Finances of the publishers of the most highly cited US medical journals

INTRODUCTION

The open access model, defined here as free access to scholarly publishing, has emerged alongside the traditional, subscription-based model for publishing medical journals [1–3]. The open access model was developed largely in response to rapidly rising subscription prices [4, 5], which raised concerns about access to scientific research, especially that funded by public entities [2]. In 2003, Public Library of Science (PLoS) launched a nonprofit scientific and publishing venture producing open access journals with no charge for access and, other than appropriate citation, no restrictions on use [6]. Funders of biomedical research, including the National Institutes of Health (NIH), also pushed for open access to research they support. In 2007, the NIH public access policy was signed into law, requiring that all investigators funded by NIH have an electronic version of their final manuscripts publicly available within twelve months of publication [2].

Despite the emergence of open access, knowledge of the finances of medical journal publishers is limited [4]. Published reports have surveyed open access journals, described their business models, and reported their finances [1, 7] but have been limited by their scope or have been disproportionately weighted away from for-profit publishers [1]. This study therefore sought to increase understanding of the finances of the publishers of the most highly cited US general and internal medicine journals by examining the tax status, revenue, expenses, and operating margins in order to inform public debate and policy.

METHODS

Journals selected for evaluation

Twenty of the most highly cited US medicine, general and internal, journals and their publishers were identified using data from Thomson Reuters ISI Journal Citation Reports for 2008 [8].

Organization and tax status of the publishers

A financial database [9]; journal and publisher websites [10–13]; and publicly accessible Form 990 database, which contained annual information for tax exempt organizations [14], were used to determine publishers' profit or nonprofit tax status. The financial analysis was restricted to organizations with a journal ranked in the top ten in 2008.

Financial evaluation of nonprofit publishers

For nonprofit publishers, Internal Revenue Service Form 990 was used to determine financial data directly related to publishing. Each year was defined as the year in which the publisher's fiscal year ended. Revenue was calculated using either the “Analysis of Income-Producing Activities” or “Statement of Revenue” sections of the form, if the organization itemized publishing-related revenues. “Publishing,” “advertising,” “printing,” “reprint activities,” “subscriptions,” and “publications” revenues were considered to be publishing related. If the organization itemized their publishing-related expenses in the “Statement of Functional Expenses,” those figures were used to determine expenses. “Printing and publications,” “publishing,” “publication production and distribution,” and “editorial services” were considered publishing-related expenses. Total publishing revenue was the sum of publishing-related revenues, and total publishing expenses were the sum of the publishing-related expenses. Operating income was calculated by subtracting total publishing-related expenses from total publishing-related revenue. If the publisher did not specifically itemize publishing-related revenues and publishing-related expenses for each year of the analysis (PLoS and Annual Reviews), total revenue and expenses of the whole organization from part I of the form were used.

Operating margin was defined as operating income (pre-tax profits) divided by total revenue. To determine the operating margin of all nonprofit publishers, the ratio of expenses to revenue was calculated and subtracted from one. For example, if a publisher in a given year had revenue of $100 and expenses of $80, the operating margin (1−($80/$100) = 0.2) would be 20%.

Financial evaluation of for-profit publishers

Parent companies of for-profit publishers were identified through publisher websites [15, 16], and revenue, expenses, and operating margins were evaluated for the period 2000 to 2009. Parent organizations did not report revenue and operating margins by journal; therefore, financial data from annual reports and US Securities and Exchange Commission filings for the divisions that were most closely related to health- and science-related publishing activity were used instead [17–19]. Total revenue and adjusted operating margins for the entire health and science divisions were used, when directly reported by the company [18]. If operating margins were not directly reported (Wolters Kluwer), ordinary earnings before interest, tax, and amortization [17] were used as operating income to calculate operating margins. Expenses were calculated by the difference of operating income from total revenue for the health sciences publishing divisions. Revenues reported in British pounds or euros were converted to US dollars, based on average annual exchange rates [20].

RESULTS

Tax status of publishing entities

Six nonprofit organizations published a journal in the top twenty most highly cited journals, including the six highest ranked. Six for-profit organizations were responsible for publishing the remaining thirteen journals (Table 1, online only), including seven journals published by subsidiaries of Reed Elsevier [9, 19].

Finances of nonprofit publishers

Financial data from 2000 to 2008 were obtained for all 5 nonprofit publishers that had a journal ranked in the top 10, except for the Massachusetts Medical Society, whose 2000–2001 data were not available, and PLoS, which began reporting financials in 2002 (Table 2). Data from 2009 were included where available (PLoS and American College of Physicians). Total revenue for nonprofit publishers of the top 10 journals was $162 million in 2002 and increased 19.5% to $193 million in 2008 (Figure 1, online only). By revenue, the Massachusetts Medical Society was the largest nonprofit publisher, accounting for 50.3% of the nonprofit's revenue in 2008. The expenses of the nonprofit publishers were $103 million in 2002 and $118 million in 2008, yielding an average operating margin of 38.8% in 2008. Operating margins were relatively stable for most nonprofit organizations from 2002–2008. Total operating income, which is the difference between operating revenue and operating expenses, increased from $59 million in 2002 to $75 million in 2008. PLoS had expenses in excess of revenue in 2009, with operating margins of −5.4%. In 2004, PLoS revenue was $7.1 million, with “contributions and grants” making up 90% of total revenue and “author fees” 3%. In 2009, PLoS revenue was $9.4 million, with “author fees” accounting for 89% and “contributions and grants” for 8% of total revenue.

Table 2.

Financial overview of the publishers of the top 10 US general and internal medicine journals, 2000–2009*

Finances of for-profit publishers

Data were not publicly available for Quadrant HealthCom [13], the publisher of Mayo Clinic Proceedings [12], and the publisher was therefore excluded from the financial analysis. Financial data obtained for Reed Elsevier were from the Elsevier publishing division, which included the science and technology and health sciences divisions [18]. For Wolters Kluwer, the publishing unit was Wolters Kluwer Health [17]. The total revenue of these 2 publishers was $1.745 billion in 2000 and increased 138% to $4.154 billion in 2009 (Figure 2, online only). Reed Elsevier was the larger of the 2 for-profit publishers, accounting for 75% of revenue in 2009. The expenses of the 2 for-profit publishers were $1.196 billion in 2000 and $2.913 billion in 2009. For-profit (Reed Elsevier and Wolters Kluwer) operating income (revenue less expense) increased from $0.549 billion in 2000 to $1.241 billion in 2009, and operating margins decreased from 31.5% in 2000 to 29.9% in 2009, implying that expenses out-paced revenue from 2000 to 2009.

DISCUSSION

From 2000 to 2008, publishers of leading US medical journals continued to generate favorable operating margins. The exception to this financial success was the nonprofit PLoS, which published exclusively open access material [6]. Other publishers experienced revenue increases and retained favorable operating margins. For example, the science and health publishing units of for-profit publishers of the leading medical journals, Reed Elsevier and Wolters Kluwer, had combined operating profits that exceeded one billion dollars in 2008.

The financial status of PLoS is consistent with previous reports [7, 21]. Its “author pays” model relies on investigators to pay, directly or indirectly through funders, to publish a manuscript. The current fee charged by PLoS is $2,900 per article, and other publishers charge similar fees [22]. As a young publisher, PLoS has an evolving financial situation. PLoS and other open access publishers (e.g., BioMed Central) have increased the number of journals and volume of papers published to increase revenues, while maintaining their goal of improving scholarly communication [7]. In 2010, PLoS announced their first profitable quarter [23], and the publisher is funding much of its growth through publishing operations with increasing revenue from authorship fees. During the study period, the primary revenue stream for PLoS shifted from “contributions and grants” (90% in 2004) to “author fees” (89% in 2009). PLoS has excluded advertisements for pharmaceuticals or medical devices, while 49% of publishing revenue for the American Medical Association in 2008 came from advertising. Additionally, reprint sales can be a financially attractive source of revenue for some publishers, which has the potential to generate about $700,000 from a single journal article [24]. In 2004, more than half of “full” open access journals reported revenue from display advertising, and a quarter received revenue from commercial reprints and classified advertising [1].

The traditional, subscription-based publishing model rewards publishers between 28 and 39 cents for every $1 of revenue generated. One analysis estimates that publishers of medical journals have profit margins that are 2–5 times greater than that for publishers of periodicals or books [25]. For for-profit publishers, much of the financial rewards flow to public investors. Large professional societies, such as the nonprofit American Medical Association, also benefit financially from publishing activities and frequently use proceeds to support other educational and membership services [3]. Additionally, some for-profit publishers have diversified their economic models, supplementing subscription-based publishing with open access. A recent example is Springer's 2008 acquisition of BioMed Central, the leading global open access publisher [26].

Limitations of the study

The study's principal limitations are that the finances of individual journals generally could not be ascertained and that this research was limited to the most highly cited US medical journals. For for-profit publishers, the financial figures obtained reflected the contribution of many journals, books, and other related activities [4, 17, 18], whose individual economic attractiveness might vary [2, 7]. Journals, though, tend to be the dominant driver. For Reed Elsevier in 2009, journals accounted for 59% ($1.8 billion) of revenue from the science and health divisions [19]. For nonprofits, matching publishing-related revenue to publishing-related expenses was imperfect. Some expense items listed in Form 990s, such as “other salaries and wages” or “accounting fees,” might have been publishing related but were not counted in the analysis. If expenses were understated, the operating margins reported here would be overestimates. For those nonprofits that did not itemize publishing-related revenue and expenses, total revenue and expenses were used and might have diluted true journal publishing–related revenue. Because of the focus on publishers of the most widely cited medical journals (as measured by citation index), the results did not address and might not be generalizable to the financial viability of smaller journals, often published by professional societies. In addition, this study's analysis of the open access model was limited to PLoS.

CONCLUSION

Despite some limitations, the results provide a broad view of the financial viability of most publishers of the leading medical journals and serve to increase understanding of the finances of medical journal publishers. Future research examining the finances of a broader range of journals will be helpful to inform policy debates about access to medical research.