---------- Forwarded message ---------- Date: Thu, 28 May 1998 14:20:24 -0500 From: Tommy Mitchell <tjmitchell@EBSCO.COM> Subject: EBSCO's 1999 Price Projections FOR IMMEDIATE RELEASE FROM: Thomas J. Mitchell Corporate Communications (205) 991-1368 e-mail: tjmitchell@ebsco.com EBSCO Releases Updated 1999 Serials Price Projections and Cost History BIRMINGHAM, Ala., U.S.A. --Projecting price increases is always challenging as there are many factors affecting journal prices, including inflation, currency exchange rates, cancellations of current subscriptions, increased volumes and pages and, of course, publisher prerogative. For 1999, journal prices could also be influenced significantly by electronic journals as they present a new pricing paradigm for publishers. With electronic journals, there are new costs associated with new means of production and new methods of access to journal content. Various pricing models for electronic journals are currently being tested by some publishers, while other publishers have not yet addressed the issue. The overall impact of electronic journals on serials pricing remains uncertain. 1999 Base Price Projections Based on historical price increase data and information recently received from publishers, EBSCO is projecting a base price increase1 for 1999 subscriptions of 9 to 11 percent for journals published in the U.S., U.K. and Continental Europe. The base price increase is the price of the subscription without regard to the effect of currency conversion when the subscription is bought by a subscriber in another country. Projections by Customer Billing Currency The impact of currency fluctuations must be considered when projecting final price increases in customers' local currencies. Generally, final projected price increases for non-U.S. customers are based on the estimated base price increase plus the relative value of the customer billing currency at the time of projection compared to the applicable publisher currency at the time of invoicing in the previous year. There is an exception to the general principle as many major scientific, technical and medical (STM) publishers outside the U.S. set U.S. dollar prices for U.S. customers. Generally, ultimate price increases for non-U.S. journals priced by publishers in U.S. dollars depends on the value of the dollar in relation to the publisher's currency at the time U.S. prices are set. This is only a general rule, however, as not all publishers simply set a U.S. dollar price by converting prices in their native currency to U.S. dollars at a set point in time. Therefore, individual publishers' policies of managing foreign currency also impact final price increases. The projections below assume customers were invoiced in late fall 1997 for 1998 subscriptions and will be invoiced in the same time frame in 1998 for 1999 subscriptions. If a customer is invoiced at a time other than late fall, projections for that customer may be different than those in the table below due to the possible impact of currency fluctuations. Projected Price Increases by Customer Billing Currency Customer Billing Currency U.S. Journals U.K. Journals European Journals Australian dollar 22 - 23% 23 - 25% 23 - 25% British pound 10 - 12% 9 - 10% 9 - 11% Canadian dollar 14 - 16% 14 - 16% 14 - 16% European Union* 9 - 11% 9 - 11% 9 - 11% New Zealand dollar 24 - 26% 25 - 27% 25 - 27% South African rand 13 - 15% 13 - 15% 13 - 15% U.S. dollar 9 - 11% 9 - 11% 9 - 11% * Countries participating in the European Monetary Union. General Currency Considerations The European Union successfully solidified its move toward a common European currency (the Euro) at its summit in Brussels on May 1-2. Irrevocable exchange rates between the currencies of the 11 nations participating in the currency union which will go into effect January 1, 1999, were established at this summit. The 11 countries participating in the union include Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain. The future effect of the Euro on price increases for journals ordered between countries participating in the currency union will be the elimination of currency impact on the prices of these publications. The Euro will function as traditional currencies and therefore will fluctuate against other currencies such as the U.S. dollar and British pound. Currently, the trend of the Euro versus the dollar and British pound remains uncertain. However, there is initial speculation that the new European currency may strengthen somewhat in relation to the pound and the dollar over the short term. At this time, it is too early to comment definitively on this. Currently, the U.S. dollar, British pound and major Continental European currencies are trading in ranges which are relatively close to those ranges in which they traded last fall when 1998 journals were ordered. At this point, the best recommendation for customers paying in these currencies is to add 2 to 5 percent to the estimated base price increases for non-domestic journals in order to protect their budgets from a potential weakening of the currency in which they are invoiced. The U.S. dollar's strength could be mitigated if the Federal Reserve Board decides to raise short-term interest rates. At this writing2, the Federal Reserve Board has decided to leave short-term rates unchanged. The Federal Reserve Board next meets July 1 to consider interest rate strategy. The Fed will likely continue to focus on the impact of the tight U.S. labor and Asian markets on inflation. Continued volatility in Asian economies and currencies continues to be a concern. There has been significant devaluation of many Asian currencies. Much of this devaluation impacted the 1998 subscription year as currencies devalued at the time of invoicing last fall. For example, the Korean won lost approximately 50 percent of its value versus the U.S. dollar, British pound and European currencies between the ordering season for 1997 subscriptions and 1998 subscriptions. During the same period, the Taiwan dollar lost roughly 12 percent of its value. The situation in Asia remains fluid as concern continues not only over monetary policy of the countries already impacted by currency devaluation, but also with regard to the economies and currencies of Japan, China and Hong Kong. Problems in these countries could have a ripple effect on other countries in the area. The Canadian dollar has weakened approximately 3 to 5 percent versus the U.S. dollar, British pound and major Continental European currencies. As a result, we are recommending Canadian libraries prepare for price increases in the 14 to 16 percent range on non-domestic materials. Over the last seven to eight months, Australia and New Zealand have both seen their currencies weaken in relation to the U.S. dollar, British pound and major Continental European currencies. This weakening has been in the range of approximately 12 to 16 percent. If this trend holds, then customers in these two countries can expect price increases well in excess of 20 percent on non-domestic material. Conservative Budgeting As always, EBSCO recommends all customers add 2 to 5 percent to the estimated price increases for non-domestic journals to protect their budgets from a weakening of the currency in which they are invoiced between now and when subscription rates are paid. EBSCO continually communicates with major publishers regarding projected price increases and monitors world currency exchange rates. Should we see major developments in these areas, we will update our projections. 1998 Subscription Historical Price Analysis An analysis of 1998 subscription prices for customers purchasing with U.S. dollars shows an average increase over 1997 subscriptions of 9.9 percent for U.S. journals, 12 percent for U.K. journals and 3.3 percent for journals published in Continental Europe. These figures include the impact of currency and are based on a weighted average of the actual ordering patterns of a significant sample of large U.S. academic and U.S. academic medical libraries. 1 Mid-May exchange rates were used for these projections. 2 Mid-May publication. Released: May 28, 1998 ___________ Thomas J. Mitchell Public Relations and Communications Manager EBSCO Information Services (205)991-1368 Fax: (205)995-1636
