Agent's Strategy

Given the interest of publishers in licensing their products for campus intranets and the universities' interest in securing such licenses, there is opportunity for enterprises to act as brokers, to package the electronic versions of the journals in databases and make them accessible, under suitable licenses, to campus intranets. The brokers may add a markup to reflect their cost of mounting the database. The size of the markup will reflect the extent of integration as well as the choice of storage strategy.

SilverPlatter became the most successful vendor of electronic index databases by making them available on CDs for use on campus intranets with proprietary software. OCLC plays an important role in offering such databases from its master center in Ohio. Ovid, a third vendor, supports sophisticated indexing that integrates full text with Standard Generalized Markup Language (SGML) and Hypertext Markup Language (HTML) tagging. A number of other vendors have also participated in the index market and are likely to seek to be brokers for the electronic distribution of journals.

A core strategy will probably be to mount the database of journals on one or more servers on the World Wide Web, with access limited to persons authorized for use from licensed campuses or through other fee-paid arrangements. This strategy has three important parts: (1) the database server, (2) the Internet communication system, and (3) the campus network.

The advantage of the World Wide Web approach is that the data can be made accessible to many campuses with no server support on any campus. A campus intranet license can be served remotely, saving the university the expense of software, hardware, and system support for the service.

The risk of the Web strategy is with the Internet itself and its inherent congestion. OCLC used a private data communication network so as to achieve a higher level of reliability than the Internet and will do the same to ensure high-quality TCP/IP (the Internet Protocol) access. Some campuses may prefer to mount database files locally, using CD-ROMs and disk servers on the campus network. Some high-intensity campuses may prefer to continue to mount the most used parts of databases locally, even at extra cost, as a method of ensuring against deficiencies in Internet services.

The third element, after storage and the Internet, is the campus network. Campus networks continue to evolve. Among the hundred universities seeking to be top-ten universities, early investment in sophisticated networking may play a

strategic role in the quest for rank. On such campuses, network distribution of journals should be well supported and popular. Other campuses will follow with some lag, particularly where funding depends primarily on the public sector. Adoption within 10 years might be expected.^[28]

The electronic agent, then, must choose a strategy with two elements: (1) a storage and network choice and (2) an approach to database integration.

Journal publishers generally start at the bottom left of Figure 6.4, the closest to print. They could make a CD and offer it as an alternative to print for current subscribers. The AEA offers the Journal of Economic Literature on CD instead of print for the same price.

Moves to the upper left seem to be economically infeasible. Integrating more materials together increases local storage costs and so tilts the storage-network balance toward less storage and more network. With more data integration, the agent's strategy will shift to the right.

Moves to the lower right, with reduced storage costs and more dependence on networks, should involve considerable cost savings but run risks. One risk is of network congestion. A second is of loss of revenues because traditional subscribers drop purchases in favor of shared network access. The viability of these strategies depends on the level of fees that may be earned from network licenses or pay-per-look.

Moves along the diagonal up and to the right involve greater database integration with cost savings from lower storage costs and more dependence on networks. The advantage of moves upward and to the right is the possibility that integration creates services of significantly more value than the replication of print journals on the Internet. When database integration creates significantly more value, subscribers will be willing to pay premium prices for using products with remote storage with networks. Of course, network congestion will remain a concern.

A move toward more database integration raises a number of interesting questions. The answers to these questions will determine the size of the markup by the electronic agent. How much should information from a variety of sources be integrated into a database with common structure, tags, and linkages? For a large database, more effort at integration and coherence may be more valuable. Just how much effort, particularly how much hand effort, remains an open question. If the electronic agent passively accepts publications from publishers, the level of integration of materials may be relatively low. The publisher may provide an abstract and metatags and might provide URLs for linking to other network sites. The higher level of integration associated with controlled vocabulary indexing and a more systematic structure for the database than comes from journal titles would seem to require either a higher level of handwork by an indexer or the imposition of standard protocols for defining data elements. Is a higher level of integration of journal material from a variety of sources sufficiently valuable to justify its cost? The index function might be centralized with storage of individual journals distributed around the Net. Physical integration of the

database is not necessary to logical integration, but will common ownership be necessary to achieve the control and commonality necessary for high levels of integration?

A second question concerns how an agent might generate a net revenue stream from its initial electronic offerings sufficient to allow it to grow. The new regime will not be borne as a whole entity; rather, it will evolve in relatively small steps. Each step must generate a surplus to be used to finance the next step. Early steps that generate larger surpluses will probably define paths that are more likely to be followed. Experimentation with products and prices is already under way. Those agents finding early financial success are likely to attract publishers and libraries and to be imitated by competitors.

JSTOR has captured the full historic run of a significant number of journals, making the promise of 100 titles in suites from major disciplines within three years. However, it does not yet have a program for access to current journals. Its program is primarily to replace archival storage of materials that libraries may or may not have already acquired in print.

OCLC's approach is to sell libraries access services while publishers sell subscriptions to the information. The publisher can avoid the cost of the distribution in print, a saving if the electronic subscriptions generate sufficient revenue. The unbundling of access from subscription sales allows the access to be priced on the basis of simultaneous users, that is, akin to the rate of use, while the information is priced on the basis of quantity and quality of material made available. Of course, the information may also be priced on a pay-per-look basis and so earn revenue as it is used. What mix of pay-per-look and subscription sales will ultimately prevail is an open question.

A third question is whether publishers will establish exclusive arrangements with electronic agents or whether they will offer nonexclusive licenses so as to sustain competition among agents. Some publishers may prefer to be their own electronic agents, retaining control of the distribution channels. If database integration is important, this strategy may be economic only for relatively large publishers with suites of journals in given disciplines. Many publishers may choose to distribute their products through multiple channels, to both capture the advantages of more integration with other sources and promote innovation and cost savings among competing distributors.

As the electronic agents gain experience and build their title lists, competition among them should drive down the markups for electronic access. If the store-once-and-network strategy bears fruit, the cost savings in access should be apparent. If higher levels of database integration prove to be important, the cost savings may be modest. Cost savings here are in terms of units of access. As the cost of access falls, the quantity of information products used may increase. The effect on total expenditure, the product of unit cost and number of units used, is hard to predict. If the demand for information proves to be price elastic, then as unit costs and unit prices fall, expenditures on information will increase.

The electronic agents will gather academic journals from publishers and distribute them in electronic formats to libraries and others. They will offer all available advantages of scale in managing electronic storage, optimize the use of networks for distribution, offer superior search interfaces and engines, and take steps to integrate materials from disparate sources into a coherent whole. The agent will be able to offer campus intranet licenses, personal subscriptions, and pay-per-look access from a common source. The agent may manage sales, accounting, billing, and technical support. Today, agents are experimenting with both technical and pricing strategies. It remains to be seen whether single agents will dominate given content areas, whether major publishers can remain apart, or whether publishers and universities can or should sustain a competitive market among agents.