Unbundling serials vendors' service charges: Are we ready?

UNBUNDLING SERIALS VENDORS SERVICE CHARGES: ARE WE READY? Joseph W. Barker

Barker is head, Acquisition Department, University of California, Berkeley, California.

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At the American Library Association Midwinter Conference in Chicago in January 1990, I attended the ALCTS Serials Section Research Libraries Discussion Group on "The Future of Serials Vendor Service Charges," moderated by Karen Tallman, head of the Serials Department at the University of Arizona. Speakers were Karen Schmidt, head of Acquisitions at the University of Illinois; Dan Tonkery, president and CEO of Readmore; and Adrian W. Alexander, regional manager, Western U.S., for the Faxon Company. Although I head an Acquisition Department, which does not oversee the full range of serials management problems, I was interested in this topic because I am a former serials payment manager, and, at the University of California at Berkeley, I work closely with the head of Serials on vendor selection, serials ordering, budgeting, and cost control. Since the head of Berkeley's serials Department was unable to attend this discussion group, she had encouraged me to go and hear what was said. In describing future trends in serials vendor service charges, Tonkery and Alexander concurred that service charges are very likely to increase; driven by increased demand for services, high automation overhead costs, high personnel expenditures for unautomatable tasks, and diminishing discounts to vendors from publishers, service charges almost have to go up. Both vendor panelists also agreed on the likelihood that we would see more "unbundling of service charges" in the fuSUMMER 1990

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ture. "Unbundling" was described as selling services individually, so that libraries could choose, and would pay for, the services they actually use; heavy users of vendor services would not be subsidized by light users. During the discussion that followed the panel presentation, I wanted to talk more about unbundling of serials service charges, but the group veered off in other directions. I wanted to ask a number of questions:

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How would unbundled service charges work? What would they look like in the marketplace? Would unbundling be cheaper or more costly? How could it be cheaper for libraries if, in the long run, vendors need to increase revenue because discounts are declining and overhead is rising? Would unbundling be fair? Would it be ethical? Who knows how to monitor it for these qualities? Why is unbundling emerging at this time? Who stands to gain? Do serials managers and the vendors know enough about the real costs and value of individual services to be able to determine what would be a fair, unbundled price? What about services that are not sold in measurable units? How, for example, would one establish a price for quality, experience, or research and development of new services?

In the ensuing three days of the ALA Midwinter Conference, I explored these questions in casual conversations with serials managers, acquisitions librarians, collection development heads, and monograph and serials vendors everywhere I could get a chance. I discovered that serious dangers may lurk around the unbundling of service charges--threatening libraries and vendors alike. I discovered too some alluring possibilities. But, for the latter to materialize without being outnumbered by the former, serials managers clearly need to develop a "cold-cash" understanding of the whole topic of packaging vendor services, and become more wary and willing to dicker than what I heard at the last ALA Midwinter. This article probes some of the questions listed above. The first time I heard the term "unbundling" used in connection with serials service charges was at the 1988 Charleston Conference on "Issues in Book and Serial Acquisition." Then, as at ALA Midwinter this year, it was Dan Tonkery who first mentioned the word from the podium. Later in the conference, October Ivins picked up the theme--but not the word--in her paper, "Do Subscription Agents Earn Their Service Charges and How Can We Tell?": 34

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I agree with Dan Tonkery from Readmore who stated earlier that the reduction in discounts from publishers and the increase in the volume of automated claiming may cause a re-evaluation of service charge calculation. I think a better basis for assessing service charges is to examine the services used by a customer and resources required to provide those services. 1 Ivins elaborated by developing four examples of services for which service charges could conceivably vary from library to library (or even from season to season within a single library), because of varying reliance on vendor resources: claiming direct vs. through the vendor, use of vendors' 800 numbers and E-mail, vendor management reports, and research into pre-order verification. Her point was "to encourage librarians and vendors to consider what vendor services are actually used in negotiating service charges" (p. 145). Indeed, a potentially very attractive dimension to unbundling serials service charges appears to be more open negotiations for service charges actually used. However, if we look into the evolution of serials vendors' service charges up to 1988, unbundling seems to be emerging as a proposal at this particular time in response to vendors' need to open new arenas for competition in marketing their wares to libraries. If unbundling is to open the way for better vendor/librarian negotiations, librarians and vendors alike should begin insisting that this happen. If we do not, a potentially very useful opportunity may become just another sales gimmick and be lost, like some earlier promising ideas, in the mire of market stagnation and over-saturation. If we take time to trace briefly the evolution of the serials vendor services market, it will help us to understand what unbundling offers. BRIEF RETROSPECTIVE ON SERIALS VENDOR SERVICES AND SERVICE CHARGES

In surveying the literature of serials vending, it seems to me that three eras have already occurred in the evolution of this market. The beginning of each is marked by a high degree of healthy competition, and each ends with market saturation and/or stagnation. The subsequent era rejuvenates the market, but then saturation sets in again: fresh ideas become stale commonplaces. The Golden Era. In his 1975 Guide to Magazine and Subscription Agents, Bill Katz provides a concise summary of the early evolution of serial vendors' charges to libraries. Until the 1960s, publisher discounts were adequate to permit vendors to operate at a profit without service charges; discounts passed on - - JOSEPH W. BARKER- -

to libraries were even possible in those good old days. Through erosion 6f publisher discounts, by 1975 vendors "simply cannot give discounts to libraries whose lists are made up the more typical low-discount or no-discount titles. ,,2 As the discount to vendors eroded, common practice, described by Harry Kuntz in 1977, was for the vendor to institute a service or handling charge so that margin requirements could be met. A generalized basic formula would be as follows: The agent's payment to the publisher plus the clearance margin or markup equals the price the library will pay for the subscription and the service? The vendor's margin is directly affected by the "mix" of high-discount, easy-to-service titles and lowdiscount foreign, society, or other hard-to-service serials--referred to in the vendor business as "quality" or "difficult" titles, respectively, a By the early 1980s service charges w e r e so prevalent that librarians accepted them as a fact of life. 5Meanwhile, the overall, average publisher discount on titles sold to vendors declined to between 6 to 7.5, 6 a level at which almost no mix of subscription orders can result in a margin for the vendor adequate to ward off a service charge. While the Golden Era lasted, however, the agents successfully saturated their marketplace, and then stagnation set in. With little or no service charge to detract from the appeal of using serials vendors, few libraries failed to enlist vendors' services. Katz (p. 33) observed that, by 1975, 95 percent of libraries used vendors. This figure held, or may even have risen thereafter, because the 1985 survey of ARL libraries" use of serial vendors showed "no signs that the use of agents is waning," and indicated that all ARL libraries who responded to the survey used vendors. 7 Few new libraries were created in the 1970s, in contrast to the boom of previous decades. And materials budgets had largely stabilized. This slow growth, coupled with saturation of the market, meant that vendors could continue to expand only by attracting business away from other vendors. With all vendors selling approximately the same portfolio of services (sending renewals, generating invoices, and processing claim problems) for more or less the same array of publications, the market was not only saturated--it was also stagnant. The "Technogeek" Era. To rejuvenate this stagnant market, vendors were blessed by the introduction and widespread use of automation. Automation permitted new services and efficiencies that could be marketed in addition to the basic vendor services. By the beginning of the 1980s, vendors had elevated the - - UNBUNDLING SERIALS VENDORS' SERVICE CHARGES - -

competition plane to include sophisticated management reports, various online ordering and claiming systems, and even distributed check-in systems. They could boast how easily their computers would enable libraries to transfer business away from another vendor, and how many automated services librarians would find, once they made the switch. In 1983, Jennifer Cargill noticed a "supermarket" of vendor services as a result of this competition, and exhorted librarians to become active "consumers. "8 Serials vendors had become in the 1980s what Marcia Tuttle described as "very much in control of their computers. "9 By 1988 ALA Midwinter, successful serials vendors were what Adrian Alexander dubbed "Technogeeks" with forward-looking automation aimed at making libraries want a vendor for the efficiencies it promised; already hinting, however, at the new market saturation taking shape, Alexander referred in his talk to the sophisticated automated services as "representative of the vendor community as a whole. "lo As if bearing testimony to this re-stagnation, other vendors in the 1980s provided us with a steady stream of talks and papers extolling the virtues of choosing vendors for the added-value services they provide--not the service charge--and unveiling very similar service packages.ll In counterpoint, further stabilizing this already static market, a number of librarians published their satisfaction with these similar services.12 The Bottom Line Era. The next re-animation of the serials vendor market came from several brief flurries of concern by serials managers for the total cost of their serials--the bottom line. The first episode seems to have started when the spotlight was aimed at the serials bottom line in the mid-1980s by the now well-known international concern about unfair serials pricing practices of some publishers. 13 This concern was intensified by a simultaneous and dramatic drop in the purchasing power of the United States dollar, beginning in 1985.14 Serials vendors responded swiftly by generating useful management reports tracking the dollar and other currencies, and following and forecasting the cost of serials published in the United States and abroad. 15 They offered useful explanations on exchange rates and how these rates affected invoice totals, and they advanced themselves as an ally on the librarians' side in applying pressure on publishers to behave fairly. 16 Vendors succeeded at quickly coming out with almost identical services and rhetoric, in the face of these third-party problems. Within a couple of years, librarians came to expect this kind of help from an alliance with all major vendors. Yet another market saturation had occurred. Another new direction for the market arose during this same period from librarians' increasing concern SUMMER 1990

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about the method used to calculate and display service charges--another bottom-line concern. At the 1987 and 1988 Charleston conferences, serials managers were encouraged to "question assumptions" such as the basis for service charges. In 1987, they heard from a serials vendor that a "very intricate set of factors" determined service charges.17 At the same meeting, serials librarians heard, and appear to have borrowed momentum from, monographic acquisitions librarians heatedly questioning current practices for setting book prices-service charges, discounts, base price, and markups alike. "Discount-from-list," "net pricing," "seat-ofthe-pants pricing," and "cost-plus" were among the pricing schemes being critically discussed. One study gathered data from three vendors, and implied strongly that some vendors indulge in the dubious (unfair?) practice of marking up prices prior to discounting them for resale to libraries. TM Marcia Romanansky likened big-name vendors' added-value marketing methods for books to the way brand-naming chickens inspires people to pay premium prices for ordinary b i r d s . 19 Richard Abel, founder of the approval plan and the "cost-plus" pricing approach for monographs, urged librarians to consider returning to this previously tried pricing method, in order to circumvent "the questionable ethics and gallimaufry of pricing studies," which create a "rogue's paradise" for vendors and librarians alike. 2°Later in the conference, Rebecca Lenzini, representing the Faxon Company, conducted an informal poll of serials managers in the audience, and found that many of them would prefer a cost-plus-type pricing structure for serials--a method that would demystify the basis for the charge on each item. Beginning with its 1988 invoices, Faxon offered the ability to show the service charge, line by line, for every title on an invoice.2x The basis and presentation of service charge calculations was the next arena for competition among vendors. At the 1988 Charleston Conference the following fall, two talks by serials vendors defended non-itemized service charges; zzDan Tonkery mentioned "unbundling" serials service charges; and October Ivins delivered the paper (mentioned at the beginning of the present article), "Do Subscription Agents Earn Their Service Charges and How Can We Tell?" At the North American Serials Interest Group meeting in June 1989, serials managers heard a panel by Dan Tonkery of Readmore and John Merriman of B.H. BlackweU entitled "Waiting for 'Nodough': The Future of Service Charges." Attention was being drawn to the need for service charges, and the ground was being worked for increased service charges in the future. Meanwhile, in March 1988, Elsevier, publisher of numerous prestigious science/technology/medicine 36

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(STM) journals, announced a cap on its agency fees, and requested of vendors that they not apply service charges to Elsevier journals, z~ The next month, Martinus Nijhoff announced its willingness to sell Elsevier journals at no service charge. This move triggered fierce competition among the major vendors centered, this time, around actual service charge amounts and the methods vendors used to reflect these charges. In 1988 and 1989, vendors swarmed around libraries to offer attractive pricing and billing structures to win the Elsevier list, other attractive STM journals, and whatever other business was negotiable. At the University of California at Berkeley, we observed a predictable sequence of offers and/or visits from four major serials vendors striving for this business. By renewal-planning time in mid-1988, however, we discovered that they all offered almost exactly the same bottom-line price. Apparently, competition had led them all to shave their margins about equally, with the result that they approached the same offer. The savings difference from the lowest price to the highest was scarcely 1 percent--not enough to warrant the work, delays, and gaps from transferring orders. Successful competition among the vendors had put a short life to this means of opening up their market. Offering various rebates, credits, interest rates, and other bonuses for prepaying substantial portions of the annual renewal list was another set of deals used to rejuvenate the market. Here again, however, our experience at Berkeley has been that, although each one offers a different form of cost-savings, the vendors have almost the same bottom-line price to offer. This practice diminishes vendors' need to borrow capital from outside sources, and this is beneficial in helping vendors contain overall costs. But, viewed over a period of several years in the context of international currency, interest, and inflation fluctuations, our observation at Berkeley is that the vendors give libraries close to the same deal. Here again, there is not enough difference to warrant transferring orders. The pattern in the Bottom Line Era is clear. A number of frustrations or needs related to the overall high cost of serials arose in fairly rapid succession. As each was perceived as a problem, the major vendors (at least) rushed to provide similar remedies or otherwise address the cause of frustration. Since they all had about the same products, services, and postures to offer as their individual responses, and all have to cover not too dissimilar costs and overhead, and all have to make some profit, the savings in the bottom line and the service each offered was very similar from one vendor to another. Early in this era, the stage was set to augment service charges. But no vendor came forward with higher rates. Instead, vendors touched briefly on - - JOSEPh W . B A R K E R -

the manner in which vendors reflect service charges and discounts on °their invoices, the formula for determining service charges, and their posture in justifying it to their customers. This is exactly where unbundling entered the scene in the national conferences. UNBUNDLING

The unbundling of serials service charges holds great promise of re-enlivening the serials vendors' marketplace. It might even usher in a new era of openness and accountabilityinlibrary/vendorrelations. On the other hand, it could turn into just another scheme for vendors to try to out maneuver one another, and for the more aggressive serials managers to thrive at the expense of the others. A Banking Model. To understand how unbundling might help the market (and how it could bring in new waves of confusion), it will be useful to think first about another service-based market, which has been rejuvenated in recent years: banks competing for depositors and checking, savings, and credit card accounts. This market holds for banks a fairly fixed potential growth rate, since most people with money for such banking already have accounts. Growth in the number of depositors comes slowly from demographic changes. Most new accounts come to a bank largely at the expense of other banks. This is rather like serials market growth, arising from libraries' switching betweenvendors, and coming from the steady birth of new journals and occasionally the creation of a new library. Like serials vendors, major banks are fully automated. Also like serials vendors, most banks have about the same product to offer their potential customers: if one bank markets a successful new service, the other major banks are compelled to follow suit with the same or their own version of the same service. Services at banks, again like serials vendor services, have over the last decade or two become very similar. All the major banks offer checking, savings, interest-bearing checking, automatic teller machines, instant cash withdrawals, a choice of credit card types, lines of credit, safety deposit boxes, dial-up as well as walk-in account service, and other services. The dilemma of how to compete has stopped being the endless supply of new services. The dilemma is how to sell existing services in appealing ways. The main way banks appear to do this is by marketing new ways to think about their basic accounts and services, and by packaging them in various shapes and sizes, with or without additional fancy services, and with varying fees and interest rates. I hear all the time about "new" checking or savings or loan accounts, in which the only thing "new" is the particular assort- - UNBUNDLING SERIALS VENDORS' SERVICE CHARGES - -

ment of standard and frill services, benefits, and costs that "come free" or "are priced right" and are touted as yielding "the high return you d e s e r v e , . . . w h e n you need it." I noted at one large California bank recently more than 36 such packages, mixing and matching primarily the same few basic services--checking, savings, credit cards. The frills that vary include auto-teller services, safety deposit boxes, automatic lines of credit, and personal contact with account representatives. The banks have unbundled the "full-service" package, and sell smaller packages aimed at specific segments of the market. By claiming to have at least one package that is "right" for each client, unbundling permits banks to offer customers something to comparison shop about: flexibility, control over what they get from a bank, what they pay for, and--to a degree--how much they pay. Unbundling also gives customers a reason to look around and question whether their current banking services suit their individual needs and pocketbook. Unbundling has encouraged customers to think of their banking needs as individual, unique, and worth shopping around for. By offering differing fee structures and rates with the various packages, unbundling also augments the probability that shopping around can yield a better deal--or, putting it another way, that NOT shopping around can result in a customer paying more for less, or missing out on the "ideal" package for his or her lifestyle. Unbundling serials services: How it might work. Keeping the previous banking discussion in mind, let us imagine a few ways unbundling might work for serials services. 24 Like bank services, not all services offered by serials vendors are equally suited to be sold unbundled. It makes sense for serials vendors to retain a "basic service" package, comprised of services they insist on providing all of their customers. Not to do this would be for the vendor to invite customer dissatisfaction, lack of control over the account, and disaster. It would be like a bank offering a checking account without offering at least occasional statements of account and basic guarantees of responsible handling of funds. Having a basic package would also eliminate time-consuming and possibly confusing negotiations over services in which neither the library nor the vendor should have any choice. Listed below are some of the services I can envision belonging to a SERIALS VENDOR'S "BASIC SERVICE PACKAGE": • •

the timely handling of order-placement and renewals; expertise in foreign languages and bibliography in the countries covered

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accurate invoices (in a specified, basic number of copies) speed in handling claims experience, competence, trustworthiness.

Vendors may decide to include other services in the basic package, depending on how they wish to be viewed by customers. Site visits by sales representatives, for example, could be mentioned as part of the basic service, or it could be offered to customers with more elaborate service needs. Likewise for 800-number service, E-mail, and similar communications facilitators. The factors that would make a vendor decide whether to include a specific service in the basic package or to sell it in special bundles seem to be its use, popularity, and cost structure. Let us look at each of these in more detail. USE. If a service is used by virtually all customers, and the volume of use is proportional to the size of each customer's account, there may be little advantage to removing the service from the basic package. This is true especially if use of the service generally helps the vendor provide quality service on a timely basis, as is the case with a certain amount of the traffic on 800-number and E-mail lines (e.g., certain claims that alert the vendor to a problem affecting many customers). Removing such services from the basic package may discourage some customers from volunteering their part in helping the vendor with quality control. The vendor would either have to find other ways of obtaining the same quality control, or, over a period of time, the account would deteriorate and the customer might become dissatisfied. On the other hand, certain uses of these same services are not a help in servicing the account; they only work to the advantage of the library (e.g., using 800 numbers and E-mail to place rush orders). Judging from the complex variety of banks' approaches to similar situations, it is conceivable that services with widespread use more or less proportional to the size of an account would be handled in different ways by different vendors. One vendor might impose no limit, another might charge for each use, another might allow a certain volume free with a charge thereafter, and still another might split the service (no limit on use for certain purposes, and a fee for other usage). POPULARITY. How much a service is perceived as desirable by customers and how intense is the desire should also affect whether the service is sold as basic or unbundled. Customers are likely not to pay extra for services unbundled and not intensely needed. At the same time, unbundling and charging for a service that is intensely needed only by some libraries may be a sure way for vendors to minimize its use. 38

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Renewal lists may fall in this latter category: some libraries that get renewal lists review them in detail and swear by them, and some that get them hardly have time to do much at all with them. These lists are fairly expensive for the vendor to produce, and might be discouraged if excluded from the basic package and priced as an add-on cost. Claims are a more complicated example, because their popularity varies even more widely. Some libraries claim infrequently and, when they do, their need has been well researched and certified. Others churn out claims by computer with only cursory human review, so that high-need and moderateneed claims are mixed together and with items claimed too soon after publication. The basic service package for some vendors might allow a certain number or type of claims for free, and vendors might use unbundling to control or discourage indiscriminate claiming. Or some vendors might feel they can best appeal to their customers by servicing all claims in the base package. Others might charge for every claim. COST STRUCTURE. Some services lend themselves to being sold by unit or volume more than others by the nature of the structure of the cost of the service. For example, claims can be unit-priced fairly easily. Use of 800 numbers can be sold in units of time. Management reports might be sold by frequency and volume (size) of the reports, possibly with computer processing time factored in. Bibliographic research on new orders might be sold by the hour, like consultant fees, or it might be sold per order, or be "free." Even speed of service could be sold at a separate price. However, some services seem not to submit at all well to being priced separately: foreign language expertise, familiarity with the publishers and bibliographic control of specific countries, reputation (accuracy, experience, trust), and timeliness are a few such services. These are expensive services, but I list them as strong candidates for the basic package, because vendors would be hard pressed to find a way to attach prices to the quantity of any of these services used by a particular library. It is interesting to note that these basic services--NOT the ones more apt to be unbundled--rank as the "most significant factors in academic ARL institutions" for influencing selection of serial agents in the 1986 survey by Derthick and Moran. 25 In light of the foregoing discussion, the tbllowing services seem to be likely CANDIDATES FOR BEING UNBUNDLED from the basic serials service package in some fashion: *

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customized fiscal and bibliographic reports, and reports of serials changes annual renewal lists -- JOSEPH W.

BARKER --

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invoices in machine-readable form (tapes) other invoiciffg special services claims, rush claims rush ordering pre-order bibliographic checking and reference work toll-free calls, E-mail lines online ordering and automated claim services requests for back issues with order catalogs and other printed publications customer service site visits

As discussed earlier, each vendor who elects to unbundle some or all of its services will no doubt approach each of the above services a little differently. Such diversity is what makes the unbundling of services a dynamic and interesting marketing strategy. Pricing unbundled and basic serials vendor services. Before looking at how unbundled serials service charges might be structured, it is important to recall from our earlier discussion that vendors NEED the revenue gleaned from present service charges to make ends meet, make a profit, and continue to exist. Unbundling, therefore, cannot result in less operating capital for vendors overall, unless it results in less costs for them. If some services are unbundled and priced to bring in less revenue than they presently do, then others must be allowed to bring in more revenue, or the need for some of the current costs must be eliminated. There will be an art to unbundling serials vendor services: the price must guarantee the minimum revenue needed for the basic services, which all vendors must provide to all libraries, while setting prices for other services competitively; and successful vendors will need to present a marketing front that steers customers away from expensive and rarely used services, while it provides at least the appearance of answering the demands from serials managers for rationality, flexibility, and accountability in pricing of services. A wide range of possibilities exist for vendors to present rational PRICING STRUCTURES once unbundling begins. I will suggest a few possibilities here. Pre-packaged accounts. Some vendors are likely to unbundle their services into various packages of services, each available at a fixed service charge, rather like some banks offering checkingaccount packages. We might see the "No Frills" account, with the lowest fee, and little or no use of vendor services other than timely placing and renewing of orders with standard-form invoices. We might also see the "Precision Account," for customers that require no bibliographic assistance, - - UNBUNDLING SERIALS VENDORS' SERVICE CHARGES - -

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that issue claims only after carefully verifying that a publication was indeed issued, and that have no backlogs. There might be a "Self-Helper" account for libraries that elect to claim directly to the publisher. And on the upscale end of luxury, at least one or two vendors might offer a "Golden Passport" account with limitless vendor services within certain prescribed guidelines. The point to these whimsical suggestions is that one approach to unbundling is to enable libraries to choose among pre-packaged services. Each would be priced with an eye to the number of libraries expected to use it and the cost of services it includes. Services sold separately. Along with one of the pre-packaged accounts, some libraries might elect to pay a fee for specialized services. These fees might be unitized (e.g., so much per claim, so much per hour for bibliographic reference work, as mentioned earlier). Or they might be offered in grouped quantities (e.g., so much for a certain number of claims, volume of reference work, or assortment of reports). Rebates, discounts, and bonuses. We can look forward to creative use of these price-based incentives, probably in conjunction with the choices already mentioned. A certainbasic service package might allow a high use of certain costly services, with rebates if they are not used beyond a certain threshold. (Already we can get rebates for prepayment of renewals.) Discounts might be provided for libraries that time their claiming for lulls in the vendor's annual work cycle. And bonuses might be earned when a library provides a publisher address new to the vendor's files. One's imagination can be allowed free reign in this area. The game is to add some allure to the standard business, to spice up the notion of using a particular vendor, and, of course, to keep the vendor's revenue adequate. Special automated services. Such specialized services as tape invoices, online check-in, and automated claims might be priced completely as add-on services, charged by connect time, number of transactions, and so on. (Some companies do this already for some services.) Libraries that do not want them would be allowed to see their service charges remain at whatever levels they agreed to in their basic packages. Title "Mix." The quantity of high- or low-discount titles and the number from easy- or hard-toservice publishers could be negotiated as a separate factor in an unbundled environment, independent of the services a library uses. Or mix could result in a rebate or surcharge, depending on the SUMMER 1990

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attractiveness or difficulty of the library's list. Fees might be lower if libraries contract to keep their "quality" titles with the vendor for a specified number of years. These are some of the possible forms unbundled prices might take. This list is by no means complete, but it suggests what we might look forward to. The potential is very positive and exciting. At the same time, the potential is there for confusion not unlike trying to make sure one has considered all the possibilities and made the best choice in choosing bank accounts (or any number of other services, like tax advisors, health-care providers, lawyers, or life insurance). In the midst of this confusion, some real advantages and serious risks await us if we venture without precaution into unbundling serials services. Advantages of unbundling for libraries. If each library were allowed to pay for what it uses vendors for, libraries that use few costly services would not be subsidizing those that use many such services. Conversely, libraries that use many such services would be required to pay their own way. For both types of libraries, knowing what vendors would charge for specific services would enable library managers to make more informed management decisions. With unbundling, the effort of finding out what specific services cost to individual libraries may prove to be worth the endeavor of ascertaining such data. If a library becomes able to know the added cost of having a particular service contracted out to a vendor, and knows the cost of doing the service in-house, librarians can decide what is best done where, and what is saved by discontinuing a service altogether. Unbundling may create the impetus for better cost studies, and re-examining priorities in libraries with the promise of direct savings to the library's materials budget. To dramatize this potential with an oversimplification, let us consider that every 1 percent of service charge on a $200,000 serials bill represents about one FTE clerical staff (disallowing the training, supervision, space, and benefits costs). Since many of us have multimillion-dollar serials accounts, we can begin to see how unbundling might pay off. Serials managers with the ability to negotiate individual fees by deciding what not to pay vendors to do might be headed in the direction of what Marcia Tuttle advanced as the "obligation" of the serials manager: "to become a full and equal partner in relationships with serials agents and journal publishers. "26 Advantages of unbundling for serials vendors. For vendors unbundling offers the potential, discussed earlier, of affording new ways to market their services in a saturated and stagnant market. It also offers the possibility of assigning realistically higher prices on

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services that cost vendors the most to provide. Thirdly, it offers the possibility for smaller vendors, perhaps new vendors, to break into the market largely cornered by a few giants at present: if the smaller vendors can appeal to a number of libraries with high-quality basic service and with attractive but scaled-down service packages, these vendors would be able to avoid the immense overhead and start-up cost of developing the full range of automated services offered by the giants. If this change results in more choices of vendors for libraries and broader competition for vendors, it will probably be healthy for the serials vendor marketplace in the long run. Risks of unbundling. An area for which there is cause for serious concern is the fairness of prices if serials vendor services are unbundled. I talked with a few vendors at the ALA Conference last January and learned that they do not know what their actual unit costs are. Vendors set prices for most services in terms of their combined costs, and, if they were asked to break out the costs of individual reports, claims, reference work, and other services, they do not at present have firm data to base these prices on. Without these data, vendors are likely to charge what the customer will accept--or they might undercharge or overcharge in terms of their real costs. Then there is the matter of the fair price for the basic package of services. What portion of the current service charge is truly attributable to basics? Do any vendors want to come forward and tell serials managers how much (or how little) of the current charge the basics represent? In deciding what is fair, it will be necessary to come to grips with determining how much of the publisher discount "belongs to" the library, and how much of it is part of the margin of the vendor. 27 Vendors and libraries alike can stand to lose in the unbundling of serials prices. It could, at least initially, be a vicious price war. The contractual arrangements and obligations of both vendors and libraries are another area for which we should be concerned. For how long should a library or vendor commit to a basic price? What warnings should be given if either party wants to modify terms? Is the order mix to be guaranteed? What happens if libraries decide to order directly with the publisher some of the high-discount titles? or decide to switch or split business because of a better deal with another vendor. Who is responsible if publishers decide to alter their discount schedules significantly? or if the dollar's purchasing power changes radically? or if significant publishers change their "must order direct" policies? Vendors' and libraries' rights and responsibilities in these arenas must be worked out before any deals are closed.

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Another risk is that unbundling will result in even more confusion surrounding vendor choices than at present. If the comparison with banks holds any validity, it is easy to see how unbundling can complicate making choices. It is hard to know which type of bank account gives you the optimum services for the minimum fees and bother. You get conflicting information even within the same bank sometimes, because the fine print is so complex. And new "come-on's" are being created regularly, trying to keep us confused and perpetuate our concern that there may be something better out there, if we would consider changing banks or account types. All serials managers can imagine how difficult choices might be if each of a half-dozen vendors offered a dozen or more packages of services with many possible add-ons, and with the implication that just one of them is the "most right for you." A more serious concern may be that unbundling may lead to erosion of research and development and the evolution of new services by serials vendors. At present, a portion of the overhead of most serials vendors goes into automation enhancements, research into industry, national, and international standards, participation in conferences, and supporting the development of new services and systems. In most cases, this work is done for the entire community of libraries who are prospective users of the resulting developments. Often any financial advantage to a vendor who invested in the research also benefits other vendors. In our present bundled environment, the total cost of this research and development is transmitted through service charges to most libraries regardless of whether they are interested or even aware of it happening. If unbundling leads to prices being set competitively and openly, it is easy to imagine vendors being obliged to invest less in research for the future. If libraries are offered the chance to select services solely on the basis of what they pay for in the present, I can imagine many libraries deciding not to support future research. New and exotic services that may one day become widespread will have trouble getting a footing in the marketplace, because libraries not using them will balk at subsidizing other libraries who do. And this may lead to libraries diminishing their chances of even finding out that new services are out there to be tapped. Arriving at ways to attenuate the damage from these risks will not be easy. Perhaps vendors should continue to include in their basic practice a subsidy for their research and development costs. Perhaps education of librarians about the value of this research will help them account for this added charge. In answering the contractual issues, both sides need to retain flexibility and be aware of state and federal regulations that might pertain. To minimize the confusion, libraries will have -- UN-aUm)IJNGSFJUALSVw-I)ORS'SERVICECHARGES--

to help and inform one another. These solutions shift the burden to the serials managers to determine what is fair, ethical, and necessary for each concern. If they do not take on this responsibility, they may lose out to institutions who bid their serials vendor business or even be forced to bid it themselves. Bidding and unbundling. The unbundling of services and service charges may be a fairer way to address the concerns than certain questionable bidding practices currently being followed. Some government agencies mandate bidding; and controlled purchasing policies and practices enter into the selection of vendor and the services that must be provided under the ensuing contract. This formal bid process is not the practice that I am alluding to as less fair than unbundling would be. What I am referring to is the practice, increasing in recent years, of libraries informally putting their serials list up for bid. I know colleagues who conduct a semiformal bid process every one, two, or three years, obliging two, three, or more vendors to quote prices for a portion or all of their serials list for the coming bid period. Service levels are sometimes specified, but the major emphasis is on the bottom line--service charges. I have been told of a reduction of as much as 3 percent in the service charge through this process. In the present bundled market, one must assume that vendors who bid successfully in these situations are expecting to make less profit on these particular lists than on their other customers, and are hoping to be able to offset the slim (or possibly negative) margin on these deals by larger service charges from other libraries. If this idea catches on, libraries will all have to bid their lists in similar fashion in order to avoid being part of the group being used to pay for the low bids. What if the majority of libraries bid their serials business? The difference between vendors' offers would have to decrease, current services and development of new services would be forfeited, or vendors would go bankrupt. I would prefer widespread unbundling, even with all its potential for making life complicated. With unbundling, semi-formal bidding could be replaced with open discussions of, and shopping around for, what a library needs and expects and is willing to pay. The price lists would be known up front, and those anxious to negotiate the lowest possible service charge could surely find bundles tailored for their needs. CONCLUSION An article with the word "unbundling" in its title would be incomplete and blind to history if it did not mention the controversial practice of "bundling" that largely died out in America some 150 years ago. It had StrMMER 1990

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nothing to do with serials, but it can easily be associated with some of the concerns over serials unbundling discussed in this paper. I am referring to a widely misunderstood and misinterpreted custom of bedsharing among unwed couples in certain New England states prior to the invention of sofas, parlors, central heating, and other comforts we now take for granted. According to two historical treatises on bundling,~ no one has ever agreed whether bundling is good or bad for society at large or the individuals involved, and no one has even agreed whether bundling arose merely from the desires o f the flesh to be kept physically warm in hostile winter climes, or other, more basic fleshly urges. By some accounts, bundling was a way for young men visiting in winter a household with unmarried women to keep from freezing without having to burn scarce firewood all night. By other accounts, bundling was a way for prospective newlyweds to find out in advance what they were getting in the carnal obligations of their marriage contract. Still other accounts describe bundling as a way for unmarried women to explore the market of available men and perhaps discover and attract a mate. Yet other versions of bundling attribute it to male aggression. In the majority of documented cases, the bedded couple were separated by the presence of a fabric garment with many little knots worn by the female. In some cases, a board was put into the bed. What has this to do with serials? Sometimes, if not often, bundling apparently did not yield the results expected by both parties involved: no relationship was kindled, or the relationship took an unexpected turn, or the experience simply led nowhere. As librarians and vendors consider the possibilities of unbundling serials services and service fees, the old practice of bundling may serve to warn us to ask, "Are we really ready for this?" To answer this question, both parties need to plan ahead, communicate, and analyze real needs and expectations, starting now--before even touching those little knots or seriously thinking about tampering with the board that separates them! NOTES 1. October Ivins, "Do Subscription Agents Earn Their Service Charges, and How Can We Tell?" Library Acquisitions: Practice & Theory 13 (1989): 144. 2. Bill Katz and Peter Gellatly, Guide to Magazine and Serial Agents (New York: R.R. Bowker Co., 1975), 100. 3. Harry Kuntz, "Serials Agents: Selection and Evaluation," Serials Librarian 63 (July/Winter 1977): 1436.

Librarian Should Know," Advances in Serials Management 2 (1988): 32. 5. Marcia Tuttle, in the section tiffed "Subscription Agent or Not?" in her Introduction to Serials Management (Greenwich, CT: JAI Press Inc., 1982), 77, wrote "The vendor now must add a service charge to the cost of publishers' prices for the library's list of titles in order to cover his expenses and make a profit." 6. Michael Markwith (the Faxon Company) stated the average discount for serials was 6.7 percent at the June 1988 NASIG conference, according to October Ivins, "Report on the North American Serials Interest Group Third Annual Conference," Library Acquisitions: Practice & Theory 12 (1988): 383. At the 1988 Charleston Conference, John B. Merriman (Director of Blackwell's Periodicals Division in Oxford), said the overall discount to vendors was 7.5 percent in his "Subscription Agents--Are They Worth Their Salt?" Library Acquisitions: Practice & Theory 13 (1989): 151. Dan Tonkery, in his 1990 presentation at ALA Midwinter, reported average publisher discounts at only 6.5 percent. 7. Jan Derthick and Barbara B. Moran, "Serial Agent Selection in ARL Libraries," Advances in Serials Management 1 (1986): 33. 8. Jennifer Cargill, "Vendor Services Supermarket: The New Consumerism," Wilson Library Bulletin 57 (1983): 400. 9. Marcia Tuttle, "The Serials Manager's Obligation," Library Resources & Technical Services 31 (1987): 140.

10. Adrian W. Alexander, "Emerging Services: From Mesopotamia to 'Technogeeks'," Library Acquisitions: Practice & Theory 12 (1988): 92. I thank Adrian for the word "technogeek." 11. Among the more noteworthy: Michael Markwith, John Secor, and Craig Flansburg, "Panel Presentation: Truth in Vending" (1984 Charleston Conference), Library Acquisitions: Practice & Theory 9 (1985): 65-78. Marlene Sue Heroux, "Anatomy and Physiology of the Publisher/Vendor/Librarian Relationship," Library Acquisitions: Practice & Theory 12 (1988): 207-10. JohnB. Merriman, "TheWork of a Periodicals Agent," Serials Librarian 14, nos. 3-4 (1988): 17-36. 12. General affirmation of the benefits of using vendors' common services may be found in many places. See articles previously cited by Ivins, "Do Subscription Agents Earn?" 143; Derthick, "Serial Agent Selection," 28-29; Tuttle, Introduction to Serials Management, 139. See also the forward-looking article by R.L Prichard, "Serials Acquisitions: The Relation between Serials Librarian and Subscription Agent," Serials Librarian 14, nos. 3-4 (1988): 5-10.

4. Jane Baldwin and Arlene Moore Sievers, "Subscription Agents and Libraries: An Inside View of What Every Serials 42

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13. Articles documenting this phenomenon abound, beginning with Charl~ Hamaker and Deana Astle, "Recent Pricing Patterns in British Journal Publishing," Library Acquisitions: Practice & Theory 8 (1984): 225-32. An analysis and summary, with bibliography, is in Economic Consulting Services, Inc., A Study of Trends in Average Prices and Costs of Certain Serials Over Time (Washington, DC: Economic Consulting Services, Inc., 1989). 14. From January 1985 to January 1988, the average purchasing power of the U.S. dollar declined about 50 percent, measured against the British pound, the French franc, the West German mark, the Dutch guilder, and the Japanese yen combined. It held best against the pound, falling about 43 percent. If fell about 55 percent against the guilder, the mark, and the yen. 15. For example: Faxon Company, "U.S. Dollar Decline to Impact 1989 European Journal Costs," Fax Letter 4, no. 1 (1988); "Lower Price Increases Projected for 1989," Fax Letter 4, no. 3 (1988). John B. Merriman appended tables of projected serials costs to his presentations at the Charleston and NASIG conferences. EBSCO, Nijhoff, Harrassowitz and other vendors furnished similar data at conferences and to their customers. 16. Notableexamples: JohnB. Merriman, "publishingand Perishing?" Nature 134 (28 September 1989): 349-50. Jane Maddox, "Harrassowitz: A Detailed Response to VCH" [Letter to the Editor], Library Acquisitions: Practice & /beery 11 (1987): 91-94. Jane Maddox, "The Exchange Rate and Inflation," Library Acquisitions: Practice & Theory 12 (1988): 181-86. 17. Marlene Sue Heroux, "Anatomy and Physiologyofthe Publisher/Vendor/Librarian Relationship:...Borrowing from that Old Country Classic, 'I May Be a Christian, Lord, but I'm a Woman Too,' I May Be a Subscription Agent, Lord, but I'm a Librarian Too," Library Acquisitions: Practice & Theory 12 (1988): 209. 18. Corrie V. Marsh, "Net Book Pricing," Library Acquisitions: Practice & Theory 12 (1988): 169-76. 19. Marcia Romanansky, "The Chicken-Pluckin' Library Market," Library Acquisitions: Practice & Theory 12 (1988): 197-200. 20. Richard Abel, "Cost-Plus Pricing: An Old-Nag with a Second Wind?" Library Acquisitions: Practice & Theory 12 (1988): 202. Abel defined "cost-plus'--not without inherent ambiguity--as "the formula of delivered cost from the publisher plus a percentage of that cost. The added per-

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centage is simply that vendor's cost of doing business plus profit," 201. 21. "New Faxon Invoice Eases Processing," Fax Letter 4, no. 5 (1988): 2. 22. N. Bernard (Buzzy) Basch [EBSCO], "The Business of Subscription Agencies: A Look at Maximizing Profitability"; and John B. Merriman [B. H. Blackwell], "Subscription Agents--Are They Worth Their Salt? nLibrary Acquisitions: Practice & Theory 13 (1989): 129-32 and 149-54, respectively. 23. A succinct account of this event and the vendors' response in the 1988 renewal cycle may be found in October Ivins, "Reflections on the Role of Vendors, Publisher Discounts, Service Charge Assessment, and Market Changes," Serials Review 15, no. 1 (Spring 1989): 76-78. This appears to have occurred purely by coincidence that this occurred at the same time serials managers were already questioning the theory of service charges. 24. What follows is by no means an attempt to anticipate what the vendors might really offer, or to be comprehensive about their services. I have based the list of services that seem to be more or less suitable to unbundling on summaries of vendor services in: Katz, Guide, 149-181; Kuntz, "Serials Agents, n 149; and Merriman "The Work of a Periodicals Agent," 17-36. 25. Derthick and Moran, "Serial Agent Selection," 27. These factors are arranged in that article as a list of six, in this order: 1) prompt renewals, 2) accurate invoices, 3) speedy claims, 4) rapid placement of orders, 5) country of serial's origin, 6) agent experience. 26.

Tuttle, "The Serials Manager's Obligation," 142.

27. For an interesting discussion of the economics of discounts and other aspects of vendor business, see Alan Singleton, The Role of Subscription Agents (Leicester: Primary Communications Research Centre, University of Leicester, 1981): 50-53. 28. "Bundling" is the subject of two historical treatises: Henry Reed Stiles, M.D., Bundling; Its Origin, Progress and Decline in America (Albany, NY: Knickerbocker Publishing Co., 1871 ). Substantial supplemental information and commentary were added in Part II of the republishing: Henry Reed Stiles, M.D., Bundling; Its Origin, Progress and Decline in America; Part IL More about Bundling by A. Monroe Aurand, Jr. (Harrisburg, PA: The Aurand Press, 1928).

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