functions and new costs for the derivation of electronic materials from the typesetting process and for the management of electronic services.

In this model, as for the vast majority of journals, so long as we continue to produce both print and electronic editions, the total cost is not going to decrease. The reason is that, even if a significant portion of the subscribers convert from paper to electronic editions, the additional costs for electronic processing are not offset by reductions in the printing and distribution costs. As we all know, the marginal

cost of printing and mailing is small, much smaller than the average cost, and the additional costs for electronic processing are substantial. The consequence is that, in this model, electronic costs turn out to be added costs, costs in addition to the total that would exist if only a print edition were being produced.

This is exactly what is argued by Regier. He reported that for Project MUSE, the electronic publishing venture of the Johns Hopkins University Press, the total costs for both print and electronic editions were about 130% of the print-only costs. This increase is significant, and I believe it is representative of efforts that are based on deriving electronic materials from typesetting files, as a separate stage of production, undertaken subsequent to the typesetting process.

I would now like to discuss another approach to electronic publishing, another way to obtain electronic materials and to do electronic dissemination. This process is quite different from the one I have just described, with different cost structures and different total costs. The process is outlined in Table 10.5. In this process, data are converted to SGML form in the earliest stages of editing. Then the SGML database is used to derive both the typeset output for hard copy printing and the electronic materials for electronic dissemination.

This process generates costs quite different than those for the model we looked at before. The costs are summarized in Table 10.6. Most important, there is a substantial increase in the cost at the beginning of the process, that is, in the conversion of data to SGML form and the editing of it in that format. SGML editing is not easy and it is not cheap. However, because manuscripts are extensively marked

up and formatted in this process, a typeset version can be derived from the SGML database inexpensively, and of course, the electronic files for distribution in electronic form are also straightforward and inexpensive to derive. Overall, the additional costs for conversion and editing are being offset in large part by reductions in typesetting costs.

This process is the approach that we have undertaken with The Astrophysical Journal at the University of Chicago Press and are now implementing for other publications. The Astrophysical Journal, sponsored by the American Astronomical Society, is the world's leading publication in astronomy, issuing some 25,000 pages each year, in both print and on-line editions. The conclusions we have reached in our efforts for that journal are that a reduction in the typesetting costs can offset other additional costs and that this method of producing the journal is less expensive than any alternative way of generating the electronic materials that we want to obtain for the on-line edition.

These general conclusions are probably applicable to most scientific and technical journals, because this method, based on processing in SGML form, results in substantial reductions in the cost of typesetting tabular and mathematical matter. For those publications, we will be able to produce electronic editions for, at most,

10% more than the cost of producing print editions alone. In some cases it may be possible to produce electronic versions in addition to the print versions at no additional total cost.

Let me add one other point. Because we are converting manuscripts to SGML immediately and editing in SGML, we can obtain materials for electronic distribution much faster than in the traditional print model. In 1997 we published papers in the on-line edition of The Astrophysical Journal Letters 14 days after acceptance by the editor. That turnaround is possible because we obtain the electronic version immediately from our SGML database and do not derive it by postprocessing typesetting files.

In sum, this process will allow us, in certain circumstances, to publish complex scientific material in a sophisticated electronic version both less expensively and more rapidly than by employing alternative means. This sort of processing is an important alternative approach to electronic publishing.