Online information drives growth
The European STM online information market has seen its fifth successive year of double-digit growth, writes industry analyst David Mort
In 2006, sales in the European online scientific, technical and medical (STM) information segment increased by 10.5 per cent to reach ?1.3bn. Such a double-digit sales increase has been achieved for the fifth year in succession mainly due to the further development of web-based STM services and the significant switching of spending from traditional hard-copy sources to new online services. In the STM information market, online sales now take an estimated 62 per cent of all sales compared to less than 50 per cent in 2003 (see tables 1 and 2).
Many of the largest players in the STM market have their headquarters in Europe and the STM information sector in Europe is well-established, particularly in major countries such as the UK, the Netherlands and Germany. Elsevier, Springer, Informa, and Wolters Kluwer are all international players with their traditional base in Europe. And other European companies such as Questel Orbit (France), FIZ Karlsruhe and Thieme Publishing Group (Germany) also have growing international profiles. The major players from outside Europe operating in this market are Thomson and Wiley.
Out of 2,000 STM publishers worldwide, an estimated 780 are based in the European Union (39 per cent). However, these European publishers account for almost 49 per cent of all STM journals published.
While many other information and publishing sectors, particularly those heavily dependent on advertising, have experienced peaks and troughs in sales and profits over the last five or six years, leading STM information players in Europe have been able to post year-on-year double-digit profit growth for most of the time. This has certainly been the case in the last three years for most of the larger players and this trend has continued in the latest reported financial year: 2006.
Elsevier continues to lead the way with an operating profit margin of 30 per cent in 2006. This is followed by Informa with an operating profit margin of 26 per cent for its Academic and Scientific division (see table 3).
Buying and selling
But the continued growth does not mean that the industry has stayed the same. In particular, there have been two significant mergers impacting on the European STM arena in the last year: Wiley’s takeover of Blackwell Publishing and the merger of CSA and Proquest. And these have not been the only changes worldwide (see table 4). Wolters Kluwer and Thomson have focused on US businesses to increase their expertise in software solutions and tools: Wolters Kluwer purchased ProVation Medical and Healthcare Analytics in North America in 2006 and Thomson purchased Mercury MD (offering solutions for hand held devices). Meanwhile in Europe, Questel Orbit has increased both its content range (industrial design information from Design Muster) and software solutions (INCOM IPS patent information processing) via two purchases.
Interest in health information
As we reported in last year’s market report, the healthcare market segment is still attracting much of the attention of the larger players, and contributing most of the sales growth. In financial year 2006, for example, organic sales of health information products and services grew by 13 per cent at Elsevier and by 12 per cent at Informa. This compares with overall organic STM sales growth of just 4 per cent at both Elsevier and Informa. Thomson noted that the healthcare support solutions market was one of its strongest markets in the last year. It has also announced that it will double its nursing journals content by the end of 2007. And health sales at Wolters Kluwer increased by 25 per cent in the year to December 2006, although most of this was due to the contribution from its new acquisitions.
This trend has also influenced search tools. For example, CMPMedica, part of United Business Media (UBM) PLC, launched specialist search engine SearchMedica.co.uk in the UK in 2006 in association with search engine business Convera and a French site was launched in March 2007. Further country sites are expected to be introduced in 2007 and beyond.
Meanwhile, as the STM information market matures, and traditional STM players in the search market face intense competition from search giants like Google (Google Scholar), leading players will turn to workflow and content management solutions, and added-value features such as text mining and analytics tools to gain a competitive edge. Questel Orbit, Thomson, Wolters Kluwer, STN are already leading the way with the first three companies acquiring software and content management businesses to integrate into their existing content businesses. IRN expects that text mining and analytical tools will soon become standard features from all of the leading STM suppliers.
Such trends are reflected in recent new product developments. For example, since Spring 2007 Springer has been using text analytics software from Temis in SpringerLink. Swets has also upgraded its SwetsWise Searcher search service to include the MuseGlobal text mining tool.
Last year’s product developments also included product re-launches, new integrated services, and moves into social networking. Elsevier’s Science Direct was re-launched in August 2006 and further enhancements were made in May 2007. SpringerLink was also re-launched in August 2006 and amongst the changes was a much stronger e-books offering. Informa launched www.informaworld.com in 2006, which provides an integrated platform for all its STM content for the first time. Nature Publishing introduced Nature Networks, a networking site for scientists. This also has local sites such as one for London. In May 2007, Thomson launched IP Manager, an integrated workflow solution for the management of intellectual assets.
Another trend that has continued over the past year is digitisation. More leading providers are introducing programmes to digitise their entire back runs of journals. For example, Wiley has an ambitious plan to digitise all its legacy journal holdings by the end of 2007 and, in 2006, Sage also began to digitise its entire backlist.
Pricing and access
Journal prices show no signs of stabilising. According to the Library Journal’s Periodicals Price Survey 2007, European journal prices increased by an average of 8 per cent in the year 2006-2007, compared to 6 per cent in the previous year. The largest increases were in Germany (14 per cent), France (9 per cent), Italy (9 per cent). Prices in the UK increased by 8 per cent and the lowest price increase was in the Netherlands (6 per cent).
The open-access debate continues and, in 2006, many leading traditional publishers tacitly accepted the role of open access by agreeing to allow both reader-pay (traditional model) and author-pay (open access model) in some ‘hybrid’ journals. The pioneer of this approach was Springer and others following in 2006 included Blackwell, Elsevier, Informa (via its Taylor & Francis business), Oxford University Press (OUP), and Wiley.
In February 2007, the European Commission announced its long-awaited policy on open access in Europe but fell short of asking for compulsory open access. Rather it announced that it will encourage authors to publish research results as either author-pay or in hybrid journals. It also announced that it will issue guidelines for making publicly-funded research available on the web after an embargo period, and introduced a series of funding arrangements to look at issues such as linking digital repositories and digital preservation through 2007 and 2008.
As all these trends continue to emerge, IRN Research is forecasting sales growth of 10 per cent in the European online STM market in 2007, just like in 2006. In other words, we can expect to see double-digit profit margins for most of the leading players for yet another year.
David Mort is director of IRN Research, a UK-based market research and information company specialising in the analysis of European information and content markets. IRN publishes an annual review of the European online information market  based on detailed desk research of information company accounts and reports, and primary research amongst key suppliers and users of STM information.