The User Perspective
When Alison McNab walked around the exhibition hall at London's Online Information 2000 conference last December, she was struck by the sheer number of stands belonging to Reed Elsevier and Thomson. "I did wonder," she says facetiously, "if the only stands at Online 2001 will be from these two companies."

McNab, Loughborough University's (U.K.) academic services manager, is not the only information professional to wonder about the ubiquity of these two companies. In fact, many are seriously worried about their dominance.

True, there are other large players serving the information industry, including Dow Jones, Reuters, McGraw-Hill, Bertelsmann, and Wolters Kluwer. But the degree and nature of the power now exercised by Reed Elsevier and Thomson is causing particular unease.

Moreover, Reed Elsevier's $4.5 billion bid for Harcourt General last year was viewed by many as introducing an alarming new note, with Reed announcing that it had already agreed to "on-sell" Harcourt's higher education and professional groups to Thomson. [For more information, see the November 6, 2000 NewsBreak at http://newsbreaks.infotoday.com/nbreader.asp?ArticleID=17713] The suspicion is that these two "competitors" are now cooperating to carve up the market.

"This is just another example of collusion between two large companies," said an anonymous industry observer. "They are now set on the path of having monopolies in separate spheres, and they are acting in concert to achieve it."

The U.K. Competition Commission has indicated that it will submit a report on the Harcourt bid by the end of May. The U.S. Department of Justice, meanwhile, is still deliberating and it's currently unclear when a decision will be made. However, some observers maintain that Reed Elsevier and Thomson already have an unacceptable monopolistic presence in the information industry.
 

Me? A Monopolist? Not Guilty, Mate
Nick Baker, Reed Elsevier's director of corporate strategy, disagrees. The problem, he suggests, is that users tend to see monopolies where they don't exist. For instance, he said: "There is this perception that Elsevier Science owns a huge chunk of the STM [scientific, technical, and medical] marketplace. But the numbers show that of the top 7,000 journals in the world, Elsevier Science owns about 12 or 13 percent. Kluwer owns around 6 percent and Harcourt around 6 percent. STM journal publishing is not, in fact, a very consolidated market."

Mary Case, director of the office of scholarly communication at the Association of Research Libraries (ARL), is unconvinced. Whatever Reed Elsevier's total market share may be, she says, the reality is that "Elsevier Science titles account for between 35-to-45 percent of our members' STM journals budgets. ARL libraries spend well over $100 million a year on Reed Elsevier products. While this may be peanuts to them it is significant for us. That is why we are concerned."

Thomson customers are also concerned. "We worry that in certain areas—including global shareholding information, M&A information, and earnings estimates—there are insufficiently strong competitors, and Thomson is becoming an increasingly monopolistic presence," said a senior information manager at a London-based investment bank.
 

A Matter of Perception
"I can understand that some users may see consolidation in a negative light, but it is just a matter of perception," responds Brian Hall, CEO of Thomson Legal & Regulatory. "Consolidation can also be seen in a positive light, since it leads to larger players with greater resources, and to stronger competition. And the ultimate beneficiary of competition is the user."

He also denies that the nature of the Harcourt bid implies that Thomson has stopped competing with Reed Elsevier. "The thing to bear in mind is that Harcourt put itself up for sale. It was not a case of Thomson and Reed Elsevier deciding to come together."
 

Customer Service Goes Down, Prices Go Up
Be that as it may, respond users, the market clout of these two companies is now problematic.

First, they argue, it has led to a deterioration in customer service. As Martin De Saulles, managing director of Researcha, a U.K.-based online community for information professionals, puts it: "The large information vendors are notoriously bad at customer service. I can see this becoming worse as there is less competition in the marketplace."

Second, they say, it means living with constant and unwarranted price increases. This is best exemplified by the journal-price inflation that has brought many libraries to their knees.

Not so, says Baker. That large companies give poorer customer service is simply unproven. And while there has been a problem with journal price inflation, this had nothing to do with consolidation. Rather it was the consequence of an explosion in research funding, combined with falling library budgets. Besides, he adds, the matter has been resolved. "We (and others) have moved to find ways to best counter the volume/price and budget imbalance, but the marketplace does not yet seem to have fully realized that."

Wrong, says Mark McCabe, a former employee of the U.S. Department of Justice, who is now an assistant professor at Georgia Institute of Technology. McCabe has just completed a study that examined the cost of 2,000 titles. "If you divide the period 1988-2001 into two identical periods—1988-1994 and 1995-2001—and you look at price increases year to year, you find the same level of price increase in both periods," he says.

Moreover, he adds, earlier studies he conducted demonstrated a clear link between consolidation and price rises. When Reed Elsevier acquired Pergamon Press in 1990-1991, for instance, the price of Pergamon's biomedical titles subsequently rose by 27 percent, while Elsevier titles increased by just 5.2 percent. A similar study found that the purchase of Lippincott by Wolters Kluwer in the same year subsequently led to a 25-percent increase in prices.
 

Dissatisfaction Spreads
And user unrest is spreading. Theodore Bergstrom, a professor of economics at the University of California-Santa Barbara, is so angry about the cost of economics journals that he has published a public vow on his Web site (http://econ.ucsb.edu/~tedb) to "stop refereeing papers for journals that charge library subscription rates greater than $1,000, and to exercise preference for journals that charge less than $300."

Bergstrom's indignation was sparked by the results of a recent study he conducted. It revealed that subscriptions for economics journals have risen at the rate of 13 percent per year since 1995—with 15 of the 20 most expensive economics journals published by Elsevier.

Meanwhile, law librarians are angry at what they perceive to be Thomson's unjustifiable use of supplementation as a way of extracting ever-larger revenues from them each year. Supplementation, moreover, that they claim adds little or no value.

In some cases these supplements now cost more than the original product, says Ken Svengalis, law librarian at the Rhode Island State Law Library. "Last year, for instance, while Thomson's Am Jur Legal Forms set was sold for $1,200, the supplementation was $1,405. Similarly, where the American Jurisprudence legal encyclopedia cost $2,300, the supplements were over $2,600."

"As the world moves to an online environment all of this becomes moot," responds Hall, "because once online, everything is commingled and we don't charge extra every time information is updated. Users either pay a monthly subscription fee, or in some cases an annual fee."

Here, however, lie the seeds of a whole new controversy.
 

Big Deal
Why is it controversial? Because some believe that once print products become available online, the market power of large content owners becomes even greater, particularly as they start to sell subscriptions to electronic "bundles" of printed products. Reed Elsevier's ScienceDirect, for instance, aggregates 1,200 journals in one electronic archive.

The problem, says McCabe, is that if a publisher's share of a particular market becomes large enough, libraries face the choice of buying everything they need from one publisher, in one electronic bundle, or buying a less convenient mix of print and electronic products from a range of different providers. And when this bundling is accompanied by services like CrossRef, he adds, the power of large publishers increases still further.

Designed to enable users to navigate between articles from different publishers using hyperlinks, such services will inevitably drive users back to the large publishers, and sideline the smaller ones, says McCabe. "Linking requires cooperation between the various publishers. But once a publisher becomes large enough it may not want to link to other publishers."

Librarians, too, are beginning to fret about the loss of flexibility to pick and choose individual journals that bundling introduces—as well as about greater dependence on the large publishers. In a recent article in D-Lib Magazine (http://www.dlib.org/dlib/march01/frazier/03frazier.html), for instance, Kenneth Frazier, director of libraries at the University of Wisconsin, advises academic libraries not to sign any comprehensive licensing agreement—which he dubs the "Big Deal"—with commercial publishers. The Big Deal, he says, "serves only the ‘Big Publishers.'"
 

Lost the Plot
The more heated the debate becomes, the more it seems that the real challenge for Thomson and Reed Elsevier lies not in acquiring new customers through further consolidation, but in trying to repair their relationships with existing customers. Here they appear to have lost the plot.

"I do not think the management of either of these companies has any perception of the user hostility they have roused, or the ability of users to figure out alternative information sources," said the previously quoted industry observer. "This is going to blindside them."

The problem for users, of course, is whether they can indeed find alternative information sources. As the previously quoted information manager at the London investment bank points out, when viable competitors emerge, their independence is often short-lived. In 1998, for instance, Thomson bought Amdata, the main competitor to its SDC database. "It happened again last August, when Thomson bought Carson Group, which had emerged as a competitor to its global shareholding database, ShareWorld."

For this reason, suggests McCabe, much will depend on what happens with the Harcourt bid. "If the deal is seriously wounded, then there is reason for optimism. If not, the prospect of monopoly—and higher prices—will become a greater threat."

Of course, if users are right in believing that these companies are already too dominant, then even the maiming of the Harcourt deal will provide little consolation.

And who knows? McNab's humorous prediction could even come true—if not this year, then next. If so, she may—in passing a Reed/Thomson booth—have the pleasure of hearing a corporate spokesperson, arms crossed, saying emphatically to a passing journalist: "Me? A monopolist? Not guilty, mate."