As the publishing arm of The Pennsylvania State University and a division of the Penn State University Libraries and Scholarly Communications, Penn State University Press is dedicated to serving the University community, the citizens of Pennsylvania, and scholars worldwide by publishing books and journals of the highest quality. The Press promotes the advance of scholarship by disseminating knowledge—new information, interpretations, methods of analysis—with an emphasis on core fields of the humanities and social sciences.
The Press is a vital member of the University community and strives to reflect many of the University’s academic strengths in the liberal arts. It also collaborates with alumni, friends, faculty, and staff in producing books about aspects of University life and history. Its thriving internship program provides valuable experience for Penn State students interested in careers in publishing. And as part of a land-grant and state-supported institution, the Press recognizes its special responsibility to develop books about Pennsylvania, both scholarly and popular, that enhance interest in the region and spread awareness of the state's history, culture, and environment.
Scholarly publishing has faced monumental challenges over the past few decades. Through its Office of Digital Scholarly Publishing, jointly managed with the Libraries, the Press takes its place among those institutions moving the enterprise forward. Its innovative projects will help identify technological advances and business models to make scholarly publishing feasible, and widely accessible, well into the future.
University presses, along with other publishing companies, managed to survive the considerable turmoil in the marketplace that characterized the first several years of the new millennium, but the troubles of those times left a clear message that businesses like ours need to be prepared to change or they will die. There are two major challenges on the immediate horizon.
From Print Books to E-Books
The first is a challenge for books to make the transition to digital form in the marketplace in the same reasonably successful way that journals did beginning in the mid-1990s when, for example, Project Muse got started with the help of a Mellon grant. Some large commercial publishers tried getting into the e-book game early, but they all failed to make a go of it and most had shut down their e-book publishing operations by 2000. Only more recently has the potential for a viable e-book market begun to emerge again, spurred in part by initial enthusiasm for the new generation of e-book readers. Amazon’s Kindle now has 110,000 titles and the Sony Reader 40,000. Jeff Bezos says he wants any book ever published to be available on the Kindle. Ingram Digital and LibreDigital, meanwhile, are providing new ways for publishers to get involved with digital distribution.
But it is a complicated story that is unfolding. As Peter Kent, CEO of DNL eBooks, recently noted, “today more people are reading on screen than on paper” and “2007 e-book sales were greater than 2004 MP3 sales.” He predicts, however, that e-book devices like the iLiad, Sony Reader, and Amazon Kindle will disappear in a few years because of the one-device problem and because multi-function devices like PC laptops keep dropping in price (and because ultra-mobile PCs are dropping in price, too). He thinks that more than 99% of e-books are being read on PCs. According to him, the solution is DRM that works. PDF is an “open system” format easy to create but also designed to be shared; efforts are being made to protect it with a “wrapping,” but solutions are needed to scramble the book inside, too. The current system for e-book ordering is also beset with multiple problems, including e-mails with activation codes going into junk mail, activation failure, downloading failure, and browser incompatibility. “Currently we have consumer unfriendly e-book formats, DRM problems, a clunky sales process, a 500-year-old model for digital goods.” The book industry, he suggests, must learn from the software industry’s “try before you buy model” by, for example, “unlocking” the first three chapters, but requiring purchase to read the rest.
We have Microsoft announcing the discontinuation of its Live Search Books program while Google continues to bring ever more content into its Book Search program. Regular bookstores, meanwhile, are trying to integrate the digital experience into their operations, as evidenced by Borders retooling its flagship store in Ann Arbor in February as a “concept” store, emphasizing niche markets like travel, self-help, cooking, wellness, graphic novels, children’s literature, etc. But growth of bricks-and-mortar stores is slow (B&N, 4.3% in 2007, Borders, 4.2%, Books-a-Million, 3.3%) compared with online retail (Amazon, 39%, B&N.com, 13.4%, AbeBooks, 11.8%, Alibris, 30%). Publishers Weekly headlined a story in its June 2 issue “Chains Stumble Out of Gate,” showing that “total revenue for the top three book retailers inched up 0.3%” in the first quarter of 2008. The Book Industry Study Group has just announced its prediction for book sales to grow 3.2% in 2008 (with university press books at 3%), down from 4.7% growth in 2007. Clearly, the trend is for sales of books in traditional print formats to level off and stabilize in the coming years, with dollar volume increasing only because of price increases while unit sales fall. (The only bright spot appears to be the market for POD editions, especially of public-domain titles: while standard book title output increased only 1% in 2007, POD and SRDP output soared by over 500%. The foreign market is relatively healthy, too, spurred by the weak dollar: export sales grew 9.6% in 2007, compared with 2.8% in 2006.) E-content, meanwhile, continues to grow by leaps and bounds, even if revenues from e-books still only account for a very small percentage of book sales overall (not yet over 3%). We might take a cue, though, from Bertelsmann chairman Hartmut Ostrowski, who said (as reported by Publishers Weekly, May 26), “since the traditional book industry is growing slowly, …new channels must be found to distribute content to consumers.” And it speaks volumes that he hired as the new head of Random House a young man named Markus Dohle, CEO of Arvato Printer, which is involved in digital services, logistics, and data management as well as traditional printing.
The second challenge, which will play itself out over time, is the sea change known as “open access” (OA). The immediate target of OA advocates is the marketplace for journals and indeed, within that space, STM journals in particular. As Peter Suber’s monthly OA newsletter sponsored by SPARC so thoroughly documents, this is a movement that has grown by leaps and bounds in the past few years, with the Canadians and Europeans traveling down this road even more quickly than Americans (no doubt because so much of STM research in Canada and Europe is centrally funded by governments rather than private industry). But even in the U.S. it has gained substantial momentum with the legislative approval of the mandatory NIH policy and Harvard’s newly announced initiatives to mount the articles of its faculty from Arts and Sciences as well as the Law School on Harvard’s institutional repository. Publishers are adapting by modifying their policies to allow for various types of Green OA while others are experimenting with Gold OA hybrid business models. It remains to be seen how much this movement will begin to impact journal publishing in the humanities and social sciences and hence such operations as Project Muse, which is vital to the viability of the Press’s whole journals program now. And, in the longer term as the illogic of having a “digital divide” separating book from journal content comes to be recognized more widely and rightly deplored, pressures will build to move books into an OA environment as well. Already, at the AAP/PSP meeting in February, librarians on several panels urged publishers to move more rapidly to making book content available in electronic form as students and faculty are clamoring for it. The danger, they noted, is that if book content is not made accessible online, it will simply be increasingly ignored.
While these two major challenges will both affect how the Press evolves its own strategies over time to adapt, even in the shorter term changes in the external environment of the print side of the business will require the Press to be nimble in its ability to take advantage of new opportunities and head off potentially damaging developments. Two recent examples may be cited here. In April, HarperCollins hired Robert S. Smith from Hyperion to launch a global publishing experiment that would share profits with authors, eliminate or reduce advances, and do away with returns. The success of this experiment can play a significant role in changing traditional business practices, and it bears close watching. About the same time, Amazon tried to bludgeon publishers into using its BookSurge subsidiary as a POD vendor exclusively by imposing this as a condition of having their books listed on Amazon’s site. Fortunately, a class-action lawsuit has been filed to protest this requirement, so it may take a while before Amazon can afford to implement it fully.
The Ithaka Report of July 2007 recommended that university presses become better integrated into the operations of their parent universities as scholarly communication evolves in new directions and as other players, most especially libraries, begin taking on new roles that overlap with those of traditional publishing in a number of ways. Fortunately, as the Ithaka Report itself acknowledged, Penn State had already seen the writing on the wall and effected the administrative merger of the Press into the Libraries by the end of 2005, following the inauguration of the Office of Digital Scholarly Publishing (ODSP) earlier that year. The ODSP thus has become one model for other universities to emulate, and our success, or failure, in this multifaceted enterprise carries implications well beyond our own university. Our aim, broadly speaking, is to identify the costs associated with electronic publishing and assess its long-term benefits to the scholarly communication system. The ODSP is, in some of its projects, testing the viability of a modified OA-cum-POD business model for sustaining its operations over the long haul. It will also directly involve the Penn State community in managing the changes to the benefit of the faculty and their research goals.
But the Press’s experimentation is by no means confined to the ODSP. We will be seeking out new opportunities to make our content available in electronic form to ever wider audiences. Some of these experiments involve supplying e-content as an intermediary, not an end product, as with providing PDFs to journals that will accept them instead of print copies for review and cooperating with Choice to supply library collection development staff with e-versions of books reviewed in the magazine to facilitate plugging the gaps in collections beyond approval plans. We have also strongly urged Project Muse to consider opening its program to books, and that possibility is now formally under review at The Johns Hopkins University Press following its annual meeting in April where the idea was discussed in depth with participating publishers. The Copyright Clearance Center has just begun to offer RightsConnect as an incentive for publishers to sell more content at a granular level, and that in turn can motivate some publishers to adopt the RightsLink program, which offers a much more sophisticated system for pricing for all types of uses of content, with delivery of hard copy enabled by a network of print vendors located strategically around the world. We have hopes down the road of selling content granularly from our own web site as well, as our e-commerce system is developed further to handle such capabilities. And we can institute hybrid OA publishing for our journals from our web site, too, as another potential stream of income to support the journals operation. Meanwhile, our digitization of backlist titles proceeds apace, and within another year or two we may well be able to have all of our backlist available in electronic form.
As the Press moves forward with these exciting initiatives, it fully recognizes the need to operate within the budgetary constraints established by the University. While the Press’s budget relies upon support from the University (about 10%, excluding overhead support from the Libraries or ITS) in addition to the Press’s own income from sales, title subsidies, and licensing rights (about 90%), the Press remains committed to lowering costs and enhancing revenues wherever possible. In staffing, the Press has recently hired a new subrights manager into a full-time position, and we anticipate being able to generate significantly more bottom-line income from her activities, including even the possibility of movie rights for some books recently accepted. It is likely that print publication will continue to be central to the Press’s operations for some time to come, and we have settled over the past few years into a workable life-cycle business model that combines initial offset printing of 400-500 copies for most books, then SRDP (100-200 copies) for paperback editions beginning within a year or so following, and finally POD when sales drop below 50 copies annually. For highly illustrated books, we are compelled to keep the older business model in place, with initial printings of up to 1,000 copies done by overseas printers (mainly in China) but pricing based upon sales of 500 or 600 copies. We have been trying to make arrangements with a British publisher (Manchester University Press) to co-publish or distribute our art book titles so that we can eliminate the need to warehouse our titles in the U.K. and just supply our regular books through Lightning Source’s U.K. division, thus saving the 50-55% discount now given to our distributor based in London, Eurospan. The viability of our model for the majority of monographs, however, depends crucially on the continuing health of the market for paperback editions, and there are already depressing signs of that market eroding in the face of rampant misuse of coursepacks, e-reserve systems, and course-management platforms all under the guise of “fair use” (now being challenged in court in a suit against Georgia State brought by two university presses along with a commercial publisher). This development even increases the pressure on the Press to develop new models for generating income from electronic publications as digital publishing of various kinds takes on a greater role within the Press’s operations.
The following summary of strategies being pursued in different functional areas of the Press, while not exhaustive, suggests the range of efforts under way.
Ten of the Press’s eleven journals are available for subscription in electronic form through Project Muse, and an increasing portion of revenues comes from this source while print subscriptions have been steadily declining. (Print accounted for $174,000, electronic $90,000 in FY02; in FY04 the corresponding figures were $168,000 and $129,000; in FY06 they were $159,000 and $168,000; and in FY08 they are expected to be about $160,000 and $250,000.) Cognizant of how vital participation in Project Muse has become to the existence of the journals program, the Press recently signed a new contract with Johns Hopkins University Press extending the relationship through 2010. With print subscriptions declining, the Press a few years ago began outsourcing subscription fulfillment through JHUP. This was instituted upon the retirement of the journals circulation manager and costs the Press less than half of the former employee’s salary. When the journals manager retired at the end of 2006, we did not replace her and instead merged the Journals Department into the Production Department, with one production assistant assigned to work on the journals full-time and another devoting about half-time to journals, thus reducing our salary costs significantly and increasing the “profit” margin of our journals even more. Journals now bring in revenues of nearly a half million while costing only about $150,000 to operate. Clearly, the Press’s success depends critically on its ability to cross-subsidize our monograph publishing from the surplus generated by journals. Contracts are also in place for including Press journals in other aggregated electronic databases (with a guaranteed annual royalty of $30,000 coming from EBSCO alone) and for the supply of back issues in print form. Contracts with societies whose journals the Press publishes are reviewed as they come up for renewal to make sure the terms are working out financially in the Press’s favor. And arrangements have been made successfully with various other societies to include subscriptions to some of our journals in their membership dues, even though the Press continues to own the journals themselves. One society, the Friedrich Nietzsche Society of Great Britain, even transferred ownership of its Journal of Nietzsche Studies to the Press in 2006. Journal prices are increased annually; for 2009 they were increased about 5% across the board (except for two society-owned journals), and in 2010 we contemplate raising them by another 10% to 20% (because our journals are priced well below even those of other nonprofit publishers included in Project Muse). Significant recent developments with our journals include consolidation of printing and shipping with one vendor, Sheridan Press located in Hanover, PA, the outsourcing of all typesetting to vendors in India (who offer XML markup as part of their standard procedure), and the purchase of a highly sophisticated editorial and production software system from Aries to manage the whole process from initial submission and peer review through transmission to the typesetter. We have just been informed that one of our journals, Journal of Policy History, will be taken to Cambridge University Press in 2009. Fortunately, we have three other journals in literary, medieval, and religious studies under review, with one already approved by our Editorial Committee, and these should start coming out under our imprint in FY09 and FY10.
The editorial program is being re-examined again, in the wake of staff changes in 2006, to determine what the optimal mix of books, in subject matter and type, should be for the FY09-FY13 period. With its profile of specializations already established in the marketplace, the Press must play to its strengths and continue to emphasize areas like art history, medieval studies, and political philosophy. At the same time, the Press must also pursue opportunities to innovate. Several new series are providing a framework for some of this innovation, especially in an interdisciplinary direction, such as “Buildings, Landscapes, and Societies,” “Refiguring Modernism,” and “Essays on Human Rights.” The Press is pursuing every opportunity to obtain title subsidies from authors’ home institutions, foundations, and other sources. Income from subsidies reached an all-time high of $306,336 in FY06, largely owing to a generous grant of $162,000 from the Getty Foundation for supporting publication of thirteen books in the “Refiguring Modernism” series. The Press applied for an NEH Challenge Grant in May 2008, which if successful will provide a 1:3 match for our effort to create a permanent $1.2 million endowment for the Press to be used to sustain publishing in twelve existing book series and one potential new one.
Another form of subsidy derives from the Press’s collaboration with museums and scholarly societies whereby their purchase of a substantial quantity of the print run of a co-published book on publication ensures an immediate return on investment sufficient to cover most or all of the manufacturing costs and reduces the amount of capital the Press keeps tied up in inventory. And distribution arrangements with some institutions, where the Press invests no money up front but receives 50% of income from sales, have been an additional means for gaining both prestige and extra revenue with little effort on our part. A particularly successful example of this kind of arrangement has been with the Index of Christian Art located in Princeton whose titles have been doing very well in the marketplace and add great luster to our list at the same time as they are manufactured with extremely high production values.
The Press aims to maintain its output of new titles around 50-60 annually, with 85-90% of these being scholarly monographs intended primarily for the academic market and 10-15% being works with the potential to reach a wider audience. Among the latter will be titles of special regional interest in our Keystone Book series and the occasional book about aspects of the University’s history and environment, such as This Is Penn State published in 2006. Though constituting only a small percentage of our list, the Keystone series is valuable both for its outreach to the citizens of the state and for its contribution to the Press’s financial well-being. In October 2007 the name “A Keystone Book” was formally recognized as a registered trademark by the federal government.
The constant challenge for the Production Department is to achieve the optimal balance between cost and quality. With about 30% of the list consisting of heavily illustrated titles, for which digital printing technology cannot yet provide satisfactory quality, the Press pursues a variety of strategies for keeping costs down: designing books to achieve savings in production (e.g., by using three-piece bindings and doing “4 over 1” color printing); using overseas vendors for typesetting, printing, and binding when significant savings can be achieved and production schedules allow; having book jackets and paperback covers done by component printers (at a 10% saving); etc. For books with few or no illustrations, the Press is now resorting more often to digital printing, which offers the advantage of being able to do shorter runs, especially on paperback editions, so that even though the unit cost is higher, not as much capital needs to be tied up in inventory and unsold books don’t have to be pulped later. Recent initiatives include beginning to incorporate XML markup into the book production workflow, consolidating the offset printing of monographs with one vendor (Thomson-Shore in Michigan), doing the same with a SRDP vendor (probably Book Mobile in Alabama or Odyssey Press in New Hampshire), and creating a track system whereby books are preassigned to certain categories that will be associated with certain levels of copyediting, design, etc. Another priority of Production is to maximize our use of eco-friendly materials to the extent that our budgetary constraints allow.
A major project just recently completed was upgrading and enhancing the Press’s web site to serve as a more effective tool for promoting and selling books. The e-commerce functioning of our web site raised various security concerns, with regard to handling of credit-card numbers, but a cooperative solution was found to use AIS’s secure site for that part of the process in a relatively seamless manner as far as the customer is concerned. The whole look and functionality of the web site are now much improved, and we are in the process of assigning BISAC codes to all backlist and current titles so as to provide a smoother flow of metadata to the book industry, which uses the ONIX system that depends on BISAC coding. The “Just a Taste” program offers sample chapters of a growing number of titles for browsing; more excerpts from reviews and tables of contents are being added, too. Google’s AdWords program has been used to drive more traffic to the Press’s site and increase online ordering of targeted titles. The emphasis going forward in marketing will be to use more online methods like AdWords and to decrease reliance on traditional print forms, like space advertising and catalogues. The Press has entered its entire active title list into Google’s Print program, which by providing keyword-searchable text has opened up a major new avenue for potential customers to learn about the Press’s books and facilitate an easy online ordering process. A contract has been signed with MyiLibrary (a division of Ingram Digital Group) to provide our book content electronically through this source as well. In conjunction with the consolidation of the Press’s warehouses, the Marketing Department oversaw the digitization of a substantial number of backlist titles and their entry into (Ingram) Lightning Source’s POD system as new paperbacks, which made them newly visible and saleable through Amazon.com while relieving the Press of keeping inventory (since POD titles are sold on a nonreturnable basis); this base of now over 400 titles will grow steadily over the coming years, with more added from the Press’s backlist and others coming into it in connection with the Press/Libraries projects.
Order Fulfillment & Warehouse
The Press has acquired a software module for the Cat’s Pajamas fulfillment system to allow for acceptance and efficient EDI processing of orders for titles available through Lightning Source. The next major upgrade for Cat’s will be the addition of functionality to handle Advance Shipment Notification, which is being demanded by the larger vendors we deal with. A thorough investigation of the potential advantages of outsourcing the order-fulfillment and warehouse operations in 2007 resulted in a decision to postpone such a decision for a number of years, partly because the additional expense proved too daunting for the Press to absorb at this point in time and the projected benefits were deemed too speculative to be confident about increased revenues sufficient to offset the known extra costs. For some large one-time handling of shipments, we may use the services of Maple-Vail located in York, PA, and perhaps store some excess stock of art books, too, until a long-term solution for distribution or co-publication of those titles can be arranged with a British publisher.
The project to overhaul the Press’s web site, host it in house, and have it serve as an engine of e-commerce was completed in the first half of 2008, as already noted. The remaining large project under way is to rationalize the structure and functioning of the Press’s relational database, upgrading it to the latest 9.0 version (the software for which has already been purchased), and to implement a process for dynamically linking the database to the web site. This may involve buying an off-the-shelf FileMaker product (from either Rutgers or Stanford) and customizing it for our needs or developing one in house, with the help of external consultants and/or temporary additional IT staff. One possible advantage of the latter is that it might be used to generate some extra income down the line if it could be licensed or sold to other small presses, the way Rutgers and Stanford are doing now. Stanford is charging $25,000 for its version of FileMaker. The IT assessment report has identified a number of ways in which the Press can better employ the IT manager’s time to maximum advantage to accomplish this major goal. Next year, in line with a University mandate, all Press computers will need to be screened for sensitive information like Social Security and credit card numbers, and this may require some amount of the IT manager’s time.
There is enough information available now about forthcoming titles to project a budget for FY09 and even FY10 with some confidence in its reliability, but beyond those fiscal years any projections need to be taken with a grain of salt. As noted above, no one now can reliably predict how quickly the e-content market for books will develop and if it will offset declining print book sales anytime soon. There may well be a period of several years in which the latter will erode more in sheer dollar amount than the former can grow to replace it one-to-one. This is reflected in the conservative estimates included in this five-year plan, with the middle three years showing a deficit because regular book sales are not expected to increase much at all, and more through price increases than through unit sale growth, while income from e-content is climbing but not at any rate sufficient to offset the decline in the traditional market.
There are some special large figures that need to be pointed out in this plan. On the cost side, $20,000 is included in Book Order Fulfillment (Computers) in FY10 for the one-time purchase of the software to implement Advance Shipment Notification; we cannot likely wait longer than that given the pressure we are already getting from the vendors to start using it. On the revenue side, one reason FY13 shows a surplus is that we are assuming the NEH Challenge Grant will be approved and that by that time the $1.2 million endowment will be in place to start generating $60,000 a year in extra subsidy support for our books. One major expenditure is the cost of buying a FileMaker system and/or hiring an external consultant, which is likely to be in excess of $40,000 when both purchase and further development are taken into account. As noted, we do expect the new subrights manager to generate an increasingly rising amount from the licensing of various types of subsidiary rights, including translation and even potentially some movie rights, and the income from Project Muse should continue to rise steadily, as it has over the past eight years. We anticipate no other major expenses out of the ordinary. For the purpose of this five-year plan, we are assuming that the Press will keep its own order-fulfillment and warehouse operation going, though we will undoubtedly begin to revisit the question before the end of this period. As POD takes over an increasing portion of our business, and if its quality can finally satisfy the high standards for art book production, we may even reach the point by the end of this period where no physical storage space is needed at all and we will rely totally on POD to meet all customer demands.
A reserve fund of $400,000 has been established to cushion financial fluctuations in this five-year period; and a subsidy fund of $100,000 is being established for selected investments, such as the FileMaker software.