Pricing Trends – Projections and Realities

I understand from various sources that preparations are well advanced for the annual meeting of the Canadian Association of Law Libraries. Among other things, the meeting offers an invaluable platform for legal publishers and law librarians to share information with each other.

A key element of the preparation for the meeting is the annual request for information on the anticipated price increases that the library community can expect in the coming year. The issue of price increases is a critical element in planning and budgeting and gives the library purchaser a useful guideline for use in budget presentations and in making the decisions made to acquire, cancel or update subscription product.

At one time, the decision to discuss pricing trends at the CALL annual meeting was an innovative way of obtaining information from legal publishers. Over time it has become almost a ritual as gracious questions presented by law librarians in a respectful and unthreatening manner are responded to with vague generic answers by legal publishers. Perhaps the time has come to have a meaningful dialogue on the subject of pricing.

Price Trends 2010

Steven Mathews and Shaunna Mireau in an earlier post provided the following report based on information gathered from legal publishers on proposed 2010 price increases which every company except Irwin Law, SOQUIJ and Wilson Lafleur proposed to implement:

It is an established tradition for the Vendors Liaison Committee to share pricing trends at this time of year. Here are the various publisher price trend predictions that the Committeee has assembled:
Canada Law Book is advising a 3% to 6% price increase for print and electronic products.
Carswell price increases will be in the 5-7% range for print products.
CCH Legal/Business/Tax subscription products will increase approximately 3-9%. The price increase for Legal/Business books available in print should be in the 2-5% range and for our Tax books in a 5-10% range for 2010.
Éditions Yvons Blais price increase for books should be in the 3-5% range. The increase for online products is in the range of 3-7%.
Emond Montgomery Publications price increases will be selective and will not exceed 2-5%.
Irwin Law has no major increase planned. They continue to produce quality books at a fair value so that their authors get a decent royalty and the company gets a fair return. Books are shipped by Canada Post and therefore this cost will be affected by increases by Canada Post.
LexisNexis products will increase on average in the range of 4-5% next year.
SOQUIJ has confirmed they do not expect any increase for 2010.
Wilson Lafleur does not plan any price increases in 2010

Pricing realities

The information provided by the legal publishers raises a number of questions. First and foremost is whether the publishers in fact did increase their prices in the manner projected in 2009. Economic and market conditions have changed since those projections were made and prices in particular have been affected. The question generally assumed that there would be price increases, but was that the case? Throughout 2009 and continuing into 2010, the market for legal information has been characterized by intense competition as the major online publishers challenge each other for market share. It is arguable that price competition for online information is now a permanent feature of the market. In such circumstances, prices likely declined or remained unchanged.

Historically, increases in usage drove the annual price increases of online services. Usage figures are still something that publishers bring to the attention of customers when renewing a subscription but it no longer has the punch it once did. In today’s market, increased usage is more likely to be an argument for simply maintaining a subscription that might otherwise be cancelled.

What constitutes a price increase? In the online environment, that is a valid question. If a publisher provides significantly more content and improved functionality for the same price, or at a slightly higher price, the reality is that the price of the component parts is effectively reduced. In the current market, price increases for online products are usually accompanied by a significant increase in the content made available to the customer. Is a price change of this character really an increase in the price?

Prices vary by publisher expectations and by product type

The publishers objective with respect to pricing varies by product. Is the publisher seeking to grow revenue by selling more copies? If so, the price will have to be attractive to the customer. Think of the three main English language annotated criminal codes that offer more and more content at the same price year after year. Statute consolidations are also constant in price.

Alternatively, the publisher may view a product as a mature product that has a limited life expectancy. Pricing theory suggests that such products be harvested for all they are worth in the short term because there will be no long term. Many print law reports fall into this category. Simply calculate the amount that is charged per case in every bound volume and compare the cost of accessing that same case in any other format. The difference is staggering.

The publisher may be seeking to “inspire” the customer to migrate from one format to another. In such a case, the price may vary dramatically according to the format. The major legal encyclopedias cost more in print than they do online. CD ROMs on the other hand are generally included as give aways with the print.

New publications and new editions of existing publications

The question that needs to be asked regarding new print treatises, or new editions of established treatises, is not whether there is a price increase of some kind, but rather how the publisher establishes its base price for treatises and monographs. In general, the price is based upon a combination of a price per page with an estimate of the number of copies certain to be sold. The per page price of a new editions of established treatises by major authors are generally at the higher end of the scale. It is a legitimate question to ask what is the per page price being charged for a publication. With a baseline established, it is then possible to determine if there has in fact been a significant increase in the price of secondary content year over year.

When I was active in legal publishing, I always wondered why law societies and bar associations were exempted from the survey on prices. In general, they have the highest per page prices with the lowest level of editorial value added. These publications are used as a source of revenue for the organizations that publish them and represent a significant part of the budget of many law firm libraries. Consideration should be given to including them in this year’s survey. CANLII/LexUM might also be a candidate if in fact there is any plan to add a complementary fee for service component to their product line, as is rumoured in publishing circles.

New ideas on pricing?

Do publishers or librarians have any new ideas on pricing? Given the current economic conditions and the pressures faced by both law libraries and legal publishers, it might be desirable to consider new approaches to pricing. Some ideas that I previously have suggested include the following:

On the publishers side, why not introduce once a year annual updating of the entire contents of a loose leaf service for a fixed price? Why not offer to update all of an institutional library’s looseleaf holdings on an annual or biannual basis for a fixed price? Why not do the same on an annual basis for new hard bound titles?

On the libraries side, why not assess your information needs and approach publishers for new deals for updating entire collections of loose leaf services in print?

At the end of the day…

In my experience, the answer to any questions about price increases is always a political one. Publishing executives meet, consider the matter with care and make a careful decision to say what any price increase will be, or whether there will be any price increase at all. An announcement is then made of a figure that the publisher believes will be acceptable to the research community. More often than not, the figure is forgotten until the following year at CALL when the question is asked again.

Actual prices are set for most products on an ongoing basis throughout the year and reflect the revenue needs of the executives and the businesses more than anything else. Overall, I believe that average price increases including both print and online in 2009 fell short of the publishers projections and will do so again in 2010. When everything is taken into account, prices were likely flat year over year and revenue growth for legal information publishers was marginal at best. However, that is not information that most legal publishers would be prepared to share.

In any event, the reality is that pricing is ultimately determined by what the publisher believes to be what the market will bear. These days, that is not very much.