Gavia Libraria

Does consortial scale matter in content licensing negotiations?

While pondering #elsexit questions last week, the Loon happened upon the Twitter conversation around New York’s local ACRL symposium. (For non-librarians: the Association of College and Research Libraries is the academic-library arm of the United States professional society known as the American Library Association.)

Among the fascinating tidbits that turned up was an advance announcement of a piece of research by Nat Gustafson-Sundell into consortial serials license negotiation results: they often aren’t any better than deals negotiated by individual libraries. (The Loon is looking for online evidence of this research, but has come up empty so far. If anyone else has a link, please do share.)

Wait. That isn’t how it’s supposed to work, is it? Consortia—that is, purchasing arrangements shared across institutions—are supposed to match vendor negotiation muscle ergo garner better licensing deals. (The Loon has often shaken her head to see faculty trot out shared purchasing as a novel solution to serials purchases, as though it had not already been happening for decades. Do faculty truly believe librarians to be acerebrates?)

Hm. Is this so? Is this not so? Why, either way? The Loon has not seen Gustafson-Sundell’s research, therefore cannot speak to its quality or generalizability, but his stated result seems fairly plausible to her. Let us walk through that plausibility.

Factors that influence outcomes of licensing negotiations include:

  • Cost to both parties of failing to make a deal (this is where BATNA comes in, obviously)
  • Quality of negotiators
  • Knowledge of market conditions (prevailing pricing and so on)
  • Each party’s time horizon (thanks to Ian Gibson for pointing this out on Twitter)
  • Each party’s freedom to suggest/accept/reject potential agreement terms (this overlaps with but does not wholly subsume the cost of negotiation failure)
  • Each party’s absolute ability to meet certain terms
  • Each party’s knowledge of the other’s situation

Do feel free to suggest other relevant factors in the comments. For now, let us take this list one at a time, and for the sake of argument compare the situations vis-à-vis Big-Pig Vendor (BPV) of All-State Consortium (ASC), Flagship State University (FSU), and Small Liberal-Arts College (SLAC).

The Loon addressed relative cost to both parties in her prior post. For any of our three higher-education parties, losing access to BPV’s journal stable is devastating. In relative terms, however, SLAC is likely in the best position:

  • SLAC’s faculty are already accustomed to spotty, inadequate journal access, ergo much more likely to sigh “same guano, different day” and let it go.
  • A lot of SLAC’s faculty have closer relationships with their librarians than is feasible at FSU (due to smaller librarian-to-faculty ratios) or ASC (due to organizational distance). This allows SLAC librarians to explain how sausage is made (ideally in advance), and reduces backlash since SLAC faculty actually see their librarians as valuable people, even as peers. (This is not unheard-of at FSUs, but the Loon can tell you from experience, deavian-/dehumanization is vastly more common.)
  • SLAC has fewer stakeholders to consider during negotiations, meaning some hope of being able to communicate with them all, and some hope of being able to be daring. ASC has many, many more stakeholders (see this comment by RLUK’s David Prosser to Gowers’s #elsexit post for an example), many of whom want a license at all costs, limiting ASC’s negotiating universe and complicating its logistics.

FSU faculty will typically do one to three less-than-productive public things faced with loss of access to BPV’s journal stable:

  • blame their librarians (up to and including sackings, on the principle of shooting all the horses that don’t leap the too-high fence),
  • blame their administrators (including asking for sackings), or
  • beg for more money.

See a current example of the latter two tactics at the University of Ottawa. When the dust dies down on any of these actions, however, FSU faculty do nothing else. Any additional money from campus couch cushions gets sucked down BPV’s maw without fundamentally improving FSU’s negotiating position one iota. In fact, these tactics damage FSU’s position: they signal clearly to BPV that FSU will do anything, including turn viciously on its own, to keep BPV’s journal stable.

As for ASC, a failed negotiation may threaten its very existence. The belief that consortial negotiating power should defeat BPV is quite strong; the fundamental attribution error does the rest. ASC therefore is in the worst position of all to let a negotiation with BPV fail. Isn’t that interesting, with respect to Gustafson-Sundell’s findings.

Intuitively, it makes sense that the cost to BPV of a failed negotiation is smallest for SLAC, larger for FSU, and largest of all for ASC. In absolute currency, this will usually be true. (Some FSUs will involve larger amounts than some ASCs.) However, BPV can replace or even forego individual customers and their currency, while neither SLAC, FSU, nor ASC can typically replace BPV’s journal stable. BPVs are making thirty to forty percent profits! BPVs have padding to let practically any deal go, including national deals like Jisc’s, not least because they fully expect the other party to come crawling back! This is an enormous structural advantage in negotiations! Worse, the size of a consortial deal does not dent it much. There is always another consortium.

(In the United States, larger-than-consortial action is contraindicated by anti-trust law; the Loon is hazy on the precise details, but she has heard this from several lawyerbrarians she trusts. A larger US boycott might budge a BPV, but just isn’t legally practical. The Loon cannot speak to the legal situation in the UK and elsewhere.)

As for negotiator quality, again, it makes intuitive sense that ASC can hire better license negotiators, not least because they will be dedicated negotiators, than SLAC or even FSU—though both sometimes glom onto some amazing negotiators. Two things about that: first, BPV can easily afford to hire anyone, whereas ASC can’t; and second, even a demigoddess of a negotiator cannot be expected to talk her way out of a critically bad negotiating position. So much for ASC’s advantage.

BPVs, as is well known, do their level best to damage the other party’s negotiators’ knowledge of market position. Non-disclosure agreements are an obvious knowledge-blocker, but in the Loon’s view, bewildering pricing schemes are as bad if not worse. “Historical spend” is tantamount to Microsoft saying “in 1989 you paid for X number of electric typewriters, so clearly now you should pay Y for Z seats of Windows.” Nothing about this makes rational sense in 2016; it is a faux-logical rationalization for BPVs charging whatever they want. Beyond historical spend lies a morass of formulae—different for every BPV, and kept secret—based on faculty headcount, student headcount, relevant-department headcount, total materials budget (which for FSU is typically easily-available public knowledge), journal count, add-on or bundled services, phase of the moon, and negotiators’ post-precession astrological sign. Even if we had the license terms, comparing them meaningfully (as Ted Bergstrom knows) would be Sisyphean if not Augean. There is no “the price.”

Consortial purchasing affects this imbalance in favor of BPVs not in the slightest. Indeed, it may make matters worse by increasing formula complexity, offering BPVs yet more opportunity to conceal or faux-logically rationalize senseless charges.

Time horizon, as Ian Gibson pointed out, always favors BPV in renewal negotiations. (Initial negotiations less so, of course, but these are rare, especially with BPVs.) Existing content licenses have end dates. If SLAC, FSU, or ASC sits tight, they risk BPV flipping the shutoff switch. The resulting campus uproar is fearsome—just ask Canadian universities. BPV can just munch popcorn and watch the fun as long as it likes; it loses no negotiating position and minimal money (at most, a few months’ worth of a license deal). Consortial purchasing, again, affects this imbalance only slightly if at all—a consortium may be organizationally insulated from campus-based uproars, but it is also more vulnerable to total dissolution than SLAC’s or FSU’s library.

Freedom to set terms does not favor ASC over SLAC or FSU because ASC has many more masters on its own side to appease. Prosser’s comment demonstrates this beautifully. From some experience with consortia (though not specifically in serials negotiation), the Loon can also say that ASC will be hampered by the dead weight of several of its librarian and administrator masters being ignorant chuckleheaded lemmings. A SLAC lacking such lemmings and benefiting from close relationships with faculty can be quite bold, much bolder than any ASC.

Absolute ability to meet terms turns out to be complicated. FSUs often have certain non-pricing terms (e.g. accessibility) mandated by state law; if BPV will not meet them, FSU has no choice but to walk away. This problem multiplies for ASC, which has to deal with all its members’ non-negotiables. In practice, though, BPVs usually accommodate such terms better than smaller vendors do, so this tends to come down to money in the end. ASC will often have more money to throw at BPVs, and less absolute accountability in how it spends it, than FSU or SLAC. Isn’t that a counterintuitive embuggerance… but wouldn’t it explain part of Gustafson-Sundell’s results?

Finally, each party’s knowledge of the other’s situation is invariably tilted in favor of BPV. FSU’s finances are public record; ASC’s might be if all its members are public institutions. SLAC has a little more leeway to keep budget secrets. Nonetheless, BPV knows what it is charging (and has charged) all its customers, libraries and consortia alike; its customers don’t. (As for trade-secret status on pricing, the Loon is inclined to suspect quite a bit of information leakage among BPVs.) BPV also intimately understands its customers’ organizational contexts, while its customers cannot easily peer into its sales or finance meetings. One last time—this is no different for ASC than for FSU or SLAC. ASC has no special insights and no special leverage.

So. Still think shared purchasing automatically means better deals? The Loon doesn’t.

What shared purchasing has accomplished over the decades—and oh, isn’t this absolutely horrific in hindsight—is enmeshing many more academic libraries in Big Deals than would have been able to acquire them on their own. SLACs largely couldn’t (and still can’t) scrape up enough money to tempt BPVs any other way than through consortia; ditto non-flagship state institutions. Now, SLACs and non-flagships are just as stuck in the mire as FSUs. Progress, from a BPV perspective.

A few years ago, textbook publishers tried to lure FSU-type institutions into “e-textbook platform” pilots strongly resembling serials Big Deals. The Loon’s Boring Alter Ego strenuously opposed these publicly, Cassandraically foreseeing disaster, and fortunately for all of us, they did not pan out. She mentions this by way of a small gleam of hope in an otherwise rather dire situation.