0.7 Subscription options and pricing  (Page 6/10)

Such value-based pricing for online journal services often takes the form of tiered price schedules. Tiered pricing can allow a publisher to generate more revenue while keeping journal prices moderate and equitable. When demand is inelastic, as is the case for scholarly and scientific journals, the amount of unappropriated revenue—the revenue forgone from institutions that perceive either greater or lesser value in the journal relative to its price—is comparatively large. Tiered pricing allows a journal to capture some of the unappropriated surplus from larger institutions that realize more value in the journal, and some of the deadweight loss from smaller institutions that could not otherwise afford the journal. Capturing this value is possible with an online service, as the marginal cost of delivering the service to each additional subscriber is near zero.

Academic libraries typically tolerate differential pricing based on institution size and intensity of use. Pricing based on such buyer characteristics allows publishers to offer online information services at price points that help maximize both service reach (in terms of revenue) and end-user access. In North America, the U.K. and Western Europe, online information services, including online journals, are often offered via banded pricing schemes based on the type of institution, The Carnegie Classification of higher education institutions is one of the most widely used ways of placing U.S. university customers within banded pricing schemes for publishers’ journal site licenses. The updated classification can be found at (External Link) . A typology for European higher education institutions is also being developed (see (External Link) ). Projecting potential revenue under this pricing approach is more difficult in countries where no standard classification system is available. on the number of full-time equivalent students (FTE) at an institution, the number of sites included in the license, the number of concurrent users able to access the service, or some combination of these measures. The American Library Directory and The Europa World of Learning provide information on budgets and populations served for libraries, universities, colleges, schools of art and music, research institutes, and museums. Although such tiered pricing models are more prevalent among commercial publishers, nonprofit publishers also use them, with approximately 25% of nonprofits basing the price on the number of sites, 17% on FTEs, 17% on institution type, and 4% on simultaneous users. Cox and Cox (2008), 31.

A society publishing a journal with a broad readership could develop tiered pricing, offering a journal at a higher price for MA/PhD-granting institutions than for baccalaureate institutions. However, for highly specialized journals, size-based price bands will not typically work well with North American institutions. Since the intensity of use of a specialized journal will not be a simple function of an institution’s size, many large institutions without programs in the specific area might not find size-based pricing compelling. Conversely, lowering the price for smaller institutions might simply reduce the society’s revenue from the journal without significantly increasing the journal’s market size.