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Springer CEO Haank courts controversy with 'tea drinkers' speech

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Springer Science and Business Media CEO Derk Haank opened proceedings at the 2015 ASA Conference in London, with a witty but challenging speech entitled ‘Subscription agents: Partners or a nuisance?’

Haank began his presentation, in BMA House’s Great Hall, with a joke: telling the audience he had been asked to say a few nice things about subscription agents – and that he wouldn’t have much to talk about!

He introduced his views of the current role of the subscription agent with an overview of figures recently published by Springer SBM; in 2010, some 60 per cent of its journal revenue was invoiced through agents. By 2014 the figure was barely 40 per cent.

Haank noted: ‘This is quite a shift, and that was without us taking any action to make this happen. We are agency-neutral; if people deliver value they are welcome to do business with us. It’s not in our interest for subscription agents to go bust; we want to keep them in business.’

He continued: ‘The question is: will the share eventually go to zero, or will it return to 60 per cent? If I was a subscription agent I would be worried – this would have to be a concern, especially as the total pie isn’t growing at this moment. The pie is stable at best.’

On the question of funding, Haank stated that has always been an issue for the industry. However, he was keen to look on the bright side: ‘When librarians complain about funding, that means they want to buy more. On the other hand there is also high supply. The average intellectual thinks we are all in dire straits because of funding problems; however the industry is actually struggling with increased supply and demand. They just need to be matched.’

Haank reflected on three decades in the industry, and the balance between profitability and providing value for money. He said that, 30 years ago, the industry felt ‘uncomfortable’ in terms of its profitability – but that this had been profoundly affected by the advent of the internet, which had forced the world of academic publishing into a rethink: ‘The internet allowed people to get much more value for money because delivery costs dropped rapidly, so these days we have high fixed costs (such as IT) and lower variables relating to sales.’

‘We have a decent equilibrium’

He continued: ‘Of course people want to pay less, but we are giving them more. Yield per article has dropped, so the customer is of course getting better value for money. We can maintain that, everyone can have access to everything, and we (and agents) can still make money. We have a decent equilibrium, lets stick with it for a while and see what happens’.

Some products don’t need subscription agents – and some have been of little interest to them, said Haank: ‘One of the biggest breakthroughs was the ebook, and we developed ebook packages quickly and successfully. We also increased our volume so we have tens of thousands of books, being bought extensively by librarians – and everyone is happy, except for the subscription agents.

‘The strange thing is that we offered them generous terms to sell our books – it was a good product on a golden plate, to be sold to the same audience (librarians) – but the result was nil. To me it’s mind-boggling. It’s a real shame … not for us, the margins are good, but I don’t understand why this has happened.’

‘Professional tea drinkers’

Haank said this failure to recognise such an opportunity showed that subscription agents are ‘just professional tea drinkers rather than sales people’. He continued: ‘If agents can't sell packages of ebooks, what can they sell? Maybe you need to look on the cost side? You are logistics operations, based on quality and cost. Swets [which declared itself bankrupt last year] failed to get its costs in order and most subscription agents still have a long way to go on this, compared to the rest of the industry.’

The Springer CEO ended his presentation in a more conciliatory tone, calling for more co-operation within the industry: ‘As publishers we work with subscription agents, libraries, authors, universities, corporations, institutions and development agencies. It’s a friendly industry and co-existent. We have more in common with our colleagues than differentiates us and we want to keep it that way. We are not here to make your lives miserable.’

Protection fund needed?

He said that Swets' bankruptcy will 'change this industry', which will have to make efforts be sure that more subscription agencies are not going to go bust: ‘Either the industry gets its act together and creates a fund to protect the customer, as they do in the travel industry, or we make sure that agents are not siting on money that is due to come to us. As a minimum the money should be heavily protected and there’s no reason why we should put up with this risk.’

He concluded: ‘Jointly we have to invest in more stability. If you want to focus on value-added services, do so – but make sure you do it right. Also don’t step on the toes of other organisation in the value chain. There will always be a role for subscription agents but you have to work hard if you want to ensure your role is as extensive as possible.’