JSTOR: where does your money go?

July 22nd, 2011 by

Writing some comments elsewhere about the recent events involving JSTOR, I commented something along the lines of – well, they’re a nonprofit organization unlike most journal publishers. Then, it occured to me, they say that but they’re remarkably reticient. What sort of nonprofit? Where does their money go? After all, the fees paid by member organizations can’t all go on servers; either there’s an endowment being built up to support the work (which would actually be a pretty smart move), or the publishers aren’t doing badly out of it.

So, let us dig a little. Who are JSTOR? How does their money flow work? Their site tells us:

JSTOR is part of ITHAKA, a not-for-profit organization helping the academic community use digital technologies to preserve the scholarly record and to advance research and teaching in sustainable ways.
©2000-2011 ITHAKA. All Rights Reserved. JSTOR®, the JSTOR logo, and ITHAKA® are registered trademarks of ITHAKA.

Okay, so, we have a name. Their About pages don’t give much more information; no details on who exactly this “non-profit organization” is. No annual report, of course, god forbid. They do give a contact address, in New York – on Fifth Avenue, in fact, very fancy – and so the obvious guess is that they’re a New York corporation.

And, lo and behold, they are. “Ithaka Harbors, Inc.”. They changed their name when the two amalgamated in 2009. The older iteration of Ithaka can be found as a Delaware corporation operating in New York. Confusingly, JSTOR remained in existence, absorbed Ithaka, and changed its name.

A little more digging turns up the current Form 990 for the merged organization (and some older ones for JSTOR alone) here. It does indeed seem to have 501(c)(3) tax-exempt status, though they’re not very helpful about letting us find the paperwork.

Well, we have it now. JSTOR/Ithaka turned over sixty million dollars in 2009, and employed 211 people. The 2007 & 08 reports both give around $45m in turnover; let’s look at 2008, to strip out the effect of the amalgamation so that we’re only looking at the “JSTOR division”.

To briefly explain the charging, first, when an organisation joins JSTOR it pays an upfront capital sum (the ACF) and then an annual subscription (AAF); the general idea is that the ACF pays for the cost of building the archive and the AAF pays for the actual day-to-day service. Poking around the various fees pages suggests the ACF varies wildly by institution and by which content you’re taking, but an average of double the annual fee seems plausible.

The income breakdown, from a total of $43.5m – $8.6m in Archive Capital Fees, $30.3m in Annual Access Fees, $1.8m in Service Revenue. “Service revenue” is unclear. Buried down in section 11, meanwhile, is the intriguing “miscellaneous revenue”; $133k in publishers fees, $35k in remote session fees, $145k in pay-per-view. Other revenue was then covered by a loss of a third of a million, which is later explained as a currency loss – presumably the vagaries of foreign exchange in a volatile year.

The next section lists expenses of “FEES AND PUBLISHERS PAYMENTS”, $8,358,557, of which $8,242,126 is attributable to program costs rather than management overhead. Journal scanning amounts for about three million – though this is low, it was eleven million in 27 and five in 2009 – with another five million on administrative costs & travel, three million on IT, eleven and a half million on salaries and staff costs. A million went to “old” Ithaka in grants, a million was written off as depreciation, a million on “occupancy” (rent?), and then some small bits of change like conference costs. Overall, an eight-million dollar surplus, but the next year was a deficit; the fluctuations of scanning charges probably come into play here.

The payroll covers 113 staff, of whom 12 seem to be listed as officers, directors, etc. The senior staff average a salary of ~$155k, with the ED paid $300k, while the other staff average about $67k.

So, some interesting points.

  • The figure of $145k for individual articles is definitely interesting – only 0.35% of JSTOR’s revenue came from pay-per-view cases? This is vastly lower than I expected; quite possibly the prices are so high (and JSTOR access so common, academically) that very few people are willing to pay and unable to circumvent it via a friend. The estimate quoted is $19/article as an average – so perhaps only seven and a half thousand articles over the year?

  • Scanning averages about six million dollars a year in 2007-9. The Archive Capital Fee averages about eight and a half. There’s a bit of a mismatch here, but it could be they compare more closely over a longer timeframe, or that this is building a surplus for future work. They’re reasonably close, at least.
  • Comparing the ACF to the AAF, estimating one to be twice the other for any given institution, we can get a proxy for what proportion of income is new – it looks like ~15% in 2008/9. There’s a corresponding growth in overall income (it’s masked by a sharp drop in investment income, which is only $2.5m in 2008, a third of what it was in 2007) which would seem to bear out this figure.

So, overall…

The once-off capital fees charged by JSTOR look reasonable for the ongoing costs of actually digitising the documents. After that, about 30% of the annual fee is payments to the publishers, with the other 70% going on overhead. Of that overhead, 10% is directly running the servers, almost 40% staffing, and the remaining 20% various administrative costs; I am no expert in the field, but the salaries paid do seem quite high (and Manhattan offices aren’t cheap, either).

So if your library pays a $10,000 ongoing subscription, that’s effectively $3,000 direct to the publishers, $1,000 on servers, and $6,000 on people to feed and water those servers (or manage those people, etc.). It would be very interesting to know how those publisher payments break down – but, equally, it would be interesting to know how much of that 60% is actually essential for running the service.

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10 Responses to “JSTOR: where does your money go?”

  1. Ben Schmidt Says:

    I ended up here trying to confirm those low pay-per-view numbers; even more interesting is that the amount drops down to $80,000 in 2009, so it’s more recently just 0.15% of revenue. Basically, seems like they don’t have any interest in selling articles directly, and just do it strategically.

  2. Andrew Says:

    Income in 2007 was $125k or so, so it plateaued and then fell. I wonder what changed in 2009, and what the 2010 figures would look like…

    If you go back to 2006, the pay-per-view fees are literally only a couple of hundred dollars; this really threw me, until I discovered they only introduced it at the turn of 2007!

    The only explicit comment on use numbers I’ve noticed so far was in a followup post to the above, which estimated 6,500 for the first half of 2007; if that rate held up through the rest of the year, it’d be equivalent to an average of ten dollars an article.


    ETA: by October 2007 “almost 17k” was being quoted. Extending that out to the end of the year gives us maybe 20k – assuming the revenue figures are accurate, that suggests the average fee paid was as low as $6.50 per article. That’s much lower than expected, which suggests either that people only pay for the cheap stuff, or that the financial reports aren’t quite telling us what we think they are.

    (These sections are a bit cryptic. I never did quite figure out what the “publishers fee” income was, either… but as it’s still a six-fiugre sum in 2006, it can’t be directly correlated here.)

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  6. Eli Rabett Says:

    IEHO what JSTOR needs to do is to drop ppv fees to $1/article and become Itune like

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  9. Paywalled academic Says:

    I suspect that the pay-per-view fees were never intended to comply with a traditional supply/demand/operating cost model. Rather, they’re intended to convince universities to buy ridiculously expensive full subscriptions instead of relying on pay-per-view.

    Any institution considering a contract with JSTOR will do calculations to consider/negotiate what JSTOR intends to charge them. As I understand it, if you’re an institution that’s considering buying access, you contact JSTOR and they give you a custom quote based on things like the number of employees at your institution (so it’s not a transparent cost that you can expect or compare with other institutions). You might try to negotiate a lower cost, but they’ll use a calculation like [number of employees]*[number of articles accessed per employee]*[pay-per-view cost] to argue that their inflated subscription fees are actually a fantastic deal. The pay-per-view cost is the part of the equation that JSTOR have complete control over, so they inflate it at will to justify their subscription costs.

    The strategy behind inflated pay-per-view pricing for academic articles might not seem all that different than the cover price versus subscription cost for traditional mass-market newspapers and magazines, but there are several crucial differences. First, JSTOR has no incentive to sell ppv access, because unlike magazines and newspapers, they don’t have to recoup the costs associated with printing and shipping a physical product. Second, because they have no incentive to sell ppv access, JSTOR can and do set absurd prices that are completely out of touch with the true cost of their services. Third, the content that JSTOR distributes is almost exclusively funded by tax dollars and academics’ donated freetime, but JSTOR charges as if they were paying for the entire operation from lab to print.

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