Online passes print to STM publishing

Sales in the online scientific, technical and medical (STM) information segment increased by 15 per cent at current prices in 2005 to reach €1.2bn. A double-digit sales increase has been achieved for the fourth year in succession. In contrast, the European STM information market overall increased by only five per cent in 2005 and has experienced only mid single-digit growth for the last three years.

The reasons for the greater increase in online sales are two-fold: the further development of web-based STM services and the significant switching of spending from traditional hard-copy sources to new online services. This latter factor can be seen in the way that online STM information sales have increased their share of the overall European online information market from just 22 per cent in 2000 to 34 per cent in 2005. In the STM information market, online sales now take an estimated 57 per cent of all sales, compared to 49 per cent two years ago.

The STM information sector in Europe is well-established. Elsevier, Springer, Informa, and Wolters Kluwer are all international players with their traditional base in Europe. Other European companies such as Questel Orbit (France), FIZ Karlsruhe and Thieme Publishing Group (Germany) and Blackwell Publishing (UK) also have growing international profiles.

Double-digit profit margins have also been usual for the leading STM information players recently, and this trend has continued in 2005, led by Elsevier. Its global STM operation posted an operating profit margin of almost 31 per cent in 2005 and 33 per cent in 2004.

The pursuit of medical information

The focus of mergers and acquisitions activity in the European STM market in the last year has been on purchases of medical and healthcare information and solutions companies. However, the European STM information market in general is still attractive to private equity buyers. With the money they have to spend in this sector, and only a limited number of potential targets, we can expect to see acquisition prices for STM companies increasing.

The largest players are increasing their market shares through acquisitions of companies and content. The growth of big-deal purchases of packages of e-journals from the major suppliers is locking users into longer-term contracts. This is also increasing the influence of these bigger players. A recent report from the European Commission⁽¹⁾, expressed some concerns about concentration in the European STM market, and particularly the possible effects on pricing of STM information. It recommended keeping a careful watch on any future major acquisitions and mergers. 'Further acquisitions by large publishers should be scrutinised by the relevant European authorities,’ it advised.

Although the majority of STM information sales are now online, the drive to digital delivery has come from the main players, led by companies like Elsevier and Thomson. Many other players, including some leading names and many smaller players, have still to switch most of their content to digital platforms. One obstacle to increased online sales is the high levels of value-added tax (VAT) imposed on online information in many European countries, compared to hard-copy sources. The position is different in the USA, where there is no VAT. Despite lobbying from publishers and others to exempt online information from VAT or reduce the VAT level, these VAT rates seem likely to stay – in the short term at least. Further confusion arises from the different rates applied in different European countries. The different rates of VAT distort buying power across Europe. For an equivalent budget, buyers can purchase more in one country than in another.

The impact of open access

The availability of journals on an open-access model in Europe is not widespread, and user-paid business models still dominate. Nevertheless, a number of research governing bodies and research councils in various European countries are supporting the development of open-access repositories rather than specific journals. The recent EU report recommended that: 'Research funding agencies should promote and support the archiving of publications in open repositories’(1).

In the UK, RCUK (Research Councils UK) has recommended that research results should be deposited in open repositories as soon as possible (see page 6). In addition, a major private-sector research funder – The Wellcome Trust – has asked those it is funding to place peer-reviewed articles relating to the research in the open-access service PubMed Central within six months of the publication of the research. Across Europe, many national and international research organisations (such as CERN in Switzerland, France’s CNRS and The Max Planck Society in Germany) are supporting open access. Commitments to open access across Europe are also increasing. For example, in early 2006, Spain’s National Research Council signed up to the Berlin Declaration on Open Access to Knowledge. This declaration promotes access to information in the sciences and humanities free-of-charge. In March 2006, a number of Swiss research institutes and other organisations also signed up. These developments pave the way for more open-access initiatives in Spain and Switzerland.

Electronic books

While the journals market has remained relatively strong in the last year, hard-copy sales of books have suffered. This has been particularly due to weak sales from the academic sector. However, after a number of years of stalled growth, the e-books market in Europe is beginning to gather momentum. This is being led by academic purchases of science e-books. E-journal holdings are now commonplace in many academic institutions. This spread of online access to journals has had a knock-on effect on the e-books market and stimulated more interest. The spread of e-journals services has also provided the infrastructure for e-books. Providers of e-books services have improved their offerings with more titles, a much better level of service and technology, and flexible subscription packages.

New product developments during the year have been led by the rollout of Elsevier’s Scopus product to a wider audience. An IRN survey of UK academic librarians (40 librarians) in 2006 found that, while most librarians agreed that Scopus offered better coverage and functionality than most existing products in the STM area, budgetary restraints were still blocking some subscriptions to the new service. In the UK, Google Scholar is gaining popularity with academic end-users; over a third of librarians interviewed noted that Google Scholar was being used extensively by academic researchers.

Workflow and integrated solutions continue to be at the centre of new product developments from the major players, and particularly in the healthcare and pharmaceuticals sectors. Thomson Pharma, launched towards the end of 2005, is an integrated solution for the pharmaceutical industry and brings together a range of content in one platform along with software tools and solutions. Purchases by Wolters Kluwer of two US software companies, NDC Health Information Management and ProVation Medical, will help the company to develop a completely integrated information and solutions system for its health information.

The healthcare market is still seen by most of the leading players as the area offering the greatest potential in the next few years. During the last year, both Elsevier and Springer Science+ Business Media have made major purchases in this sector. They compete with other big companies such as Thomson, Wolters Kluwer, and Informa in this sector. Proquest has also moved into the market with an exclusive distribution deal for Evidence Matters, a service comparing peer-reviewed medical research. The roll-out of electronic medical and patient records in the next few years in some European countries will encourage the integration of external information into electronic records

Market growth in 2006

IRN Research is forecasting sales growth of 10 per cent in the European online STM market in 2006, with slower growth in 2007. Profit performances for most of the leading players should remain stable in the next two years. Leading players and venture capital businesses, in particular, have funds to invest in targeted mergers and acquisitions so further acquisition activity can be expected.

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. The company’s annual review of the European online information market ^[2] is based on detailed desk research of information company accounts and reports, and primary research amongst key suppliers and users of STM information.

Further information:

(1) Study on the Economic and Technical Evolution of the Scientific Publications Markets in Europe, DG Research, January 2006
(2) European Online Information Market 2005. IRN Research. May 2006. www.irn-research.com.