Library Costs
Library Materials: Print
The results of the economic crisis in scholarly publishing were documented statistically in 1992 in University Libraries and Scholarly Communication.[2] Some of the principal findings included the fact that although materials and binding expenditures remain a relatively constant percentage of total library expenses, there has been a hidden, but significant, change in the ratio of books to serials expenses. Although materials expenditures have steadily risen, the average numbers of volumes added to library collections annually continue to decline. Not only are libraries spending more and receiving fewer items in absolute terms, but also libraries are collecting
an ever smaller percentage of the world's annual output of scholarly publications. Since 1974, even increases in university press outputs have outstripped increases in library acquisition rates.
Moreover, the study documents that some of the fields experiencing the greatest increases in their share of the total output are precisely those with the highest average per-volume hardcover prices: business, law, medicine, science, and technology. According to the report, science had the highest average prices; social sciences and business experienced price increase rates closer to the GNP deflator (p. xix).
Another finding was that serials prices consistently increase faster than general inflation. Serials had an overall annual inflation rate of more than 11% from 1986 to 1990. Prices of scientific and technical journals rose at the highest rates (13.5% per year, on average, from 1970 to 1990), and the most expensive serials experienced the largest relative price increases. In contrast, book prices inflated at 7.2% per year, while the general inflation rate averaged approximately 6.1%. In some institutions, science journals could comprise only 29% of the total number of journal subscriptions but consumed 65% of the serials budget. According to the Mellon report, "three European commercial publishers (Elsevier, Pergamon, and Springer ...) accounted for 43% of the increase in serials expenditures at one university between 1986 and 1987" (p. xxi). The report does not introduce the question of the extent to which these inflation rates in the prices of scientific journals reflect increasing costs of production, expansion in content, price gouging, or the market value of the information itself-a value that might extend well beyond the university.
Brian Hawkins's 1996 study of library acquisition budgets of 89 schools finds that although budgets nearly tripled from 1981 to 1995 and increased by an average of 82% when corrected for inflation using the Consumer Price Index, the average library in the study lost 38% of its buying power. In the 15 years covered by his study, the inflation rate for acquisitions was consistently in the midteens. Confirming the Mellon study, he finds that the costs of some science journals increase more than 20% per year. He also notes that the trend line for average increases in library acquisition budgets is downward, accelerating the rate of decline in volumes added to collections.[3]
Harrassowitz regularly alerts libraries to subscription pricing information so that its customers can plan in advance to adjust purchasing patterns to stay within budget. In November 1996, Harrassowitz provided firm 1997-98 subscription pricing for six publishers publishing the majority of the STM (science, technology, and medicine) journals.[4] The announced price increases ranged from 1.2% to 22%, averaging 11%. According to Harrassowitz's analysis, libraries categorized as "General Academic/including Sci-Tech" could expect average price increases from the six publishers of almost 14%.
Peter Brueggeman from the Scripps Institution of Oceanography (SIO) Library at UCSD has discussed the problem from the perspective of a science li-
brary.[5] During the five-year period from 1992 to 1996, journal subscription costs at SIO rose 57% but the recurring collections budget increased 2.3%. Brueggeman singles out Elsevier and Pergamon for particular analysis: "Elsevier titles had a 28% increase between 1995 and 1996 and a 32% increase between 1992 and 1993. Pergamon titles had a 29% price increase between 1995 and 1996 and a 17% price increase between 1992 and 1993."
Various authors have demonstrated that not only do the most expensive journals experience the highest rates of inflation, but they are also among the most used. Chrzastowski and Olesko found that over a period of eight years, the cost of acquiring the ten most used chemistry journals increased 159% compared to an increase of 137% for the 100 most used journals.[6] During the same period, usage of the top ten journals increased 60% compared to an increase of 41% for the top 100 journals.
Library budgets that inflate more slowly than the rate of inflation for scholarly journals will cause a steady decline in the number of titles held in each library. Because libraries generally cancel journals on the basis of use, high-use, high-inflating titles may be protected. This protection results in a gradual homogenization of collections among libraries. Lesser-used titles, many with low prices and low inflation rates, will be crowded out faster than the general rate of decline in library subscriptions.
Figure 18.1 illustrates a hypothetical scenario. This scenario assumes that the collections budget is inflated by 4% per year. However, the average rate of inflation in the cost of scholarly publications is greater. The graph shows that if science journals, because they demonstrate high usage patterns, are canceled more slowly than other titles, then science journals will eventually crowd out other journals. In the example, the budget for science journals is allowed to inflate at approximately 8% per year (slightly less than one-half the actual inflation rate, but twice the rate of inflation in the total serials budget). Other, lesser-used journals, with lower subscription prices and lower rates of inflation, therefore must be canceled more rapidly in order for the collections budget to be balanced. Within a few years, the crowding-out effect from protection of high-use/high-price/high-inflation journals is quite noticeable. While no particular library may implement a budget strategy exactly like that depicted, all libraries tend to retain subscriptions to the highest use journals and to cancel first the lesser-used journals. Although the curve may change as the time line lengthens or shortens, the eventual result will be similar to that shown.
Library Materials: Electronic
As yet, there is no evidence that the emergence of electronic journals will improve the fundamental economic problems in the cycle of scholarly communication. The basic premise of publishers is that they must protect their current revenue base and secure guarantees to cover future inflation and increases in content.
Figure 18.1.
Crowding-out Effect
Thus, publishers frequently structure their initial subscription pricing for digital journals upon the actual cost of paper subscriptions acquired by the institution with which the publisher is negotiating. The proposed base subscription rate may include all subscriptions: library, departmental, personal, and other types identified with the campus, thereby greatly increasing the price that the library would have to pay to receive the digital journals. Clearly, publishers are concerned that network availability of electronic journals on the campus network will undermine nonlibrary subscriptions to the print versions.
In early 1996, Ann Okerson reported that
In general electronic licenses so far have cost on average 1/3 more than print equivalents.... Publishers are setting surcharges of as much as 35% on electronic journals, and libraries simply do not have the capacity to pay such monies without canceling a corresponding number of the journals of that particular publisher or dipping into other publishers' journals.[7]
Moreover, during license negotiations for certain electronic journals, libraries may be asked to consent to such provisos as the following:
1. That there be multiyear price increase guarantees to compensate for inflation, often at somewhat lower rates than historical rates of price increase for print materials
2. That there be upward price adjustments for increases in content, often capped at lower rates than typical for print journals
3. That the publisher be protected against declines in revenue through cancellation
4. That fair use rights typical for print journals be abrogated for the digital journals
Maintaining a combination of print and electronic subscriptions for a multiyear period without incurring substantial new marginal costs for electronic versions and ensuring a cap on inflation are attractive to libraries. But neither "feature" of these new licenses will alter the basic economic difficulty facing libraries: inflation in the price of scholarly information outstrips libraries' ability to pay. In fact, by being locked into multiyear agreements that ensure price increases to particular publishers, libraries hasten the rate at which other journals and monographs are crowded out of the market.
Not all scientific publishers have negotiated as described above. For example, the American Physical Society and the American Mathematical Society offer electronic versions of their journals free to subscribers to the print editions. Clearly, publishers must find revenue streams that will enable them to survive, and the pricing structures for both print and digital journals are the key to those revenue streams. To base a pricing structure for electronic publishing on the costly print model will not be economically viable in the long run (it may, in fact, be unsustainable in the short term as well). Libraries' declining budgets will result inevitably in cancellations to avoid the structural problems associated with doubledigit inflation, thereby undermining the publishers as well.
The current economic model for scholarly publication cannot be sustained. Continued escalation in the prices for scholarly journals, stagnation in library budgets, and isolation of the creators and consumers of scholarly information (the faculty) from the effects of the economy could lead to the collapse of the system of scholarly communication itself.
Operations Costs in Libraries
Library operations costs associated with printed scholarly journals include the costs to acquire, process, preserve, and circulate journals. Each library's costs differ based on the organizational structure, degree of centralization or decentralization of processes, differentials in salary and benefit scales, effectiveness of automated systems, success at reengineering internal operations, and other factors.
University Libraries and Scholarly Communication reports that "salaries as a percentage of total library expenditures have declined over the past two decades, while other operating expenditures (heavily reflecting computerization) have risen
markedly" (p. xxii). The report infers that the increases in other operating expenditures reflect automation of technical service operations such as acquisition, cataloging, serials control, and circulation. It also notes that despite the decline in salaries as a percentage of total library expenses and the increase in other expenditures, "the number of volumes added per staff member has declined" (p. xxii), implying that there has not been a measurable staff efficiency gain from the investments in automation. In fact, on average, library staff increased by a total of 7% from 1970 to 1985 and by 6% from 1985 to 1991. Thus the rise in the nonsalary operations portion of the total operating expenses did not occur through staff reductions but rather as a result of budget augmentation for nonsalary items.
Presumably, greater efficiency in processing and circulation coupled with declining acquisitions should have resulted either in staff reductions or in substantial shifts of personnel away from the back room of technical processing to and into service to faculty and students, but it is not possible to discern from ARL statistics whether this is so. The ARL did not report service transactions until 1991, so one cannot discern changes in user demand for the earlier periods. Between 1991 and 1996, the ARL reports steady increases in interlibrary borrowing, library instruction, reference transactions, and total circulation. During the same period, total staff has declined by 2%.[8]
The inability to learn from the ARL reports or other reliable studies how libraries might be changing their staff allocation among operations and services reflects a serious flaw common to almost all analyses of library costs relating to both collections and operations. It is not obvious to what extent nonsalary investments, for example in automated systems, have actually improved processing productivity or the quality of services rendered by staff; nor is it clear whether or to what degree these investments have moderated the rate of rise of operations costs.
Library rankings typically reflect inputs such as budget, volumes acquired, number of serial subscriptions maintained, size of staff; or operational statistics such as the number of circulation transactions, titles cataloged, hours of opening, or items borrowed through interlibrary services. Ironically, the ARL Index ranks research libraries in part on the number of staff they employ; improving productivity and reducing staff accordingly would have the paradoxical effect of reducing a library's ranking vis-à-vis its peers. Developing measurements of service outcomes related to the mission of the institution would be more helpful as comparative data. For example, how do a library's collections and services contribute to research quality, faculty productivity, or student learning? The problem of defining productivity of knowledge workers was mentioned 30 years ago by Peter Drucker[9] and is further examined by Manuel Castells in his recent book The Rise of the Network Society.[10] Library operations represent a clear example of this productivity paradox.
William Massy and Robert Zemsky, discussing the use of information technology to enhance academic productivity in general, remark on its transformational potential, calling it a "modern industrial revolution for the university" that can
create economies of scale, deliver broad information access at low marginal cost, and allow for mass customization.[11] The analysis they provide for the academy at large would appear to be even more pertinent to libraries, many of whose functions are of a processing nature similar to those in industry and whose services can also be generalized to a greater degree than is possible for teaching and research.
Massy and Zemsky suggest that although capital investments in technology to enhance productivity will increase the ratio of capital cost to labor cost, they may not actually reduce overall costs. But the writers argue that those investments will save money in the long term because over time labor costs rise with productivity gains and technology costs decline.
The primary purposes of automating processing operations in libraries have been to reduce the rate of rise of labor costs and to improve timeliness and accuracy of information. From the point of view of faculty and students, the service improvements are the most important result of automation. For example, on-line catalogs and automated circulation services provide users with more rapid access to information about the library's collections, reduce errors in borrowing records, and support more timely inventory control. Use of on-line indexing and abstracting services rather than the print versions preserves the scarce time of scholars and effectively extends the library's walls throughout the network.
Despite the efficiencies that automation has brought, labor costs to perform library processing operations such as ordering and receiving, cataloging, maintenance of the physical inventory, and certain user services including interlibrary lending and borrowing remain substantial. A transition to electronic publishing of journals (accompanied by the elimination of print subscriptions) could enable libraries to reduce or eliminate many of the costs of these labor-intensive operations. The freed-up resources might then be moved into higher priority services, necessary capital investments in technology, or provision of technology-based information resources. The benefits to end users could also be significant: less time spent in finding and retrieving physical issues of journals.
In the very long term, restructuring of library operations in response to electronic scholarly publishing could, in theory, result in major improvements to the quality of library services and also reduce operations costs. However, to maximize operations costs reductions, libraries will need to define better the desired outcomes of their operations investments, measure those outcomes effectively, and engage in rigorous reengineering of processes.
Several studies have attempted to quantify typical costs of acquiring journals. In a study funded by CLR (The Council on Library Resources), Bruce Kingma found the average fixed cost of purchasing a journal subscription to be $62.96.[12] In discussing the economics of JSTOR, Bowen estimates the costs of processing, check-in, and binding to be approximately $40.00.[13] In 1996, the library of the University of California, Berkeley estimated the physical processing costs, including check-in of individual issues, bindery preparation, and binding, for print serial subscriptions received and housed in the main library to be as low as $17.47 for
a quarterly journal and up to $113.08 for a weekly journal. Berkeley's figures exclude the costs of ordering and order maintenance under the assumption that those costs will not differ significantly for electronic journals. The figures also exclude staff benefit costs and overhead and therefore understate the true cost to the university of receiving print subscriptions. Assuming an average annual processing cost of $50.00 per print serial subscription, a research library subscribing to 50,000 titles may incur an operations cost of $2.5 million per year simply to acquire journals.
Once the library acquires these journals, it begins to incur the costs of making them available to students, faculty, and other users. In the late 1980s, Michael Cooper reviewed the costs of alternative book storage strategies.[14] He found that circulation costs ranged from a low of $.53 per transaction in a medium-sized, open-stack research library to a high of $9.36 per transaction from a remote storage facility. Adjusted for inflation of 3% per year, these costs would range from approximately $.67 to $11.86 per transaction today. Berkeley calculates that an average circulation transaction costs approximately $1.07, and Bowen's estimate is $1.00. According to ARL Statistics, 1995-96, the mean number of initial circulations per library was 452,428. Using a circulation transaction cost of $1.00, the average ARL library spent almost $500,000 to circulate materials during the fiscal year 1995/96.
A review of the costs of acquiring and circulating print journals indicates that a transition from print to electronic journals would eventually reduce annual library operations costs related to providing the university community with the fruits of recent scholarship, but it is not clear how much of these savings might be offset by costs of technology infrastructure and equipment replacement. Large recurring expenses in support of historical print collections would continue but gradually diminish over time as the aging of the collection reduced the rate of usage. The long-term cost reductions could be substantial in the sciences where currency of information is of utmost importance. Costs associated with traditional operations and physical facilities might be more rapidly reduced were high-use print collections converted to digital form. Ultimately, the shift from labor-intensive processing operations to capital investments in electronic content (current journals and retrospective conversion of high-use print collections) might bring about the kinds of effects envisioned by Massy and Zemsky.
However, caution must be exercised in forecasting these types of savings. Despite the potential for long-range cost reductions, savings are unlikely to occur to any significant degree in the short term. The pace of transition from print to digital journals is moving slowly, and only those publishers with a strong financial base will be likely to succeed in quickly providing on-line access. As noted above and in the section of this paper relating to publishers' cost structures, there is no clearly viable economic path to move from print to digital publishing. Moreover, because user acceptance of digital journals may not occur rapidly and because of the many uncertainties about archiving digital information, libraries will need to
maintain print collections-historical and prospective-into the foreseeable future, requiring that investments in operations and facilities be maintained.
Interlibrary borrowing and lending is a growing cost within research libraries,[15] and its rate of increase promises to escalate as the inflation-generated rate of serials cancellations escalates. According to the ARL, faculty and students borrowed more than twice as many items through interlibrary loan in 1996 as they did in 1986. The University of California Libraries recently reported an annual increase approaching 10% per year. Interlibrary services are labor-intensive operations; in 1993, the ARL conducted a cost study that determined the average cost of a borrowing transaction to be $18.62 and that of a lending transaction to be $10.93. The average ARL university library processed 17,804 interlibrary borrowing transactions and 33,397 interlibrary lending transactions during 1995-96, incurring an average annual cost of approximately $700,000. Given the rate of rise of interlibrary resource sharing transactions as well as the rate of rise of labor costs, research libraries are likely to experience increasing interlibrary borrowing and lending costs of about 10% per year. The rate of rise of interlibrary lending costs could be reduced through use of on-line journals rather than print journals; but if traditional print-based fair use practices are abrogated in the on-line environment, publishers might create pay-per-view contracts that would actually increase costs beyond the costs of manual interlibrary loans. Thus there are unknown cost implications in interlibrary resource sharing of digital information.
Capital Costs
Capital assets in libraries are of three basic types: buildings, collections, and equipment. Expenditures for the most costly of these assets, buildings, are typically not a part of library budgets and therefore are not generally considered by librarians in their discussions of library costs. This paper will not attempt to discuss capital costs for library buildings in any depth except to cite several relevant studies. In the late 1980s Cooper estimated the construction cost per volume housed in an on-campus open-stack library to range from $4.33 for compact shelving to $15.84 for traditional open stacks; he calculated the construction cost per volume of a remote regional storage facility to be $2.78.[16] Bowen uses Cooper's construction costs, adjusted for inflation, and Malcolm Getz's life cycle estimates to calculate an annual storage cost of $3.07 per volume.[17] Lemberg's research substantiates Bowen's premises regarding the capital cost that might be avoided through digitization of high-use materials.[18] He demonstrates that, even considering the capital costs of technology necessary to realize a digital document access system, research libraries as a system could accrue substantial savings over time if documents are stored and delivered electronically rather than in print form.
Extrapolating from Bowen's estimate of an annual storage cost of $3.07 per volume, a research library subscribing to 50,000 journal titles per year, each of which constitutes one volume, accrues $153,000 in new storage costs each year.
Over 10 years the cumulative cost to house the volumes received through the 50,000 subscriptions would exceed $8 million.
The growing dependence on information technologies to deliver scholarly information requires that universities make new investments in capital equipment and allocate recurring operations resources to the maintenance of that equipment and the network infrastructure. Although universities have invested heavily in network technologies, the true costs are still inadequately understood, and it is clear that increasing dependence on digital, rather than print, scholarly information will require that reliable funding for technology be developed. While capital costs for print libraries entail buildings, whose construction costs fall within known ranges and whose life cycle is long, and collections, the long-term costs of which can be rather reliably estimated, capital costs for the digital library are distributed across the campus and indeed the world. As yet, there is no clear formula to indicate how much initial capital investment in technology might be required to deliver a given number of digital documents to a given size academic community. Moreover, the life cycle for capital assets relating to delivery of digital library content is typically very short, perhaps shorter than five years. Thus funding allocations must be made frequently and regularly to ensure continued access to digital information. The Berkeley library, for example, estimates that annual equipment replacement costs for the existing installed base of equipment would be approximately $650,000, assuming a five-year life cycle. But the library has never had an explicit budget to support that expense, so investments in computer equipment, networking, and equipment replacement have been made through periodic redirection of the operating budget. Similar technology funding and renewal problems exist across the campus. Berkeley's situation is not unusual, and further work needs to be done to understand more fully the capital cost differentials between the physical plant investments required for print collections and the network investments required to make digital information available to the campus community.M
It is possible that if libraries and their parent institutions, universities, could avoid some of the capital and operations costs associated with print-based dissemination of scholarly publications, these resources could be reallocated to capital investments in technology, provision of additional information resources available to the academic community, service improvements within libraries, and restoration of control of the system of scholarly publishing to universities and scholarly societies rather than the commercial sector.