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# Big Deal Price Caps

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### Big Deal Price Caps

1. 1. Big Deal Price Caps: Do they really benefit libraries? Jason S. Price, Ph.D. Science & Electronic Resources Librarian The Claremont Colleges Charleston Conference, 2006 Lively Lunch
2. 2. Big Deal Refresher <ul><li>E-Journal package pricing </li></ul><ul><li>Includes e-access to subscribed titles plus additional titles at a discount price </li></ul><ul><li>Library makes a subscription expenditure commitment based on current or historical journal subscription total or ‘spend’ </li></ul>
3. 3. Price cap or Inflation rate? <ul><li>It is touted as a price cap because: </li></ul><ul><li>“ The average price per title will not increase by more than X% over the price paid for the prior year” </li></ul><ul><li>This is a percentage value that determines the rate of increase in a library’s expenditure commitment </li></ul>
4. 4. Two reasons its not a Price Cap… <ul><li>“ The average price per title will not increase by more than X% over the price paid for the prior year” </li></ul><ul><li>Lower percentages are never applied </li></ul><ul><li>The knowing the average price increase per title DOES NOT determine the amount of the increase for the package </li></ul>
5. 5. “ Average price increase”   This year Case 1 Opt 1 Price Case 2 Opt 2 Price   \$10,000 5% \$ 10,500 9% \$ 10,900   \$ 5,000 5% \$ 5,250 5% \$ 5,250   \$ 1,000 5% \$ 1,050 1% \$ 1,010 Ave. Increase   5%   5%   Total \$16,000   \$ 16,800   \$ 17,160 Overall Increase     5.00%   6.90%
6. 6. Reality is not average <ul><li>Luckily this clause (though still in many licenses) is not applied as written </li></ul><ul><li>In practice: </li></ul><ul><ul><li>Price of every title increases by exactly the amount of the Annual price increase (PC) </li></ul></ul><ul><li>Are these below the market increase? </li></ul>
7. 7. Publisher market rate increases <ul><li>5 year historical list price from Ebsco for ScienceDirect & Wiley Interscience Packages </li></ul><ul><li>Titles with 5yrs of data </li></ul><ul><ul><li>SD n = 1434; WI n = 371 </li></ul></ul><ul><li>Examined 4yr increase & 2yr increase, to get a feel for change over time </li></ul>
8. 8. Historical Market Price Increases 2006
9. 10. Next step… <ul><li>Examine the ACTUAL market percentage increase for real subscription profiles </li></ul><ul><li>Convenience sample </li></ul><ul><li>How much variation is there in the price increases that libraries would experience without the caps, and how close is it to those caps </li></ul>
10. 13. But these results are still preliminary <ul><li>A definitive answer would require calculation of actual increases in cost for subscription profiles that factor in: </li></ul><ul><ul><li>Variation in increases from year to year (important because of compounding interest) </li></ul></ul><ul><ul><li>Variation in subscription price from time zero (if pricier titles go </li></ul></ul>
11. 14. A qualified answer: <ul><li>Yes, fixed annual price increases (PC’s) benefit libraries when: </li></ul><ul><ul><li>They are sufficiently below the market rate </li></ul></ul><ul><ul><li>And they are applied effectively* </li></ul></ul><ul><li>Other conclusions: </li></ul><ul><ul><li>PCs are NOT average increases, but fixed </li></ul></ul><ul><ul><li>Value is decreasing as market increases slow </li></ul></ul><ul><ul><li>Comparison to blanket market increase is of limited value, but perhaps more value than comparison between deals </li></ul></ul>
12. 15. A maybe not: fixed price increases must be applied <ul><li>Claremont’s story </li></ul><ul><li>A different price for each institution for each title? </li></ul><ul><li>Can subscription agents keep up? </li></ul><ul><ul><li>What about new E-only big deals? </li></ul></ul><ul><ul><li>What services do they provide in this ‘price capped’ world? </li></ul></ul>