This Section Contains the Following Headings
This project seeks to establish a widely understood and accepted frame of reference for monitoring cost effects and managing cost claims. In addition, it wishes to set a firm and visible foundation for addressing cost questions in the future. Should the initiative succeed in establishing a frame of reference (one everyone in the information pipeline can live with), then it is our hope to use it as a visible foundation to ask different cost questions, i.e., “Why is this cost developing?” and “What is happening to affect the costs for that?”
The project is designed to provide a framework so that all sectors served by the Coalition (authors, buyers, libraries, intermediaries, publishers, and readers) can work within a common framework and language for addressing cost questions and cost claims. Other Coalition initiatives focus on the benefits and other performance attributes of networked information resources and services. This initiative focuses, as tightly as it can, on cost issues and questions.
Under contract with the Coalition for Networked Information, Robert Ubell Associates convened a series of three expert panels. Participants were chosen for each group from a pool of interested candidates responding to CNI’s Call for Statement of Interest.
Those candidates not chosen for participation in the sessions, or unable to attend, have been placed on an advisory panel which will review and comment on the draft report. A total of 9 participants attended the buyer panel on July 24, 1995; 11 attended the publisher panel on July 27, 1995; and 9 attended the intermediary panel on July 28, 1995.
Participants were sent the following documents for review prior to their session:
- “Electronic Markets and Virtual Value Chains on the Information Superhighway,” by Robert Benjamin and Rolf Wigand, Sloan Management Review, Winter 1995
- “Managing in the Marketspace,” by Jeffrey F. Rayport and John J. Sviokla, Harvard Business Review, November-December 1994
- “The Impact of Information Systems on Organizations and Markets,” by Vijay Gurbaxani and Seungjin Whang, Communications of the ACM, January 1991, Volume 34 Number 1
- “Electronic Markets and Electronic Hierarchies,” by Thomas W. Malone, Joanne Yates, and Robert I. Benjamin, Communications of the ACM, June 1987, Volume 30 Number 6
At the start of each session participants were presented with a set of “ground rules” and a page of “defined terms” to assist them during the discussion. The ground rules were expressed as follows:
- The focus of the discussion is on networked information primarily.
- Participants should assume that a stable value chain will continue for some time in the future. By value chain we are referring to the flow of scholarly and scientific information from authors to readers through a number of intermediaries who add value to the author’s work.
- This discussion will focus on cost, to the exclusion of all other performance attributes (accuracy, relevance, timeliness, for example).
- Participants should ignore cost recovery mechanisms (for example, what is charged for a piece of information, or how it is subsidized).
- Participants should assume that the subject of the information is not important (works in the humanities vs. other sciences, for example, will be attended equally).
- Participants should also assume that the type of material (or product line) is also unimportant (for example, whether a work is a periodical, monograph, videotape, or technical report).
The definition of terms provided to participants included:
- Information system. A system of scholarly and scientific communication and publication.
- Networks. Wide area, completely digital, two-way (but not necessarily symmetric) telecommunications system like the Internet.
- Networked Information. Information that is accessed and delivered through, and ever more created and preserved in, networks, information for which there are no tangible artifacts of transmission and storage.
- Content. The specific products and services offered by an enterprise.
- Context. The ways in which customers access those products or services, often together with other related products and services.
- Infrastructure. The mechanisms by which an enterprise actually delivers its products or services.
A moderator script was prepared and approved by members of the Coalition staff and at least one member of the Coalition staff was present at each session.
These three all-day panels of buyers, publishers, and intermediaries held in New York City can be thought of as “anthropological studies” of the cost question. In each, “tribal elders” came together to discuss their belief systems, show those belief systems to other tribes, and produce a snapshot of how things now appear. The primary goal was to capture what participants think about their costs in this new networked environment. We believe that this gathering and discussion of different beliefs (and aspirations) is a pre-condition to gathering and measuring cost data.
It is often true that understanding follows measurement. However, since few producers or buyers are readily prepared to study, express, or communicate their costs (or agree on how they should be measured), some work has to be performed to reach a degree of understanding before the process of cost measurement can proceed. Currently, there are no baselines (and certainly no shared concepts) within or between the tribes. We have taken the position that before measuring costs, an understanding, a degree of trust, and basis for a common language must be established so that each group can express the state of its costs and cost structures to the other (and be understood). This is an important consideration since, in the discussions, we allowed each group to “reach its own ground, rather than try to pull any group onto existing ground.”
We are fundamentally interested in positions that affect the primary publication chain. Many secondary publications have already shifted from print to electronic delivery systems, and are already past the major changes that primary publications are now experiencing.
This draft report covers the principal topics addressed by participants. It will not follow the order in which the questions were raised, nor will it cover every item discussed. Rather, it provides an overall assessment of the findings of the sessions. The purpose of this document is to report the major themes that were discussed in the three sessions. We are not advocating any of the views that were expressed.
In general, the mood of the three groups could be characterized as:
Publishers consider themselves in a mixed economy as many are experimenting with digital delivery of digitized information. Most agree, however, that a mixed model of information delivery will co-exist with a digital model for some time into the future–as some products will be generated digitally (and distributed in print or other formats), some products will be converted from print archives into digital formats for distribution, and still others will be offered in a variety of digital and analog formats.
Intermediaries have evolved into niche market-makers and survive by adapting to fill technology, information, or service voids between publishers and buyers. The majority of them have moved well past historical print models of identifying costs and cost structures.
Buyers recognize that technology has a significant impact on their costs and methods of information delivery/access. However, they focus (when investigating their costs) primarily on those associated with internal staff and “intellectual organization.”
Next Steps
This document reports upon the initial step in Phase I of our investigation of costs and cost issues in the networked information value-chain.
I
Understanding the “lay of the land” Through the use of expert panel sessions identify, discuss and define the functions and activities performed by each group in each stage of the networked information value-chain which connects author to reader.
II
Focus on “functions” The draft report will be distributed to panel participants, a group of advisors, and other interested parties for their comment and review. In addition, we will use the opportunity to attempt to validate, substantiate, clarify, define and further sharpen the document (for example, by soliciting examples of as many of the functions and activities as possible).
III
Focus on “costs” After reaching a level of acceptance within each group as to the functions or activities provided in the networked information value-chain, one next step will be to ask each group to assign costs (or cost elements) to the functions and activities they have identified. In addition, we will begin to collect any data and cost studies that participants are willing to share.
IV
Focus on the “future” The goal would be a system of measurement capable of identifying how costs and functions will change over time (identifying trends as well as cost increases, decreases, shifts, and other changes).
The following series of outlines can be considered the working outcome of the initial three sessions–the outlines seek to identify the primary set of functions (or activities) performed by each group in the information chain which stretches from author to reader.
Value-Added Functions in the Information Chain
Publishers
a) General and Administrative (G&A)
– Management
– Staff Salaries/Fringe Benefits/Bonuses
– Legal
– Penalties/Damages
– Contracts Department
– Travel and Entertainment
– Space
– Utilities/Postage
– Accounting/Auditing Services
– Personnel/Human Resources
– Equipment/Capital Costs
– equipment maintenance
– Corporate Dues/Subscriptions/Memberships
– Insurance
b) Acquisition (Peer Review/Selection/Acquiring Rights)
– Cost of Rights
– Editorial/Support Staff and Infrastructure
– Travel and Entertainment
– (Outside) Editorial Support
– Readers’ Fees
– Telecommunications/Postage
– Dues/Subscriptions/Memberships (Staff Development)
– Translator Fees
– Contracting
c) Marketing/Sales/Promotion
– Direct-Mail Promotions
– Catalog Promotions
– Exhibits
– Advertising
– Sales Force
– Public Relations
– Sample Issues
– Travel and Entertainment
– Telecommunications/Telemarketing
– Customer Service/Technical Support
d) Distribution (Fulfillment/Storage/Freight)
– Shipping (To Warehouse/Outlets)
– Postage
– Business Computing
– Collections (Bad Debts)
– Packaging/Recycling
– Warehouse Space/Management
– Returns/Damaged Merchandise
– List Maintenance
e) Financing (Cost of Financing)
– Inventory Rightdown
– Taxes
– Regulation
– Research and Development
– Cost of Acquiring Capital/Fund Raising (Recruitment)
– Interest
– new product development
– accounts receivable
– capital investments
– inventory
– advances (royalty)
f) Managing Rights and Protections
– Copyright Registration
– Permissions
– Rights Management Personnel
– Legal/Contracts
– Licensing
g) Manufacturing
– Printing, Paper, Binding (Vary with Print Run)
– Plant Costs
– typesetting
– make-ready
– separations
– Permissions
– Production of Offprints
h) Copyediting/Design
– Proofreading
– Line Editing
– Indexing
– Text Design/Jacket Design
– Art Program
– Proofhandling
– Capital Costs (Computers and Software)
– Production Edition
– Telecommunications/Postage
i) Royalties
– Authors and Institutions
– Advisors and Series Editors
– Other Publishers
j) In-house Authorship
– Developmental Editing
– Fact Checking
– Work-for-Hire Authors
– Repackaging/Compiling
– Artwork Program/Graphics
- Quality Control and Presentation Enhancement are imbedded in the entire publishing process. Costs associated with Quality Control absorbed into Acquisition (peer review).
- Presentation Enhancement costs could be identified under Manufacturing or Copyediting/Design.
Value-Added Functions in the Information Chain
Intermediaries
a) Acquiring (Selection/Acquiring Rights)
– Cost of Rights
– Editorial/Support Staff and Infrastructure
– Travel and Entertainment
– (Outside) Editorial Support
– Readers’ Fees
– Telecommunications/Postage
– Dues/Subscriptions/Memberships (Staff Development)
– Translator Fees
– Contracting
b) Editorial (Abstracts/Indexes/Surrogate Preparation)
– Intellectual Organization
– Staff
– surrogate preparation
– indexing/product enhancement
– Capital Cost
– infrastructure
– software & automation
– Training
– Quality Control
c) Managing Rights/Royalties
– Copyright Registration
– Permissions
– Rights Management Personnel
– Legal/Contracts
– Licensing
d) Marketing/Sales/Promotion
– Direct-Mail Promotions
– Advertising/Promotional Materials
– Sales/Customer Support/Sales Force (Commissions)
– Technical Support
– Public Relations
– Distributer Arrangements
– Exhibits
– Travel and Entertainment
e) Production/Distribution
– Printing, Binding, Paper
– Freight/Inventory/Shipping/Postage
– Reformatting
– Order Processing/Fulfillment/Receiving
– Capital Costs
– Staff
– Royalties (Separate or Included in COP)
f) General and Administrative (G&A)
– Management
– Staff Salaries/Fringe Benefits/Bonuses
– Legal
– Penalties/Damages
– Contracts Department
– Travel and Entertainment
– Space
– Utilities/Postage
– Accounting/Auditing Services
– Personnel/Human Resources
– Equipment/Capital Costs
– equipment maintenance
– Corporate Dues/Subscriptions/Memberships
– Insurance
g) Financing
– Inventory Rightdown
– Taxes
– Regulation
– Research and Development
– Cost of Acquiring Capital/Fund Raising (Recruitment)
– Interest
– new product development
– accounts receivable
– capital investments
– inventory
– advances (royalty)
h) Research and Development/Product Development
i) Data Preparation
- Both (h and i) were identified in the session as major value-added cost categories unique to Intermediaries.
Value-Added Functions in the Information Chain
Buyers
a) Selecting
– Staff Review and Decision/Faculty Intervention
– Selection Sources
– Equipment
– Approval Plan Vendor Costs
– Profiles
b) Acquisition/De-acquisition (Cancellation)
– Staff/Consulting
– filing dynamic publications
– filing static publications
– Materials (Books, Journals, Periodicals)
– Infrastructure Materials (Record Keeping)
– Transportation (Gifts, etc.)
– Licensing Access
c) Intellectual Organization
– Preparing Surrogates, Representations
– staff
– infrastructure tools/utilities
– equipment
d) Storage
– Location Tracking
– Staff
– Transportation
– Supplies/Specialty Supplies
– Climate/Humidity Control
e) Preservation and Archiving
– Disaster Recovery
– Binding Restoration
– Staff
– Format Replacement (Microfilm)
– Climate Control
– Specialty Supplies
– Specialty Environments
– Transportation
f) Training, Retraining, and Support (Customer/Staff)
– Staff/Consulting
– Equipment/Materials
– Supplies
– Curriculum Development
g) Access and Delivery
– Card Catalog/Access Tools
– Staff (Help Desk)
– Operating Costs
– Supplies/Specialty
– Interlibrary Loan/Document Delivery
– Microform Reader/Printers/Other Equipment
– Permission Process
– Royalties
h) Diffusion (Publicity)
– Staff
– Supplies
– Publications/Newsletters/Bibliographies (Staff Development)
– Displays/Exhibits
i) General and Administrative
– Travel
– Supplies
– Building/Storage
– Operating/Utilities
– Maintenance
– Legal & Regulatory
– Accounting/Bookkeeping Interface
– Security
Mark Tesoriero
Market Research Director
Robert Ubell Associates
111 Eighth Avenue, Suite 1503
New York, NY 10011
Phone: 212-645-3303
Fax: 212-645-5988
Email: 73303.111@Compuserve.com