Why Digital Expenses Continue to Rise

A consistent misrepresentation about the digital age in scholarly publishing has been that moving from print to digital would mean far lower costs, which would save everyone money. After all, print is slick, heavy, and arrives by truck or carrier, so it has to be expensive to produce and deliver. Liberated from the page, the thinking goes, information can flow freely — both in the sense of unbound and without cost.

This basic assumption has led to a flawed logical process — if online is virtually free, with the marginal cost of every additional copy approaching zero, we could demand information for lower and lower prices once we eliminated print editions.

Don’t tell online-only eLife that — their technology costs escalated 14% between 2016 and 2017, driving their deficit up 48%.

Print, in aggregate, is and was expensive — but not that expensive. What is known as “first copy cost” — the cost of generating the first copy off a printing press — is loaded with expense, from plates to color setup to prepress and more. The first copy cost could also have all the salaries, overheads, and other charges associated with the editorial, production, and administrative work pushed into it. These fixed costs are important to understand before making statements about relative expense levels. Once the presses got rolling, each subsequent issue wasn’t very expensive to produce. Most of the expense was in everything that preceded the first copy — the editorial office, the business operations, the production facilities, the overheads like finance and HR, and other costs. These fixed costs are the bulk of any operation, with the production and distribution costs being a fraction of the rest.

Print costs are and were relatively stable and manageable (yes, publishers still print journals and books). You can change paper grades, alter trim sizes, modify frequency, and more to manage your costs. Print costs are incurred regularly but not continuously, and shift little from week to week or month to month. Costs for print are largely based on how many you mail, a number that doesn’t change much or often.

Some academics still don’t understand this, and seem to have the impression that print was and is outrageously expensive to produce and distribute. (Many also think nobody cares about or uses print anymore, another fallacy.)

Others have learned that digital is expensive — and, unlike print, it gets more expensive the more it is used. In 2017, a librarian in the University of California system was quoted in the Chronicle of Higher Education:

In the beginning, we all thought, everything is going online, it will save us a ton of money. But that’s not true. Now that’s pretty widely understood.

It may be widely understood, but some people still don’t get it. Plan S is predicated on some version of “digital will be cheaper,” redolent with ideas of price caps and per-article charges based on the fallacy that digital is virtually free to provide and use.

Will digital be more expensive for a long time to come? Here are a few reasons it probably will be:

• Storage space and bandwidth still cost money. If you manage an AWS, Google, or Azure cloud account, you know that the more it is used, the more it costs. Competition in the space is slim, and while costs aren’t extraordinarily high, they are continuous, and growing.
• Competition for talent. Programmers are expensive, and in high demand, with no end to this in sight. From autonomous vehicles to AI to security to the Internet of Things to voice to facial recognition to surveillance to machine learning to statistical analysis to a sensor economy, programmers, engineers, and computer scientists have a lot of opportunities. Paying them enough to attract them, to keep them, and to incentivize them will be a major source of costs, and already is.
• More consumer expectations. Consumers will expect journals and books to integrate with voice, gesture, tablet, countertop, vehicle, and other systems. We barely have browser compatibility managed, and all of these expectations are developing quickly. These will be expensive to build and maintain.
• Deeper and better infrastructure. We’ve been skating by for a while on HTML, some XML, “security through obscurity,” and a few databases often linked by clumsy batch upload integrations. Soon if not now, real-time data and security needs will ratchet up the costs of providing what we already provide clumsily. Elegance is complex, and complexity creates costs.
• Design and technology interactions will continue to add complexity. With print, you designed one edition. With online, you have to design multiple versions, and each needs to be revisited often. As new devices come online, as screens change, as new media innovations occur, new things need to be designed, redesigned, and redeployed. Often, it covers the entire archive, another factor missing from print redesigns.

Publishers aren’t the only ones bearing the costs of the digital economy. For consumers, print isn’t very expensive compared to digital. To read print, they don’t have to pay $900 for a new mailbox every 2-3 years, or pay a monthly fee of $200 for the road outside their house to meet their driveway. However, this is pretty much how digital costs have escalated for consumers — a new smartphone every few years, monthly broadband expenses, computer replacements and upgrades, and new printers and routers. Back in 2010, an article in the New York Times broke it these new costs to digital infrastructure for consumers as follows:

It used to be that a basic $25-a-month phone bill was your main telecommunications expense. But by 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau. By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.

There’s a backlash to these costs, with cable cutting leading the way, but more recently a trend to hold onto smartphones longer, paying to replace batteries rather than upgrading, a trend that has hurt Apple’s iPhone business.

The New York Times’ analysis was done nearly a decade ago, before streaming, tablets, and Alexa. (It’s worth noting that Americans in 2010 were also spending nearly 10x on radio than they had been just six years earlier.) With entire families on upgrade cycles, and more devices — thermostats, ovens, locks, and lights — connected, prices for bandwidth are sure to climb. Consumers depend on it more and more, after all.

It seems fairly certain that digital information will continue to be more expensive to produce and consume. It’s already far more complex than print as a technology and distribution medium. The people who make it work are in high demand, which makes them expensive. Consumers will continue to bring new expectations to the table, adding to the complexity — and because they’ve spent a lot on their consumption infrastructure, they won’t tolerate laggards among their producers.

I’ll end with something I wrote in 2014, because I think it’s still accurate:

. . . we were wrong in thinking that online or digital publishing could be cheaper and simpler than print publishing. Paper and ink were actually easier to buy and distribute than polished and well-placed pixels. Print advertising was more scalable. Print archives were easier to manage. The postal services were more consultative with publishers than Apple or Google. The ecosystem was less costly to operate within.

Now, if you’ll excuse me, I have to go pay my wireless bill.

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