Re: FTE-based pricing and usage-based pricing

["Sally Morris \(Chief Executive\)" <sally.morris@alpsp.org>]

Usage-based pricing only discourages use at a certain level.

Do we refrain from using telephones?  Electricity?  Water?  Yet 
many of us pay for these, at least in part, on a usage basis. 
It's all a matter of pricing level, isn't it?

The trick would be to work out a pricing model which, in total, 
produced the same amount of money (give or take) to producers, 
but distributed its payment more fairly among users.  Of course, 
heavy users who paid more would hate it - low users who paid less 
would love it.  And that may, in fact, be the main obstacle!

Sally Morris, Chief Executive
Association of Learned and Professional Society Publishers
Email: sally.morris@alpsp.org
Website:  www.alpsp.org

----- Original Message -----
From: "Heather Morrison" <heatherm@eln.bc.ca>
To: <liblicense-l@lists.yale.edu>
Sent: Monday, October 16, 2006 2:47 AM
Subject: re: FTE-based pricing and usage-based pricing

> Every pricing model has its advantages and disadvantages.
>
> Usage based pricing has its place, but could have some serious, 
> harmful consequences if it became widespread in calculating 
> pricing for electronic resources.
>
> As Andrew Odlyzkow said (referring to internet use pricing, not 
> e- resources):  usage-based pricing can be very effective. 
> The trouble is, you might not like the effects.
>
> There are two very serious potential harmful consequences with 
> a widespread shift to usage-based pricing:
>
> Usage-based pricing will inevitably discourage use.  Think 
> about library fees for ILL, or for photocopies.  Why did we 
> implement these?  To limit use, because we cannot afford to 
> provide these services on an unlimited basis.
>
> Let's apply that concept to browser or reading.  If we apply 
> usage- based pricing, unlimited reading for an undergraduate 
> assignment suddenly can become something we cannot afford. 
> Eliminating undergrad research assignments, or information 
> literacy assignments, will be viewed by some as a potential 
> cost-cutting measure.
>
> Usage-based pricing could harm very important research areas 
> with smaller research communities - for example, research on 
> endangered species, rare diseases, or essential but esoteric 
> basic research.
>
> Another reason to think carefully about usage-based pricing: 
> of course, we want to pay less for what we use less.  However, 
> do we want to pay more for what we use more?  This is a very 
> likely consequence of usage-based pricing.
>
> I believe there are very important reasons for pausing to give 
> thought before we consider making use of usage statistics for 
> pricing / purchasing / cancellation decisions, which are 
> outlined in my book chapter, "The implications of usage 
> statistics as an economic factor in scholarly communications", 
> in "Usage Statistics of E- Serials" by David Fowler (editor). 
> Published by the Haworth Press [2005]. Part of the "Haworth 
> Series on Serials Librarianship and Continuing Resources", 
> available in the SFU D-Space at: 
> <http://ir.lib.sfu.ca/handle/1892/1639> Or, in E-LIS at: 
> <http://eprints.rclis.org/archive/00004889/>.
>
> If you're going to Charleston, please join Helen Clarke, 
> Melanie Schaffner, Don Taylor, and myself for "The Value of 
> Use" on the Thursday afternoon, or join us at the Saturday 
> morning Beastly Breakfast on this topic.
>
> As for FTE based pricing, this is one of the fairer methods of 
> assessing pricing, particularly when the per-FTE rate is low. 
> However, if often does not work for larger institutions where 
> per-FTE pricing can become ludicrous.  With per-FTE pricing, it 
> is not unusual for the smallest institutions to enjoy unlimited 
> access, while the larger ones resort to a single simultaneous 
> user for the same product.  It is better to consider FTE 
> pricing as one element in a pricing model, for example to 
> determine tiered pricing, or combine FTE pricing with a price 
> cap for larger institutions.
>
> Open access, in addition to being the optimum for access and 
> research dissemination, in my view, offers the simplest and 
> fairest possible economic models for e-resources.
>
> As one example, consider a library shift from a purchase to a 
> production model, with a focus on local production (e.g., 
> support locally produced journals, fund or partially fund open 
> access processing fees).  Here are some suggestions on what 
> this might mean for different libraries:
>
> A small college likely has a modest research output - their 
> costs are low.
>
> A research-intensive university in a developing country has 
> relatively high needs for publishing; but, if this is based on 
> local production, costs will be low (and good local jobs are 
> generated).
>
> If disaster hits (whether natural or financial) and your 
> university's research output drops - so do your e-resources 
> costs, directly and proportionately, while your access is 100%, 
> as soon as your internet connections are back up.
>
> This model is trickiest for the large, research-intensive 
> university in a wealthy country.  Even here, however, the costs 
> could easily be less than at present, with a little efficiency 
> built in (e.g., support local journals using free, open source 
> software, cap subsidies for processing fees), and/or some 
> contribution to processing fee costs from funding agencies.
>
> For more about this model, please see my blogpost, "An Open 
> Access Model with Potential to Facilitate Global Economic 
> Stability and Equity", at: 
> <http://poeticeconomics.blogspot.com/2005/08/open-access-model-with-potential-to.html>
>
> Heather Morrison http://poeticeconomics.blogspot.com