The Access Copyright’s Board response to the Friedland Report is one of the few public sources that breaks down its revenue and distribution (though it is no longer posted online). In 2005, its licensing revenue came from the following sources:
|Universities and Colleges||46 percent|
|K – 12 Schools||31 percent|
|Foreign Reproduction Rights Organizations (RROs)||5 percent|
The percentages may have changed slightly, but there is every reason to believe they are fairly similar today. In the Access Copyright application for an interim tariff, it told the Board that “almost 50 percent” of its licensing revenue comes from universities and colleges.
The obvious problem is that Access Copyright is dependent on education for roughly 75 percent of its revenues. In the years ahead, much of this is likely to disappear. I’ve already argued that universities and colleges will increasingly walk away from Access Copyright as they pursue other licensing approaches for their materials (universities are spending over $100 million a year on site licenses via CRKN alone).
The Access Copyright problem involves more than just dependence on the education sector, however. The problem is exacerbated by the fact that its repertoire is available from other sources. Consider the distribution by genre data it provided in the Friedland Report. In 2006, the top five genres were as follows:
|Text (education)||33.39 percent|
To understand the Access Copyright problem is to recognize that the bottom three genres, which in 2006 constituted 27.5 percent of its distributions, will fall to a few percentage points sooner rather than later. Virtually every Canadian university and college already subscribes to electronic access to most journals, magazines, and newspapers (in fact, many of the journals are now open access). In other words, these works are still being licensed by universities and colleges, but not through Access Copyright. This represents a significant decrease in the value of the Access Copyright repertoire to these institutions, since they get the same materials in a more flexible, accessible, and economic manner from other sources. The same is often true for corporate clients who access these materials through commercial databases.
The educational text category is also likely to decline in the coming years as universities and colleges move toward electronic casebooks that do not rely on the Access Copyright licence and K-12 schools begin to develop open educational resources to serve their needs. Note that colleges will also move toward OERs, particularly given the U.S. investment of $2 billion over the next four years in new free and open materials for colleges.
What should Access Copyright do? I’d propose four steps.
First, it must become much more efficient as its administrative costs are far higher than other similarly placed collectives. When other collectives are able to run at half the administrative burden, there is surely much that can be done.
Second, the Access Copyright board, with 18 members (nine representing publishers and nine representing creators) is far too big for an organization of its size. The Friedland Report recommending cutting back to 13 (four publisher, four creator, four independent, and the executive director). That recommendation was rejected by the board. I think that even 13 is too big. Nine board members is fine – three publisher, three creator, and three independent. A crucial element is the need for independent directors as it is stunning to see a board of this size comprised exclusively of directly interested parties. Moreover, board compensation should be slashed – a $500 honorarium for each board meeting is plenty for a non-profit, not the current rates that may run as high as $10,000 annually per board member.
Third, rather than rejecting pay-per-use licensing for education (it is still unclear what approach AC is taking), it should be shifting toward it. Its distribution model has long been a source of controversy since much of it relies on membership, not actual copying. Payback starts to change that in terms of distributions, but at a significant cost to the majority of Access Copyright members. Moreover, as discussed above, its repertoire offers less and less to its most important customer segment. Pay-per-use transactions offer a potential competitive advantage (publisher and education relationships, economies of scale that a publisher or author alone won’t have) and the chance to shift more of its business to the corporate world. This would move the organization toward the U.S. Copyright Clearance Center model, which does not rely on domestic education licensing for a significant portion of its revenues.
Fourth, it must become more transparent. Transparency was the top issue raised by the Friedland Report, yet a review of the most recent annual report shows that the organization still does not plainly disclose who gets what. In fact, compare the Access Copyright approach with the Public Lending Right Commission release, which opens its report with specific reference to how much was collected, how many authors received money, and the average distribution. Its website then delves into further detail on its financial distributions.
Access Copyright’s annual report runs 31 pages and never discloses this information in a clear, transparent manner. For example, some have noted that the annual report includes a specific distribution number as page 19 states that the distribution for 2010 was $23.3 million. Unfortunately, that figure does not disclose how much of the 2010 revenues were distributed. The 2010 distribution drew from both 2010 provision for royalties for distribution ($24 million) and the balance entering the year, which stood at $29.5 million. The analysis in yesterday’s post makes it clear that the majority of the 2010 distribution came from the prior balance, not from the 2010 revenues. Clear disclosure is surely in the interests of all associated with the collective.
I conclude by noting that Access Copyright’s problems are not necessarily an author problem. Authors will still be paid to create OERs (that is what the $2 billion is for in the U.S.) and receive growing licensing revenues from electronic access subscriptions on campuses. In other instances, their work will be freely available consistent with their open access licensing choices. Moreover, the U.S. experience demonstrates there are significant licensing opportunities in the corporate market. The reality is that this is an Access Copyright problem as it spends far too much relative to what it earns, has failed to address persistent transparency concerns, and it effectively faces a more competitive market with other intermediaries who are offering a more compelling product to its most important customers.