Scott Wicks makes a number of cogent comments on the issue of vendor
pricing and discounts.  I am in substantial agreement with each of his
points.

As Scott points out, serials vendor pricing is comprised of a number of
complex variables (publisher discounts, price of title, the mix of the
list, prepayment). These are not easy to sort out, especially if one
tries to compare one vendor's "price" with another.  As a result there
has always been a fair amount of mystery and confusion about serials
vendor pricing.  More openness about serials vendor pricing will clearly
benefit libraries as a whole.

Here are a few additional observations about serials vendor pricing
which may be of interest.

Some high-discount STM publishers provide agents discounts with the
stipulation that no vendor service charge may be applied to those
titles.  Typically those titles generate more than enough discount to
cover the vendor's expenses in servicing those titles.

Some publishers provide no discounts at all. While an Elsevier title
with a list price of $1,000, after a vendor discount of $50, generates
$950 in revenue for Elsevier, an American Chemical Society title with a
$1,000 list price has no vendor discount and thus generates $1,000 for
ACS.  Prices are not always what they seem and librarians have a right
to be aware of such differences among publishers.

Low-cost titles, even with relatively high service charges, often fail
to generate enough revenue to cover the vendor's costs.  A $50 title
with a 5% discount and a 3% service charge adds up to $4. for the
vendor.  Thus the high-priced, high-discount titles tend to subsidize
the lower-priced titles.

Higher priced titles generally have fewer problems than low-priced
titles and often are easier to service.  Since such higher priced titles
also tend to generate more revenue for the vendor, both in discount
dollars and service charge dollars, they tend to be much more profitable
for serials vendors than low-cost titles.

Since traditional vendors typically have a discount and a service charge
based on a percentage of the publisher's list price, these vendors
benefit financially by high inflation in serials prices.  As the price
of the journal increases, their discount, service charge and profits
tend to increase comparably.

Another variable in the pricing equation is prepayment. Often agencies
reduce service charges if libraries prepay.  In many cases, the
reduction in service charges is less than the interest earned on the
prepayment funds.  This "float" can be another source of profit for
agencies.

For these reasons we at RoweCom, as a new kind of serials subscription
vendor, have chosen to pass on to our library clients all of the
publisher discounts and to charge a flat transaction fee per title,
regardless of the price of the serial.  Additionally, our prepayment
program allows the libraries to earn all the interest that their funds
accrue.   This approach significantly  reduces the cross-title, and
cross-publisher, subsidies and gives the librarian a straight-forward
pricing system that is reasonable and easy to understand.

Richard R. Rowe, Ph.D.
President and CEO
RoweCom
http://www.rowe.com