Archive for the ‘disruption’ Tag
Scientific Publishing: Disruption and Semantic Build-Up
Filed under: Diversification, Open Access, Publishing, Semantic Web | Tags: annotation, Clayton Christensen, Collexis, data mining, DeepDyve, disruption, Elsevier, FEBS, Hakia, illumin8, Linked Data, McGraw-Hill, Mendeley, NaCTeM, NetBase, NextBio, NLP, NPG, ontology, PLoS, Project Prospect, RDF, RSC, science, ScienceDirect, scientific journal, scientific publishing, Scopus, Semantic Web, Semantico, Springer, STM, SWAN, taxonomy, Temis, text mining, Thomson, value shift, Wiley, Wolters Kluwer
Leave a Comment Abstract:
A new technology paired with a viable business model will have disruptive impact on incumbent companies in a specific market, if they do not reevaluate and update their business models accordingly. As the Internet matures, Semantic Web technologies enable applications for meaning-based and dynamic filtering and processing of information, which has a disruptive impact on scientific publishing. This article calls for publishers to adopt semantic technologies and emphasises the “need to include a semantic strategy in their business models” (Hawkins 2009). With a focus on journals as the ‘cash cow’ of scientific publishers, it assembles debates about disruption and general tendencies in scientific publishing. An introduction to Semantic Web, Text Mining and Semantic Publishing is given as well as various examples of product developments, company partnerships and acquisitions related to semantic technologies. Finally, different ways of acquiring semantic annotation data and financial aspects of semantic enhancements are discussed.
Read the full article following this link: Scientific Publishing: Disruption and Semantic Build-Up
The article was also published last week in: LOGOS: The Journal of the World Book Community, Volume 20, pp. 184-198 (DOI: 10.1163/095796509X12777334632744).
Following are a few minor errors which couldn’t be incorporated before publication:
1) One reference is missing:
Shotton D., Portwin K., Klyne G., Miles A., 2009b. Adventures in semantic publishing: exemplar semantic enhancement of a research article. PLoS Computational Biology 5: e1000361. Available at: http://dx.doi.org/10.1371/journal.pcbi.1000361.
2) p 187, para 3, reference is wrong:
“Phillips (2009) in The Future of Journal Publishing quotes Brunelle’s (2006)…” should read instead “Phillips (2009) in Business models in journal publishing quotes Brunelle’s (2006)…“.
3) p 191, last-but-one para, three times the same reference is wrong and should read instead:
“NetBase is licensing its technology to drive Elsevier’s illumin8 product, an R&D research support tool sold via a subscription model (Pollock 2008b). The key differentiator of NetBase is that by not relying on taxonomies “it scales across subject areas with no need for investment in domain expertise” (ibid). Pollock (ibid) wonders whether…”
4) p 193, para 3 should read:
“Although there are all sorts of workflow tools benefiting from semantic technologies, the focus in this article will be on tools for acquiring annotation data.“
Scientific Publishing: Disruption and Semantic Build-Up (Part 1)
Filed under: Open Access, Publishing, Semantic Web | Tags: Clayton Christensen, disruption, Elsevier, Linked Data, McGraw-Hill, NLP, NPG, Semantic Web, Springer, STM, text mining, Thomson, value shift, Wiley, Wolters Kluwer
Comments (1) Update 14 August 2010:
Read the full article following this link: Scientific Publishing: Disruption and Semantic Build-Up
Introduction
While there are ongoing debates whether scientific publishing is in a process of disruption it seems to be undisputed that profound changes are on the way. In this first part of an article I will recall the debates about disruption and explore the changes and tendencies in scientific publishing. I will finish with a brief introduction to Semantic Web and Semantic Publishing as one way for publishers to leverage upcoming business opportunities. In the recommendations chapter I will prefigure what the second part of this article will be about.
Disruptive Innovation
According to Clayton Christensen (2008), disruptive innovation makes a product simpler and more affordable. Disruptive innovation comprises an enabling technology and a business model that can deliver this solution more cost effectively. Such innovations have disruptive effects on established companies, as managers tend to compare investing in a new business model (full cost) with leveraging what is already in place (marginal cost). This causes them to think that business model innovation is not attractive. New entrants in contrast, without a comparison, create what needs to be created. (Christensen 2008)
Concerning the implications of the advanced process of scientific literature becoming available in digital formats, Bruck (2008) mentions P2P networks, Open Access / open archive publishing and intercommunity trading as “challenges” for publishers.
Cope and Kalantzis (2009) in Signs of epistemic disruption: transformation in the knowledge system of the academic journal describe “disruptions of scholarly work”. For example, they suggest that pre-publications erode the significance of post-publication. In some areas, conference proceedings, for their immediacy, and reports become more important than journal articles, and authors and institutions insist that articles be published in their own institutional repositories or on personal websites – “legally or illegally, with or without reference to the publishing agreement they have signed.” (ibid) Cope and Kalantzis identify as further drivers of disruption that knowledge these days is produced by a whole host of organisations, and more knowledge is produced within the networked interstices of the Social Web where amateurs mingle with professionals.
David Bousfield (2009), Vice President and Lead Analyst of research and advisory firm Outsell, mentions the first of four “disruptive forces“ for the STM market as Open Access. He notes: “Springer’s purchase of BioMed Central and the launch of Nature’s Communications [journal] both represent significant landmarks in the adoption of this disruptive business model by for-profit publishers.” The Open Access “business model that has infected mainstream STM publishing is working its way through legal, tax, and regulatory content, and also permeates the co-creation of news and market research” (Stratigos et al. 2009). Also, funding institutions increasingly demand an Open Access approach (Lunn 2010).
The commercial Open Access market “accounts for 3.3 per cent of the total journal publishing market, growing at 11.3 per cent per year”. Although significantly mitigated by other trends in R&D spending Open Access will reduce revenues to the primary journal publishing market, and in the event of widespread take-up will shrink the market value by estimated 57 per cent” (Pollock 2009).
Michael Nielsen (2009) in his article “Is scientific publishing about to be disrupted?” claims “that scientific publishing is in the early days of a major disruption” and that “those publishers that don’t become technology driven will die off”.
Michael Clarke (2010), asking why scientific publishing has not been disrupted already, examines the potential for disruption by listing five functions of journals. He asserts that beyond dissemination and registration, for which journals are no longer needed, there are three additional functions that journals serve which have developed over time: validation, filtration and designation. Regarding validation Clarke writes: “To date, no one has succeeded in developing a literature peer-review system independent of journal publication”. Concerning filtration, various new tools, instead of replacing journals, “rely on the filtration provided by journals” (ibid). Clarke continues:
“While there is the possibility that recent semantic technologies will be able to provide increasingly sophisticated filtering capabilities, these technologies are largely predicated on journal publishers providing semantic context to the content they publish. In other words, as more sophisticated filtering systems are developed – they tend to augment, not disrupt, the existing journal publication system.”
As funding and career advancement decisions are based on scientists’ publication record (designation), Clarke, at best, sees a shift away from journal toward article-based metrics. But even then, “change would likely be incremental rather than disruptive” and such a transition “would likely be measured not in years but in decades”. (ibid) Finally, he argues that the main reason why the latter three functions were not easily replaced is that they are not technology-driven but “cultural functions” and therefore not vulnerable to disruption.
Also concerning publishers’ value proposition filtration, Hagenhoff (2006) acknowledges that progress in metadata, harvesting and Semantic Web technologies enable increasingly reliable selection and aggregation of research papers, and therefore the commercial publishers are no longer needed. Accordingly, Tim Berners-Lee (n.d.) explicitly describes the disruptive impact of semantic technologies on scientific publishing.
Bernard Lunn (2010) assumes scientific publishing is not YET disrupted and lists the key elements of the STM process according to the journal functions outlined by Clarke. First copy costs are approximately 80 per cent, 96 per cent of articles are available electronically, and “Companies like Wiley, McGraw-Hill, Elsevier, Wolters Kluwer and Springer … [are] in good financial health” (ibid). Therefore, the Internet’s superiority regarding distribution is not the disruptive force in STM publishing. Also, innovative technologies for registration, validation (peer review) and filtration are not main drivers for disruption in Lunn’s view. In contrast to Clarke, Lunn believes the element
“designation … where the researcher gets credit … may be the main impediment to disruptive change. … Journals have a power law distribution, like a network effect. The best journals attract the best articles, which have the biggest impact on academic reputation and so on. … But we see the same power law distribution in social networks. … As these peer networks do not require the intermediation of a journal brand, they are fundamentally disruptive.” (ibid)
Furthermore, Lunn writes, in some disciplines, recognition with an Open Access system may start to have a serious impact on academic reputation (designation) (ibid).
Although there are good reasons to deploy semantic technologies predicated on journal publishers’ content as Clarke suggests, there is no reason why there should not be a more efficient filtration system not predicated on journals and metadata provided by publishers, by acquiring metadata from other sources and in other ways through authors’ and readers’ ‘contribution’. With Open Access paving the way, it is also not evident that a new system would even need publishers’ acquiescence for leveraging their assets. Semantic filtration technologies not only “augment” the journal publishing system, but also will have disruptive effects on journal publishers’ offerings.
Also with Julia Lane’s (2010) recall of flaws of existing metrics and suggestions for “measuring ALL activities that make up academic productivity” to “make science metrics more scientific” Clark’s affirmation of funding criteria is not entirely convincing.
His notion that filtration and designation are not technology-driven but “cultural” functions is also unconvincing as a culturally-driven function may also be technology-driven. A culture mediated by technology is prone to be disrupted regarding the way the culture is mediated – and the mediation is part of journal publishers’ business.
Because scientific search tools are improving, more scientists will publish Open Access articles (Lunn 2010). It can be argued that publishers’ paid content business models are kept alive because distribution of scientific literature is controlled by them due to distribution being bundled to the publishers’ other value propositions filtration and designation, which are not yet undermined by new technologies. Hence, Open Access beyond author-fee models could take off just as Open Access content is available in formats allowing filtration and designation to be done by machines and new hybrid solutions based on semantic technologies. Thereby, semantic technologies could unfold a disruptive potential also regarding the distribution aspect of the publishers’ work and their paid content business models by enforcing adoption of Open Access.
Summarising, it can be said that a significant decline in revenues in journal publishing in the coming years is realistic. Thereby, advanced filtration technologies, social networking services and Open Access models can be identified as drivers for disruption. Accordingly, Lunn’s (2010) conclusion “that we are on the cusp of disruptive change and that it will be brought on by the implementation of social networking and semantic technology” might be a good starting point for further assessments.
Where the Value Goes
Phillips (2009) in The Future of Journal Publishing quotes Brunelle’s (2006) report emphasising a “basic shift in business models that is mandated by a move from a journal economy of scarcity (print world) to a journal economy of plenty (online world)” with completely new players flooding the market with free content. Semantic technologies allow grey literature to become more visible while the increasing amount of freely available data will trigger higher demand for science services (Hagenhoff 2006).
In the same time the peer review article becomes less relevant.
“Grant allocating bodies and researchers themselves rely on the primary research output data rather than text as the main means for evaluation … The research article often is the gateway into a world of simulations, data analysis, modelling etc. … It has ‘links’ to similar databases, to bibliographic databases, has links to images, maps and structures … but it becomes less essential as standalone entity.” (Brown & Boulderstone 2008)
Reasons why journals will be less satisfying in the future are the increasing speed of research, the static character of the journal as well as the fact that it is a single mode of communication and relatively isolated (Morris 2009). In the domain of “economics, top authors are moving away from top journals altogether” (Ellison 2007). The concept of an “article within an issue within a journal becomes redundant. Instead users will ‘subscribe’ to those items that are specifically relevant to their needs irrespective of source” (Brown & Boulderstone 2008). Likewise the proportion of pure data and the importance of data publishers such as WesternGeco have risen significantly during the last few years (ibid).
Clarke (2010), although opposing the notion of a disruption process in scientific publishing, acknowledges that “new technologies are opening the door for entirely new products and services built on top of – and adjacent to – the existing scientific publishing system”. Beside mobile technologies and Open Data standards he lists semantic technologies as particularly promising. Citing King and Tenopir (2000) he explains:
“the cost of journals is small relative to the cost, as measured in the time of researchers, of reading and otherwise searching for information … Which is to say that the value to an institution of workflow applications powered by semantic and mobile technologies and interoperable linked data sets may exceed that of scientific journals. If such applications can save researchers … significant amounts of time, their institutions will be willing to pay for that time savings and its concatenate increase in productivity.”
Clarke also confirms that there will be “a downward pressure on journal pricing” and he refers to Nielsen, emphasizing “that acquiring expertise in information technology (and especially semantic technology) – as opposed to production technology – is of critical importance to scientific publishers”.
Also Bousfield (2009) emphasises a trend that publishers
“move up the value chain. … Elsevier, Thomson Reuters, and Wolters Kluwer Health are rapidly diversifying their STM publishing divisions in order to add more value to their offerings … They are all moving away from traditional article publishing into areas that require enterprise scale content aggregation and analysis”.
Products based on data mining flourish with Open Access licences, and repository services such as “abstracting and indexing, semantic search and discovery tools, and new ways of presenting the scholarly article … all can add value and enable publishers to charge for their services” (Pollock 2009).
Scientific publishing is shifting from selling static pieces of content toward access centred models for dynamic content in multiple formats coupled with value added services. It also has been indicated that the boundaries between resources themselves and discovery services are increasingly permeable (Brown & Boulderstone 2008). We
“will witness a strengthening in secondary information systems over primary publications, with a significant growth in A&I [abstracting and indexing] platforms over the next 3-5 years. Services such as Science Direct (Elsevier) and Web of Science (Thomson) are paving the way” (ibid).
In this context the “extend of value add provided will determine price and market acceptability … [and] larger publishers in particular are looking at redefining their business and moving from a content-focus to a service orientation”. (ibid) Publishers are becoming information solutions providers and scientific support service providers.
Whether through a disruptive change or an incremental process Open Access is on the rise, and value is migrating away from journals and content altogether toward technology (Nielsen 2009) and services related to the scientific process (Brown & Boulderstone 2008). David Shotton predicts for the coming decade a decrease in the value of raw text while the value of semantic services that help readers to find actionable data, interpret information and to extract knowledge will increase. (Shotton 2009)
Generally there are four main areas of growth for scientific information markets: emerging markets (in particular BRIC countries), mobile content and services, the non-library audience and the extensive-knowledge worker sector (those people outside the research institutional environment) (Brown & Boulderstone 2008) and finally peer networks and Social Semantic Web services. All four of these areas of growth comprise tendencies of a ‘journal economy of plenty’, decline of importance of the journal article and value shifting toward workflow applications and value added services related to scientific content – with semantic technologies playing a pivotal role.
Semantic Web
According to the World Wide Web Consortium (W3C) the main goals of the Semantic Web is to extend the principles of the Web from documents to data. Data should be related to one another to be shared and reused across applications and to reveal possible new relationships. In order to achieve these goals, the most important is to be able to define and describe the relations among data between any two resources (W3C 2009). It is all about common formats for integration and combination of data drawn from diverse sources and about a language for recording how the data relates to real world objects. “That allows a person, or a machine, to start off in one database, and then move through an unending set of databases which are connected not by wires but by being about the same thing” (W3C 2010). In other words, the “markup” language behind each Web page would be cross-referenced into countless other databases, once developers agreed on a common set of definitions. (Shannon 2006)
Semantic Publishing
To date the Semantic Web is still in its infancy and most publishers just start to implement semantic technologies. David Shotton and his team handcrafted a semantically enhanced scientific article (see reference R. B. Reis et al. 2008) to demonstrate the potential of semantic technologies. In his paper Semantic publishing: the coming revolution in scientific journal publishing Shotton (2009) defines Semantic Publishing as
“anything that enhances the meaning of a published journal article, facilitates its automated discovery, enables its linking to semantically related articles, provides access to data within the article in actionable form, or facilitates integration of data between papers. Among other things, it involves enriching the article with appropriate metadata that are amenable to automated processing and analysis, allowing enhanced verifiability of published information and providing the capacity for automated discovery and summarization. These semantic enhancements increase the intrinsic value of journal articles, by increasing the ease by which information, understanding and knowledge can be extracted. They also enable the development of secondary services that can integrate information between such enhanced articles” (ibid).
Conclusion
Given the likelihood of diminishing revenues in journal publishing within traditional business models and ongoing value migration toward science support services Semantic Publishing as a set of enhanced content features and value added services represents a major opportunity for scientific publishers to leverage additional and nascent business opportunities (ibid).
Recommendations
For further research it is recommended to assess semantic technologies as well as existing products and services for scientific information based on these technologies. In particular social and mobile semantic services should be examined as, beside emerging markets and non-library audiences, sizeable new income streams can be expected in those fields. Finally, it is recommended to examine partnerships and acquisition activities related to semantic technologies. Additionally, the wider effects of Semantic Publishing on innovation and generativity in science is a topic worth being explored.
References
Berners-Lee, T., Scientific publishing on the ‘semantic web’. Available at: http://www.nature.com/nature/debates/e-access/Articles/bernerslee.htm [Accessed May 24, 2010].
Bousfield, D., 2009. Scientific, Technical & Medical Information: 2009 Market Forecast and Trends Report, Outsell, Inc.
Brown, D. & Boulderstone, R., 2008. The Impact of Electronic Publishing : The Future for Publishers and Librarians, München: K.G. Saur. Available at: http://books.google.de/books?hl=de&lr=&id=lpr0EV0JvzwC&oi=fnd&pg=PR15&dq=%22The+Impact+of+Electronic+Publishing+%22+autor:David+autor:J+autor:Brown&ots=0_KAZ1MN3N&sig=jg_RdLEHMo2wjcYDH-Lz1vTIrOk#v=onepage&q=&f=false.
Bruck, P., 2008. Multimedia and E-Content Trends : Implications for Academia. 1st ed., Wiesbaden: Vieweg Teubner.
Brunelle, B., 2006. Publishers Speak Up On Open Access: Big Promise, Small Uptake, Outsell, Inc.
Christensen, C.M., 2008. Reinventing Your Business Model. Harvard Business IdeaCast 122. Available at: http://itunes.apple.com/podcast/harvard-business-ideacast/id152022135 [Accessed February 23, 2010].
Clarke, M., 2010. Why Hasn’t Scientific Publishing Been Disrupted Already? The Scholarly Kitchen. Available at: http://scholarlykitchen.sspnet.org/2010/01/04/why-hasnt-scientific-publishing-been-disrupted-already/ [Accessed April 13, 2010].
Cope, B. & Kalantzis, M., 2009. Signs of epistemic disruption: transformation in the knowledge system of the academic journal. In: The Future of the Academic Journal, Oxford: Chandos.
Ellison, G., 2007. Is Peer Review in Decline? NBER Working Paper. Available at: http://www.nber.org/papers/w13272.pdf.
Hagenhoff, S., 2006. Internetökonomie der Medienbranche, Göttingen: Universitätsverlag Göttingen.
Lane, J., 2010. Let’s make science metrics more scientific. Nature, 464(7288), 488-489.
Lunn, B., 2010. Semantic Wave Hits STM Publishing, Part 1: Current Cash Cows. Semantic Web. Available at: http://www.semanticweb.com/features/semantic_wave_hits_stm_publishing_part_1_current_cash_cows_154355.asp [Accessed April 13, 2010].
Morris, S., 2009. ‘The tiger in the corner’: will journal matter to tomorrows scholars. In: The future of the academic journal. Oxford: Chandos.
Nielsen, M., 2009. Is scientific publishing about to be disrupted? Michael Nielsen. Available at: http://michaelnielsen.org/blog/is-scientific-publishing-about-to-be-disrupted/ [Accessed April 13, 2010].
Phillips, A., 2009. Business models in journal publishing. In: The Future of the Academic Journal. Oxford: Chandos.
Pollock, D., 2009. An Open Access Primer – Market Size and Trends, Outsell, Inc.
Reis, R.B. et al., 2008. Impact of Environment and Social Gradient on Leptospira Infection in Urban Slums. R. E. Gurtler, ed. PLoS Neglected Tropical Diseases, 2(4), e228.
Rotman Epps, S., 2009. Eight Models For Monetizing Digital Content, Forrester Research.
Shannon, V., 2006. A ‘more revolutionary’ Web. The New York Times. Available at: http://www.nytimes.com/2006/05/23/technology/23iht-web.html?_r=2 [Accessed April 13, 2010].
Shotton, D., 2009. Semantic publishing: the coming revolution in scientific journal publishing. Learned Publishing, 22(2), 85-94.
Stratigos, A.C., Strohlein, M. & Watson Healy, L., 2009. Information Industry Outlook 2010: A New Dawn, New Day, New Decade, Outsell, Inc.
Tenopir, C., 2000. Towards electronic journals : realities for scientists, librarians, and publishers, Washington DC: Special Libraries Association.
W3C, 2010. W3C Semantic Web Activity. Available at: http://www.w3.org/2001/sw/ [Accessed April 13, 2010].
W3C, 2009. W3C Semantic Web FAQ. Available at: http://www.w3.org/2001/sw/SW-FAQ#whatarebuildingblocks [Accessed April 13, 2010].
IHS Shows Where STM Value Goes
Filed under: Diversification, Open Access, Publishing, Semantic Web | Tags: disruption, IHS, STM, value shift
Comments (1) Triggered by Michael Nielsen’s blog post about disruption of scientific publishing and value migration away from publishing companies, in this post I will briefly summarize acquisition activities of IHS, Inc. (IHS), one of the leading providers of science, technical and medical (STM) information, to examine whether these activities substantiate a broader STM market trend also described by research firm Outsell as “using technology to move up the value chain” (Bousfield & Outsell, Inc. 2009).
IHS provides information and services such as decision-making support for customers in four areas: energy, product lifecycle, security, and environment. IHS achieved $844 million in revenue in 2008 which equates to 3.6 per cent market share of the primary segment STM. With 22.6 per cent in 2008 IHS had the strongest total growth among the top ten companies of the segment. (Outsell, Inc. 2010).
“The data is obtained from public sources, third parties, and IHS’ own proprietary databases, and are then combined with proprietary and third-party technology to create graphical user interfaces and search and navigation tools. Year-to-date 2009 organic revenue growth was 4% overall and 10% for the subscription-based portion of the business. Acquisitions added a further 18%.“ (Bousfield & Outsell, Inc. 2009).
Early embracing the Internet IHS acquired at least 37 companies since 2004. According to the assumed trend mentioned above most of these companies are rather focused on technology than rest upon a classical (paid) content business model.
In 2005 IHS acquired the content and data services business of I2 Technologies Inc., a developer of client/server-based decision support software. John S. Herold, which provides in-depth analyses and key financial and operational data on more than 400 global oil and gas companies, was acquired by IHS in 2007. Herold’s annual product license agreements provide clients with enterprise-, division- or location-wide access to herold.com online research, databases and tools as well as onsite and webcast training, and analyst presentations.
Furthermore in 2007 IHS announced acquisitions of Jane’s Information Group (Jane’s), EnvironMax, Exploration Data Services (EDS) and The McCloskey Group.
Jane’s is a leading provider of information to the defence industry and governments while EnvironMax provides client/server and web based Environmental Management Information System (EMIS) software. EDS, specialized in mapping, exploration scanning, bookmarking and metadata capture of technical reports and data, is the major supplier of open file (public domain) oil & gas exploration data for Western Australia basins and the Timor Sea area. The acquisition of EDS complements to purchases of Geological Data Services and Geological Consulting Services IHS made earlier in 2007 (IHS, Inc. 2007a). The McCloskey Group, world leaders in coal information, keeps its customers informed via eight print and online publications, and annual conferences and consulting offerings (IHS, Inc. 2007b).
IHS continued its pushing strategy in 2008 with the acquisition of two environmental information companies, Dolphin Software, Inc. and Environmental Software Providers (ESP). Dolphin provides Material Safety Data Sheet (MSDS) management, chemical inventory management and environmental reporting services. ESP’s services include greenhouse gas management, air, water, and waste management and internal and regulatory compliance assurance.
Later in 2008 IHS acquired a 50 per cent stake in Lloyd’s Register-Fairplay Ltd., a maritime information company, and JFA International, a provider of an analysis and decision support tool, which supports oil industry business development, planning, portfolio management and communication (IHS, Inc. 2008).
Reservoir Visualization Inc., a provider of exploration and reservoir management consulting services, was acquired in July 2008 and IHS completed the year by acquiring Documental Solutions, Divestco USA Inc. and Global Insight.
Documental Solutions provides the leading market analysis tool for strategic planners, business developers and analysts within the commercial defence industry. Its assets will be integrated with and managed through Jane’s Information Group. Divestco is a developer of geological data and application software, and Global Insight offers comprehensive financial, and political coverage and, according to IHS chairman and chief executive officer Jerre Stead, is recognized as the most consistently accurate economic forecasting company in the world.
In 2009 IHS acquired the remaining 49.9 percent of Lloyd’s Register-Fairplay whose information products and services are unique to the shipping industry. After about one year without acquisition activities IHS in September 2009 bought LogTech, which caters for the oil and gas industry with a comprehensive suite of services, data and software designed to manage exploration risk and optimize production.
In the same month IHS reported that it had acquired Environmental Support Solutions, a leading provider of Environmental, Health and Safety (EHS) and Crisis Management sustainability software. After IHS also bought Prómiere, a bundling of service and tool offerings for management decisions in the electronics industry, IHS’ latest acquisition so far was directed at Emerging Energy Research (EER) in Februar 2010. EER offers clients advisory and consulting services as well as market studies about emerging technologies.
In some areas IHS also responded to the increasing demand for more open ways to purchase and use data. “Data is becoming an enterprise solution that needs to be vetted through a series of in-house and third party tools to get maximum benefit” said Tim Crago, Valtus vice president and general manager. IHS and Valtus are cooperating to distribute Valtus Orthophotos while realigning to an open access distribution model.
Summarizing it can be said that the majority of companies acquired by IHS in the last five years are technology companies with competencies in software, management and workflow solutions. Significant investments also have been made in ‘raw’ data and data services as well as consultings. On the other hand IHS’ motivation to invest in ‘long’ text content was very limited.
IHS’ M&A strategy and its success underpin the assumtion of a trend toward a data and service centric STM information industry. Nielsen’s claim that value is migrating away from media and publishing companies toward technology companies, as well as Outsell’s assertion that publishers are moving up the value chain by investing in technology is widely supported by IHS’ activities.
Considering also the rising significance of open APIs and public domain data, these trends are unlikely to be reversed, and value will be increasingly generated by mining, processing, filtering, aggregating and enriching of abundant data. Revenues will be derived from dynamic and hightly customised information subscription services rather than from classical paid content models (Brown & Boulderstone 2008).
Whether these trends apply only for data intensive, fact focused and time sensitive sectors such as STM, or eventually, with ongoing disruption of paid content and advertisement business models, will affect all publishers remains to be seen.
References:
Bousfield, D. & Outsell, Inc., 2009. Scientific, Technical & Medical Information: 2009 Market Forecast and Trends Report, Outsell, Inc.
Brown, D. & Boulderstone, R., 2008. The Impact of Electronic Publishing : The Future for Publishers and Librarians, Müchen: K.G. Saur. Available at: http://books.google.de/books?hl=de&lr=&id=lpr0EV0JvzwC&oi=fnd&pg=PR15&dq=%22The+Impact+of+Electronic+Publishing+%22+autor:David+autor:J+autor:Brown&ots=0_KAZ1MN3N&sig=jg_RdLEHMo2wjcYDH-Lz1vTIrOk#v=onepage&q=&f=false.
IHS, Inc., 2007. IHS Acquires Exploration Data Services Assets. Available at: http://www.ihs.com/News/Press-Releases/2007/IHSacquiresEDS.htm [Accessed March 7, 2010].
IHS, Inc., 2008. IHS Acquires JFA International, an Energy Industry Services Firm. Available at: http://www.ihs.com/News/Press-Releases/2008/IHSJFA.htm [Accessed March 7, 2010].
IHS, Inc., 2007. IHS Online Pressroom: IHS Acquires McCloskey Group, a Leading Coal Markets Research Firm. Available at: http://press.ihs.com/article_display.cfm?article_id=4118 [Accessed March 7, 2010].
Outsell, Inc., 2010. Outsell Inc. :: Company Profile – IHS, Inc. Available at: https://www.outsellinc.com/data/companies/profile/4987 [Accessed March 7, 2010].
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Hardware Sucks: Content Demonetization and Publisher’s Trace
Filed under: Diversification, Mobile Internet, Open Access, Publishing | Tags: Amazon, Apple, B&N, Chris Anderson, disruption, EPub, Google, Hearst, Kindle, Newscorp, Nokia, NYT, Pearson, Plastic Logic, RIM, Sony, value shift, Wiley
Leave a Comment Chris Anderson might have been criticized for being a pop-scientist and I regret not having a list of cited works of his recent book FREE1 within my paper back edition. Still, after a short presentation I did in middle of June, asking how publishers can cope with content devaluation, now in Anderson’s book I stumbled upon the term “demonetization” which in fact comes closer to what I was talking about in my presentation. In this article I will shortly rework my thinking, summarize some essential ideas Anderson came up with and I will give additional thoughts on hardware markets as a driver of demonetization of content as well as an opportunity for publishers.
The idea behind devaluation of content is simple. There is just much more content available because it is much easier to produce and distribute content and the technology to do this is becoming ever cheaper. As the prices of bandwidth, storage and computer processing power decline (Anderson describes the cubic decay even topping Moore’s Law) the growth in amount of content is staggering – it might be even exponential. With this explosion there is also a new business logic becoming prevalent which Jeff Jarvis describes as “link economy” in contrast to “content economy”. These two logics clash because one measures the value of content by its links (it is like currency) while the other one requires a “pay-wall” to keep up pay-per-unit revenues but which obviously imposes barriers for links and opportunities to reap other revenue sources. Because free content handled within the link economy exceeds paid content in amount and often is an acceptable alternative regarding quality (or the paid content is copied bypassing the pay-wall), the willingness to pay for content is shrinking and traditional business models don’t work anymore unless your content is an extremely light buoy of continuous exclusiveness.
To make the clash tangible I showcased in my presentation two prominent players in the news industry who embrace the rules of internet and the link economy. I introduced the New York Time’s bold move to provide an API offering third-party company developers access to the Times’ entire online article archive going back to 1981 which has “triggered a whole host of mash-ups, increasing the reach and value of its content”. Secondly, the Guardian Open Platform “which will allow users to build their own applications in return for carrying Guardian advertising”. In opposition to this idea I illustrated the A.P.’s stance and the hassle it has with aggregators which has been refreshed by its recent announcements to crack down on unpaid use of articles on the web by licensing even small snippets. Also I mentioned the push of some German publishers to find a collecting society to encounter revenue losses and to enforce legislation to give them ancillary copyright which would bring them in a better position to sue people using content they publish. Ambitions like this culminated recently in the Hamburg Declaration signed by 166 European publishers. Nevertheless, these ambitions and Rupert Murdoch with his latest decision to charge for online content might be wrong.
Chris Anderson’s book, Free – The Future of a Radical Price, comprises what I was talking about in my presentation and examines a variety of aspects circling around the idea that something is available for free. He stresses the fact that there is a difference between twentieth-century Free and twenty-first-century Free, the second rather based on economics of bits, not atoms. “The near-zero marginal costs of digital distribution allow us to be indiscriminate in what we use it for – no gatekeepers are required to decide if something deserves global reach or not.” While proclaiming an abundance of information Anderson refers to the Law of Conversion of Attractive Profits introduced by Clayton Christenson a couple of years ago: “Products that can become commoditized and cheap tend to do so, and companies seeking profits move upstream in search of new scarcities. Where abundance drives the cost of something to the floor, value shifts to adjacent levels”.
He outlines four categories – or rather characteristics – of free-based business models which are all variations of four kinds of cross-subsidy, “shifting money around from product to product, person to person, between now and later or into non-monetary markets and back out again.” The first model is based on direct (within one company) cross-subsidies where one product or service is given away for free to promote something else for what money is charged for. The fact that sometimes the giveaway has to be purchased from another company doesn’t make it a case of the second model which is called Three-Party Market. This model is “the extension of the media business model to industries of all sorts”. It’s not just about advertising but attention based revenues from a second market or customer class. The third model, called Freemium, is actually a case of the first model but the product or service given away is a limited version of something and it is charged for the advanced version. For digital products this model becomes much more attractive because the “ration of free to paid is reversed” as the cost of serving 95 percent of users is close enough to zero to be subsidized by the fee charged from the five percent premium users. The distinctive credential of the fourth “model” is that the subsidy crosses the blurry border between markets measured in money and markets rather based on attention and reputation. Anderson’s systematization helps to demystify the term Free although he doesn’t go very far at this point to explore the adjacent value levels or, as Kevin Kelly coined it, the “stuff which can’t be copied”, which becomes scarce and valuable instead of what now becomes abundant and which is better than free.
Anderson appoints six drivers of content devaluation. One is the growth of supply of content coupled with the obvious limit of demand (and attention). Secondly, with the loss of physical form content can be replicated without actually depriving the originator, although this is objected in often awkward court cases against so called piracy. The third is the ease of access and thereby decline of search costs resulting in a decline of “willingness to pay for having content made available”. Fourth, the advance of the ad-supported free content model results in consumers expecting content to be free anywhere. Another reason for content devaluation is that a new generation has grown up in the digital economy being habituated to free content and “either indifferent or hostile to copyright”. As there is a constant interdependency between recipients, technologies and business models I don’t see a specific point here. Finally, the computer and hardware industry wants content to be free, because the more content is available the more valuable the devices through which content is consumed. I’m going to examine this point in more detail below. Furthermore the fact that software companies such as search engines have a vested interest in cheap and free content too should be addressed in this collection of drivers.
These drivers might be analyzed using the term demonetization rather than the term devaluation because value shifts and is scattered. Anderson explains: Although something is free doesn’t mean that there isn’t someone making lots of money or lots of people make little money. Regarding the demonetization of the classified ad market enabled by sites such as Craigslist the value “is distributed among the site’s hundreds of thousands of users”. Similarly in the case of Wikipedia, part of the demonetization process of a billion dollar encyclopaedia market. Anderson continues: “…because an incomparable information source is now available to all at no cost, our own ability to make money armed with more knowledge is improved (…) In other words, it’s shrinking the value we can measure (direct revenues), even as it’s hugely increasing the value we can’t (our collective knowledge)”. On the other hand tiny amounts of money go back to Wikipedia via corporate donors who pass on the donation costs to their paying consumers.
Anderson’s model of cross-subsidy between monetary and non-monetary markets challenges economics as a science all together: “What can not be directly measured in economic systems is handwaved away into a category called “externalities” and another way to “handle things which don’t fit into basic models” are opportunity costs. Anderson seems to criticise the “basic models” and “standard theories”. On the other hand he builds on standard theories such as the conservation law: “wealth doesn’t vaporize”. So, what is it all about? Would it be a good idea to include more of these externalities into an economic theory? At least they become more measureable as people move their communication and relations online – of course with some questionable equations like: amount of links is equal to reputation. Additionally I was wondering why the cross-subsidies “back out” of nonmonetary markets, the provision of value into monetary markets by crowds of people allegedly keen mainly on reputation, isn’t elaborated that explicitly by Anderson. The crowd from which something is sourced might not lose knowledge or money but these people expend time and attention – also on things again which are monetized by others.
As emphasized by Google’s announcement to offer a free operating system, software markets are demonetized as are the travel agent and the stockbroker businesses and, of course, content markets. One major impact on content value, other than the effect of search engines, derives from hardware markets. As content becomes digital it requires appliances and new infrastructure to be received. Content distributed via Apple Stores for example can be seen rather as a means for Apple to sell iPods and iPhones. If necessary, the content is subsidized in order to keep prices down to keep up demand for these highly profitable devices2. In content markets Apple competes with Amazon which drives content prices even further down. Apple doesn’t need to be actually in the content market though. It just collects the market-makers fee for letting the trading happen in the iPhone arena and will take a 30% commission. “Since Amazon have a track record of obtaining 55-65% discounts from book publishers, and since Google’s terms trade for the Settlement have been announced at 38% (plus a bit more), the Apple share does not look too greedy. But for the daily expense in running the Store it is a fat margin.” Apple’s infrastructure definitely attracts publishers as CourseSmart LCC just indicated. Founded by Pearson, John Wiley & Sons Inc. and others it’s offering 7,000 titles of its e-textbooks for iPhone.
Amazon meanwhile by acquiring Lexcycle, the owner of the leading e-book reader application used on the iPhone, and by launching its iPhone-optimized Kindle store, has shown that it is heading to a further integrated e-book strategy going beyond the Kindle e-reader. This strategy also deprives publishers of direct costumer relation, ownership of costumer data and control of pricing. “In selling e-books at $9.99, Amazon effectively takes a loss on each sale because publishers generally charge booksellers about half the list price of a hardcover typically, around $13 or $14.” By bundling e-books with the Kindle it assigns the costs improperly and subsidizes the e-books which are undercosted to push Kindle sales and further network effects. The content eventually will be demonetized while Amazon moves upstream to leverage the e-reader market as well as data regarding sales, products and customers which is essential for personalization of content, advertisement and e-commerce.
Google is going to offer a cloud-based alternative to Amazon while simply selling access to e-books via mobile phones as well as the Sony Reader, the Kindle’s largest competitor. As Google is making money from advertisement and benefits hugely from the link-economy it obviously enforces open standards, makes millions of public domain books available for free and reserves the right to set prices as well.
Because of the loss of control and dumping prices for e-books, publishers such as Hearst, the New York Times and Newscorp. announced the introduction of their own e-readers. The bookseller Barnes & Noble will be the exclusive provider for content on the Plastic Logic reading device. There are several new e-readers and e-reader-like appliances announced for the coming season and publishers already compete in this fast paced market with powerful technology companies. Some of these companies bet on open standards, some have their own online stores and some are bargaining with publishers about pricing conditions to bundle content subscriptions with their hardware. Either way, there wouldn’t be much reason not to behave like Amazon and to try to undercut even the $9,99 to get a share of retail, hardware and data related markets. There would be only slightly more reason for publishers not to do so, but by entering the appliances and mobile platform space they are more likely to manage the transition and to carry over their competencies to make them work for them.
Apple has set the paradigm and established a completely new market with its App Store and many other phone companies like RIM and even network operators follow. A recent Forrester report claims that the next wave of e-book reader use devices they already own and some argue that the Kindle market is insignificant compared to the mass of people reading e-books on their phone or laptop. The advantages for phone companies against e-reader companies are evident. The price for an extra device is still too high. With mostly voice service available and better browsing features (some e-readers don’t even have wireless connection yet to purchase and link content) it’s more probable to cooperate with network providers to subsidize their fancy devices as it’s speculated for the upcoming Apple, Nokia and HTC tablets. The Dell 5-inch touchscreen tablet, expected to hit the market in around six months, will be provided free of charge to users who sign up to digital content subscriptions and it will directly compete with Amazon’s Kindle e-reader. If such devices are becoming cheaper and if they would have additional features like telephony capability, this would create more revenue and more flexibility in pricing. Hence, subscription models, where not only the hardware but the content is cross-subsidized and feels like free are becoming realistic not just for music but for all digital content, including e-books.
Markets for mobile digital content as well as for mobile appliances and platforms are becoming bigger and more fragmented. Publishers have to find the right mix of subscription, pay-per-unit, ad-supported and free-based models. They have to further explore the potential of price differentiation, content customization and bundling of different content formats and services and they need to be aware of the sometimes counterintuitive new conditions. Beyond this they need a sustainable mobile strategy and have to find appropriate partners to diversify into adjacent value levels. To gear into hardware segments of content related value chains is one of these new sources of value, as well as a precondition for leveraging adjacent sources of income by engaging with audiences in the direction media consumption is heading – the mobile internet.
[1] Chris Anderson, Free : the future of a radical price (London: Random House Business, 2009).
[1] Michel Clement, Ökonomie der Buchindustrie Herausforderungen in der Buchbranche erfolgreich managen (Wiesbaden: Gabler Verlag / GWV Fachverlage GmbH, Wiesbaden, 2009).
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