The Challenge with Transformative Agreements and Society Journals

During a panel I moderated at the 2023 STM Frankfurt meeting, it became evident that some publishers are not fully aware of the challenges transformative agreements create for societies. Discussions between C&E and some societies in recent months have revealed the challenges these agreements can pose to their journal portfolios. A closer look at the components of these agreements is merited, given that both societies and their publishing partners are best served by having a mutual understanding of each other’s position and ensuring that there is a strategic alignment in place.

By “transformative agreements” (TAs), we mean both “read and publish” (RAP) and “publish and read” (PAR) agreements. These agreements between publishers and universities (or university consortia) combine payments for “read” access to a publisher’s portfolio (which follows from the traditional reader-pays subscription model) with payments to publish affiliated researchers’ work in journals in the publisher’s portfolio – including society journals published by the publisher – as open access articles. There are many variations on such agreements, and allocations to “read” (subscription dollars) and “publish” (OA dollars) might shift over time (hence the “transformative” moniker).

First developed in 2014 by IOP Publishing and the Austrian Science Fund, the Austrian Academic Consortium, and the University of Vienna, TAs gained momentum starting in 2019 with the advent of Plan S. Plan S disallows funds from cOAlition S funders to be used for publication in hybrid journals (which are supported by both subscription and OA payments), with exceptions made for journals covered by a transformative agreement or that are registered as transformative journals. Accordingly, many publishers adopted this “transformative” state as the easiest path to Plan S compliance. 

Plan S compliance is only part of the story, however. TAs are popular with publishers for other reasons, and it is worth reviewing them here to better understand why publishers are pursuing these arrangements. 

Advantages of TAs for Publishers

• TAs build on the publisher’s institutional sales infrastructure. Publishers have spent the last two decades (since the advent of the Big Deal) building out a global institutional salesforce along with various institutional authentication systems. Publishers know how to sell and manage these deals – TAs are effectively “Big Deals” with OA payments thrown in. 
• TAs simplify payments. Compared to the APC model, TAs simplify payment processing for publishers. Instead of processing each APC, a publisher receives a bulk payment from the institution. 
• TAs lock-in budget. Institutional budgets are finite resources. If a publisher can stake a contractual claim several years in advance, as with multiple-year contracts, that is better than fighting for budget share each year. 
• TAs enable payments for researchers without funding for APCs. Researchers and scholars without grant funding (or without sufficient grant funding) for OA fees will have OA fees paid for centrally by the university or consortium. 
• TAs convert one-off OA revenues to recurring revenues. Perhaps most important of all, TAs convert the one-time payment model of APCs into recurring revenues. Recurring revenues are more valuable, as they give publishers the ability to better forecast revenue as well as provide revenue stability.

For all these reasons, publishers have been actively promulgating TAs (some more than others).

Challenges for Publishers

There are, of course, challenges for publishers:

• TAs require a great deal of upfront analysis in order to determine terms that are remunerative for the publisher and acceptable to a given institution. 
• TAs require more negotiation (often, much more), thereby raising sales costs.
• TAs create an administration burden, as they require tracking author eligibility and providing ongoing reporting and compliance monitoring.
• TAs create revenue risk elsewhere for publishers. Publishers still have more subscription agreements with institutional customers than TAs. Each TA that a publisher signs means more articles in the publisher’s portfolio will be published on an OA basis. At a certain point, if the number of articles covered by subscription agreements (the articles that are not OA) decrease (because authors elect to, or are required to, publish OA), publishers will face pricing pressure from subscription customers. Increased OA adoption also creates risks for journals with significant commercial reprint and licensing revenue (including emerging licensing opportunities related to generative AI). These revenue streams are likely to be adversely impacted if more content becomes open via permissive CC BY licenses. There is some danger to advertising revenues too, as open licenses allow aggregation of articles away from the journal website. 

Many publishers believe the benefits outweigh the risks and costs associated with TAs and have been actively pursuing them. 

Institutions and TAs

But it “takes two to tango.” Many academic and research institutions, especially in Europe, have embraced TAs. For institutions there are also a number of benefits.

• TAs convert an institution’s research output to OA. A critical aim of TAs is that they make an institution’s research output in journals published by a given publisher open. Research articles from affiliated researchers (typically defined by the affiliation of the corresponding author) are more likely to be published on an OA basis where there is a TA in place.
• TAs are more equitable for an institution’s researchers and scholars. In a typical TA, any researcher or scholar affiliated with the institution signing the TA can publish on an OA basis (assuming they are the corresponding author) in the publisher’s journals (assuming the paper is accepted for publication). This is more equitable because previously only authors with grant funding or departmental funding for OA fees were able to publish OA in those journals. Under a TA, all (corresponding) authors are able to publish regardless of grant or departmental funding as the OA fees are paid centrally by the university. (Some TAs include caps on publishing activity, but researchers and scholars have more equitable access to publish up to that cap.)
• TAs allow the library to offer a new benefit to faculty and researchers. TAs allow the library to add a new service to their campus community and promote their value not just in procuring access to content, but also in providing access to publish.
• TAs allow budgeting predictability. An institution can look at how many articles affiliated researchers and scholars have published with a given publisher in the past and reasonably estimate annual publication output. Financial “floors” and “ceilings” can be put in place, particularly in the first year of a deal, to make payments more predictable for both publisher and university. Multiyear deals can add year-over-year ceilings to further extend predictability. 
• TAs better enable tracking and compliance monitoring. As the university is paying centrally for OA fees, it is in a better position (as compared to each author paying individually) to track its institutional research output and to ensure compliance with both institutional policies and funder policies. 

Despite these benefits, TAs have not been universally adopted by universities. Many research-intensive universities are concerned about the costs of such deals, which are ultimately based on output (and such universities, by definition, have higher research outputs). Others have soured on TAs precisely because they have not been universally adopted. Because most universities in the world have not yet entered into TAs, those that have done so are effectively paying to make their research output freely accessible while continuing to pay to access the research from institutions that have not signed such agreements. This sentiment is behind the recent announcement from the Association of Swedish Higher Education Institutions and the associated Bibsam consortium, an early adopter of TAs, that it will pull back from TAs after 2024.

Challenges from the Society Perspective

With this background on the advantages and challenges for publishers and universities related to TAs, we turn to another important constituent in these deals: scientific and scholarly societies. A great number of societies that own journals do not publish themselves. Instead, they contract with a commercial publisher, university press, or large society to publish on their behalf. This contract is typically referred to as a publishing services agreement (PSA).

In a PSA, a publisher will manage most aspects of the publication process following acceptance of a paper by the society journal (societies retain editorial control of the journal). This typically includes hosting the society’s journals on the publisher’s platform and including the journals in various institutional packages, including TAs. On the surface, this seems like a benefit. But societies are in a very different position from publishers when it comes to TAs for three reasons:

1. Societies cannot opt out of a specific TA if the deal is bad for them.

As noted above, TAs require a great deal of analysis by publishers. What publishers are analyzing is whether the deal, at a certain price point, is good for the publisher. When a publisher signs a TA, the TA replaces previous subscriptions and packages. Publishers therefore must analyze how many subscriptions they will lose due to the deal (and the revenue associated with those subscriptions) and how many articles associated with the deal the publisher is likely to publish (and the revenue associated with those articles). If the math does not work out, the publisher will propose different terms or walk away from the deal.

A society that contracts with a publisher is not in the same position. The society cannot analyze the deal in advance (they typically are not even aware that any given deal is being negotiated) and cannot propose different terms or opt out if the deal does not work for them. Some societies may be in a position (depending on the terms of their PSA with their publisher) to opt out of all TAs a publisher may sign (or perhaps all TAs in a given region), but typically a society cannot opt out on a deal-by-deal basis. (Given the large number of journals, including society journals, included in these deals, the logistics of trying to coordinate opt in/opt out on a per-society basis would mean that no deal would ever get done.) The result is that TAs are bad for many society journals. By “bad,” we mean the deal provides less revenue, in some cases much less revenue, than the deal in place before the TA was signed. This is especially true for North American societies that have accumulated, over many decades, a healthy number of subscriptions in Europe but maintain a North America–centric authorship (meaning, the majority of authors are from the US and Canada). Because the vast majority of TAs to date are with European institutions, this results in the elimination of European subscription revenue without a proportionate increase in OA article fees for these societies. As we wrote in the September 2023 issue of The Brief regarding a hypothetical TA between a publisher and Projekt DEAL, a consortium of German universities:

When a publisher signs a transformative agreement with a university consortium, it typically replaces any subscriptions a society may have had with consortium members. Let’s say Society Journal A has 50 subscriptions across German research institutions each valued at €2,500 and authors associated with DEAL institutions only publish 20 papers annually in the same journal. If the society’s publisher strikes a transformative agreement with DEAL at the €2,550 per-article price point, the society journal will be trading €125,000 in subscription revenue for €51,000 in OA revenue. Conversely, if Society Journal B has only 20 subscriptions (at the same €2,500 value) but receives 50 papers from DEAL institutions, it will be trading €50,000 in subscription revenue for €127,500 in OA revenue. This hypothetical transformative agreement would be a terrible deal for Society Journal A, but a great deal for Society Journal B.

While this example is hypothetical, the math is indicative. Specific TAs can present radically different scenarios for different society journals.

2. Price points for TAs are set at the portfolio level and not for specific titles.

A closely related problem for societies is that the price point for OA fees for hybrid titles included in TAs is typically set at the portfolio level. For example, the society’s publisher might negotiate a price of $2,750 USD that would cover publication of an article in any hybrid journal included in the deal. This (hypothetical) price point was arrived at as it works well for the publisher overall (at the deal level) and is acceptable to the institution. But it might be the case that a given society flagship journal is highly selective, with a high Journal Impact Factor, and it typically charges an APC of $5,500 USD. In this scenario, the publisher has effectively set an OA fee at a 50% discount for publication in the society’s flagship. As a highly selective journal, there are unlikely to be a great number of papers coming from any given institution or consortium to offset subscription losses and, to compound the problem, these papers will now be published at a steep discount. As we recently discussed in The Brief, publishers realize that one APC price point does not work given the inclusion of highly selective flagship journals in TAs and have begun to address this with regard to their own titles by introducing a two-tiered pricing scheme. However, to our knowledge, no TAs currently address this issue for the flagship journals of their society partners.

3. Reuse licenses are typically negotiated at the portfolio level.

Many TAs will specify, as part of the terms, the reuse licenses that will apply to articles published through the TA. This is problematic for societies that generate significant revenues from reprints, licensing (including licensing for AI applications), or permissions. Many clinical medical titles, for example, derive substantial revenues from these sources (in some case more revenues than are derived from subscriptions). The liberal reuse licenses (CC BY) that are often associated with TAs mean that, for these society titles, subscription losses are compounded by downward pressure on these revenue streams.

4. Data regarding TAs are typically not shared.

We encourage societies to adopt a “data sovereignty” mindset when dealing with publishing partners. Societies are typically flying blind with regard to TAs. Not only are they not able to analyze deals in advance, but they often receive little information about the deal and its impact after it is signed. How many subscriptions are lost in the deal and how much associated revenue? How many submissions do the society’s journals typically receive from the authors affiliated with the institution signing the TA and how much revenue from APCs is anticipated? Is the TA anticipated to have net positive or net negative impact on the society’s journal revenue? Societies that participate in TAs should insist on transparency in reporting on TA impact – not simply receive a “single bucket” allocation of “institutional package revenue.” In addition to data about how the TA will impact submissions and revenue, publishers should collaborate with their society partners to provide data that allows identification of and marketing to authors to increase submissions from researchers affiliated with a TA. Societies focused on improving member/customer experience need to have full access to their audience intelligence.

Potential Society Strategies

Given these twin challenges of TAs confronting societies that partner with publishers, it is incumbent on societies to develop one or more strategic responses. Selection of a strategy will require careful analysis of how well the TA fits the society journal circumstances, and might include a combination of one or more of the following:

• Opt out of all TAs. A society might consider opting out of its publisher’s TAs entirely (assuming their PSA allows this). This option is prudent if there is a regional misalignment between the society’s institutional subscribers and its authors. If, for example, the society’s journals have a relatively high number of subscribers in Europe but few authors there, the society is likely to be on the losing end of most TAs. 
• Opt out of TAs for selected titles. Another option is to opt selected titles out of TAs (again, assuming the society’s PSA allows for it). For example, it may make sense to keep a society’s flagship journal out of all TAs if the flagship is highly selective and has a strong institutional subscriber base. Such journals are unlikely to make up for lost subscription revenue with OA fees, unless the price point is high (see below). Societies may also wish to consider leaving out titles with healthy reprint or licensing revenues as liberal reuse licenses could put such revenues at risk. 
• Opt out of selected regions. It may make sense to opt out of TAs in certain regions of the world (again, if contractually possible). To use the same example as above, a journal with many subscriptions in Europe but relatively few authors in Europe might consider opting out of all TAs from European institutions or consortia. Conversely, a European-based journal with few US authors might opt out of TAs with US institutions. 
• Participate only in TAs with premium pricing tiers. Some highly selective, flagship society titles command relatively high APCs (above $5,000 USD). As noted above, publishers have begun negotiating deals with higher price points for the publisher’s premier titles. Societies may seek to participate in TAs only when they can do so in a premium pricing tier.

• Participate in TAs only with restrictive reuse licenses. Societies may opt to participate in TAs only in instances where a restrictive reuse license (CC BY-NC-ND) is possible. This may either be because the terms of the TA specify such a license or because the terms of the TA allow license terms to be set at the journal level (or allow for carve-outs for certain journals, such as clinical medical titles). 

It is understandable that publishers cannot permit societies to opt out or opt in to deals on an ad hoc basis, as it would derail already complex and time-consuming negotiations. However, introducing a few high-level inclusion criteria (title, region, tier) would go a long way toward making TAs work better for societies. We are seeing some of these inclusion criteria (particularly title-level inclusion/exclusion) become points of negotiation during PSA renewals. Given the long terms of most PSAs (5–10 years) and the still nascent nature of TAs (which have yet to congeal around standard terms and conditions), more flexibility is needed for society partners.

It is essential that societies not only carefully negotiate TA participation (or exclusion) when negotiating a PSA, but also that they select a publishing partner that allows a strategic response to OA that supports the society’s journals. If the society wishes to focus on a green OA strategy or it has publications with significant commercial reprint or licensing revenue, for example, signing with a publisher that is aggressively pursuing TAs and seeking to flip its complete journal portfolio to Gold OA is perhaps not the wisest course of action. Conversely, if the society aims to flip its own titles to OA, has relatively few subscriptions to defend, does not have much in the way of reprint or licensing revenues, and has good author alignment in regions where publishers are signing TAs, partnering with a publisher with an accelerated approach to TAs would be prudent. 

We recommend that societies partnered with publishers engage their publisher in frank discussion about the impact of the publisher’s open access strategy and TAs on the society’s journals. It is critical to model, as more of the journal becomes open access via TAs, how the society journal’s different revenue streams will be impacted. C&E is happy to help with such analyses, and to help societies develop a strategy for TAs.