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Scientific output is exploding. The number of articles published has increased by a half in just six years to 2022, estimates suggest. That is putting a strain on the academic publishing sector even as it fuels its growth.
A shift from a pay-to-read model to a pay-to-publish model has increased the proportion of scientific papers published without a paywall by 20 percentage points to about half in the decade from 2010, one study found. Making research more accessible has clear benefits. But the change has brought several problems too.
The new model has opened the door to thousands of “predatory” publishers with substandard or outright faked peer review. Some reputable journals have also been hit by editors resigning in protest against high processing fees or commercial pressure to relax editorial standards.
Publishers are struggling to sift out the growing volumes of sham research from paper mills. Last year US publisher John Wiley closed four “heavily compromised” journals that were part of Hindawi which it bought for $298mn in 2021. It retracted more than 1,700 articles and stopped using the Hindawi brand name, saying it expected revenues to be hit by $35mn-$40mn in the 2024 financial year.
Separately, publishers are under constant pressure over the article processing charges — that can be much as $12,000 an article — levied when authors want their work to be freely accessible. Securing open access for a specific article in a ‘hybrid’ subscription journal is particularly expensive. The Bill & Melinda Gates Foundation is set to stop paying article processing charges, and will instead require grant recipients to publish preprints on public servers. The Council of the European Union last year called for a new non-profit publishing model to tackle unsustainable costs.
Yet there is little sign that investors consider these pressures a threat to the sector’s margins. To be sure, those of Taylor & Francis — a subsidiary of UK publishing and exhibitions company Informa — have dipped by over 3 percentage points over three years as it invested in tools and services for open access publishing. But analysts expect a 2 percentage point rise to 37 per cent by the end of the decade, according to Visible Alpha.
Elsevier, part of another FTSE 100 business Relx, is the market leader in scientific publishing. The unit, which also includes data analytics, has stable operating profit margins of about 38 per cent. A sum-of-the-parts calculation implies that Relx’s academic publishing arm is valued at about 13 times forward ebitda, according to Citi’s Thomas Singlehurst. While that is a third lower than the company as a whole, it does not signal imminent disruption. By way of comparison, Bloomsbury, a successful publisher of fiction and non-fiction, trades on a forward EV-to-ebitda multiple of eight times.
Investors might be reassured by Elsevier’s past resilience. Profits and sales have grown fivefold since 1995 despite repeated warnings about the internet’s impact on its business model. Given the high costs of technology, marketing and management, big publishers have an advantage. Non-profits that lack scale would not necessarily be able to publish articles for less.
The barriers to entry in top tier academic publishing are also significant. Despite a flood of new entrants, the biggest publishers have increased their share of the more prestigious end of the market, according to recent research into the open access market. Publishing in top journals still matters for academic grants and careers. That creates a formidable moat.
vanessa.houlder@ft.com
