Economic Strategies for Developing Digital Content and Digital Libraries

Citation

Tanner, S. and Deegan, M. (2002), "Economic Strategies for Developing Digital Content and Digital Libraries", Library Hi Tech News, Vol. 19 No. 3. https://doi.org/10.1108/lhtn.2002.23919caf.001

Economic Strategies for Developing Digital Content and Digital Libraries

Simon Tanner and Marilyn Deegan

Introduction

The effective utilization of resources is one of the most important management activities in developing digital content and establishing digital libraries. The history of library development has many examples of great libraries being created through the largess of benefactors or the tax-paying public without necessarily having much consideration for the cost-effectiveness of the development: between 1881 and 1917 Andrew Carnegie contributed $56m to build 2,509 libraries (www.carnegie.org/). The new market economies faced by today's manager mean that, even in those few scenarios of generous funding, every last drop of value must be squeezed from the available resources to maintain that funding now and in the future. Senior managers are confronting ever more difficult decisions on resource allocation, with the significant issue of opportunity costs to contend with.

There are a number of key aspects to consider in the effective utilization of resources for the purchase, creation and delivery of digital resources:

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  the immediate start-up costs of either creating or purchasing digital content;

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  the further implementation costs for establishing a digital library or even just basic access to bought resources;

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  the costs implicit in managing and maintaining a digital resource in the longer term.

Hand in hand with resource expenditure is the value and benefit derived from the resource itself, how these are measured and offset against costs - can going digital ever become cost-effective? Whether there are intentions to recover costs in data use or to seek profit in the future is a key strategic question that every library manager will have to address in developing digital information resources or digital libraries.

This paper seeks to describe the strategic influences and implications of these issues in the creation, purchasing and managing of information content, and in measuring its cost-effectiveness. Will it be possible to divert resources saved in other areas of operation to digitization or is the only viable option to pass costs on to the users of digital products? Digital libraries being developed have to demonstrate a highly visible value (that is often greater than the actual assets being delivered); otherwise investment in their initiation is hard to acquire. The intersection between what the user is shown to need, what they actually want, and for what they are prepared to pay, is what will constitute value. Without demonstrating "apparent" values, the digital library will be undervalued and thus unaffordable.

The cost and benefit relationship of digital content

The debate continues to rage over whether digital content creation and management can ever be considered cost-effective. The cost of creation and initiation appears so high that doubts are raised that this investment will ever be recouped in financial terms or even in added value, productivity or enhanced organizational prestige and access. This begs a query as to why libraries are actually embarking upon large-scale digitization projects and digital library programmes. The examples are varied and encompass all aspects of library, education and business development. Many corporate organizations are installing knowledge management systems or document management installations and obviously believe that these are cost-effective solutions to their business process. Universities and colleges are developing the digital library concept, often with commercial software solutions and at great expense, because the belief is that this will convey educational advantages to their students and researchers, whilst enhancing the image of the institution. Public libraries that have a civic duty to provide maximum access to publicly available information are embarking with greater confidence than ever before on digital projects, and are developing high quality resources for free or low cost access. Governments are gearing up to provide public services and information through electronic means both as a way to disseminate more widely and as a means of reaping perceived benefits in efficiency. National Libraries such as the Bibliothèque National de France and the US Library of Congress are investing heavily in content creation as a means of preserving and promoting national and cultural imperatives.

All of this activity and yet it is hard to find real evidence of how cost-effective these developments are in real terms. Kenney states that "cost-recovery solutions have been advanced, but to date there is little hard evidence that they will succeed" (Kenney and Rieger, 2000, p. 171). Further studies show that digitization is becoming a commercialized activity for libraries, as found in an IFLA/Unesco survey, with 7 percent returning commercial exploitation as a selection criterion for digitization (Gould and Ebdon, 1999, section 8), whilst the remainder cited preservation of the original, and improving access. Commercial entities like Questia (www.questia.com/) have secured $130m in venture capital and promise at least 50,000 digitized books on start-up, and 250,000 volumes within three years (Dolphin, 2001, p. 104) - these commercial start-ups are a risky proposition and some are already failing in business terms. There is some evidence that costs in some cases may be well balanced by the intangible or indirect benefits, especially so in national libraries, where the purpose is to reap returns on investment not in terms of money, but in cultural benefits.

If we look at funded activity in this area, then we can see, for instance:

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  £50 million for digitization from the UK's New Opportunities Fund.

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  CAN$ 75 million (~ £35 million) on content digitization programmes in libraries, museums and archives via the Canadian Federal Government's Digital Cultural Content Initiative.

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  >£1 million on national digitization projects in Denmark in 2002.

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  >£1 million start-up costs at the University of Central England for digital library development.

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  >$12 million expenditure over five years on the Library Digital Initiative at Harvard University, USA.

The challenge facing all the recipients of this funding is to transfer projects into programmes and to develop financial models that will sustain services, resources and development into the period after the initial funding has ceased.

This paper will now focus upon the dilemmas facing libraries in presenting new modes of access to information and upon how electronic commerce might affect their activities. It should be noted that libraries in particular have been utilising e-commerce techniques and technologies such as Electronic Data Interchange (EDI) since the 1970s and thus have an insight into e-commerce's trials and tribulations, but are also aware of its great advantages in the management of library services.

Purchasing digital content

Whilst the creation of content for the digital library seems both desirable and viable, it will not be the sole form of digital resource held and managed by the digital library. Bought resources from owners of copyright materials will be likely to make up the majority of the materials held in most digital libraries. These materials may be "born digital" resources, like database products such as OCLC Firstsearch (www. oclc.org/firstsearch/databases/), or may be digital recreations from original materials, like the journals available from JSTOR (www.jstor.org/). From the recipient library perspective, they may as well both be regarded as "born digital", as that library will only have to deal with the resource in its digital format. This factor is viewed as so strategically important to some libraries that they have taken the approach of designing their initiatives around the future supply of born digital resources. In particular, the Harvard Library Digital Initiative has developed the philosophy of managing digital resources within the library context and infrastructure, rather than focusing on the digital to the detriment of the core library goals. Managing the costs and materials involved, the methods of access and the integration process, while balancing the resources against the needs of the rest of the library, is a key strategic management issue.

There are several models applied by publishers in charging for these digital materials. These interact and interlock, as the publishing world attempts to balance the delivery of technical advances with retaining profitability. Information resources may be offered to a library in one of three main marketing modes:

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  the site licence;

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  the individual subscription;

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  the pay per view option.

Larger publishers will generally prefer the site licence model, while the pay per view option will mainly be championed by the not-for-profit publishers and smaller institutions pursuing a more active market. In general this approach appears to have been followed, but the actual market is highly complex and the nuances are intriguing and instructive for future development. The future of charging will be a hybrid of all three main marketing modes.

The site licence model is offered to the organization as a whole, through the library, or may be sold directly to the most relevant division. The costs of use are borne by the purchaser on behalf of the organization, and use of the resource is free at the point of use by approved users. The organization pays one fee for all this use for a limited period. These rates may vary according to the amount of digital resource being purchased (such as number of journal titles), the size of the organization and the level of expected or measured usage. This model remains popular but there are some aspects of the implementation that have been unpopular, especially when purchasing from the major journal publishers. Some of these require libraries to continue to subscribe to the paper version of the journal, with the electronic version as an add-on cost on top of the journal subscription. This makes them more expensive and reflects the desire of the publisher to maximize revenues from added value services.

Such services may potentially be offered to the individual as an annual subscription or on a pay per view basis. Personal subscriptions are directly analogous with print subscriptions, but the individual loses out on two counts: they miss the technical and subject guidance of the library plus they have access to the materials but not any ownership of them in the longer term. In the pay per view model, the individual may access the resource to a certain level at zero fee or low cost subscription for the purposes of identifying the required resource. Once the resources have been located and browsed, the user then pays a fee for full use of items, such as the printing and viewing of the full text of an article, the viewing of a streaming video or the licensed use or printing of a higher resolution picture. RosettaBooks (www.rosettabooks.com/), for instance, offer a time-limited product, a self-destructing e-book, which is electronically available at low cost for up to ten hours before the content disappears and has to be renewed. The concern for librarians is that, as more and more published content goes digital, they will have to constantly pay for the work via a licensing model - or risk losing it.

Interacting models

What becomes clear is that these models will all interact, and will have consequential impacts upon the purchasing organization. The site licence model seems to protect the interests of the larger publishers, whilst conferring benefits to the purchaser in terms of organization-wide access at low unit value costs with predictable (if ever increasing) budgeting. The pay per view model is more unpredictable for the organization if individuals choose the level of use but the organization pays the bill. Historically, this has been an expensive way to use such resources, as demonstrated by the relatively small number of organizations that could afford unlimited end-user access to online databases suppliers such as Dialog in the 1980s and 1990s, because the charging was based upon usage and time spent connected. As we discuss below, the pay per view option also has inherent start-up risks for the publisher, in that initial returns on investment require knowledge of likely end-user behaviour that is generally not possible at the beginning of resource development.

Acquisition dilemmas

For the acquisitions function of the library, the purchase of digital resources remains a difficult balancing act of apparently conflicting interests. The publishers want to retain and enhance profitability and thus the costs of print journals are rising rapidly every year. Journal prices in the humanities, medicine, science and technology rose by 55 percent between 1994 and 1999 (Maynard, 2000). Electronic availability of journals is not relieving the cost to the library. It is often treated as a value-added service, rather than a replacement technology, especially by Reed Elsevier with their large share of the market (www.reedelsevier.com/). Thus the library budget appears to be shrinking for the same amount of information resource and the user demand for more digital content direct to their desktops continues to grow. Purchase of a digital is likely to mean less money for a paper-based, and thus the balancing of costs against opportunity has arguably never been harder for the library manager. Some institutions have gone down the road of direct charging for the use of digital products. This is surely short- termism that may help balance the books today, but library managers may find that the library itself becomes under-funded and non-existent in the future. If the traditional library user transfers their sense of value from the library as a service provider to the provider of the few digital resources for which they are individually paying directly, then the further diminishing of the library's role could accelerate.

The future remains complex, with a hybrid approach the most likely to succeed, as long as the information professional takes a central role in promoting the best products for the most appropriate information, and acts as a valued guide through the myriad resources.

The cost of managing digital content

In the light of the expenditure already made on creating or purchasing digital content there is yet another shock in store - the cost of managing that content and keeping it accessible over time. Digital preservation and the basic issues of how much it will cost to "keep and show" information are imperative to planning and budget bidding efforts. Unfortunately the answers are either too vague or too frighteningly high cost to be much comfort - as found by Hendley (1998), and as entertainingly put in a slightly different context by Baker (2000) - "like missile defense, leading-edge library automation is a money pit".

Sustainable development and funding

Sustainable development and funding are needed to manage the digital content effectively into the future. Without these two factors, relevant technology cannot be renewed, skilled staff cannot be retained and the intellectual, cultural and educational rewards cannot be reaped. To develop in a sustainable way will require support at the highest levels of the organization to enable it to move from project-by-project funding into a more secure programme base. Any materials that are created will need to be managed into the future, and resources for their perpetual care should be established to address the complete lifecycle of the digital objects, including their long-term management for access. Further, there needs to be continued and extended co-operation between institutions, including further extensions of the commercial academic co-ordinated effort, as seen in the relationship between Chadwyck-Healey and the University of Virginia to produce a large product: Early American Fiction 1789-1850 (Seaman, 1999). This sharing of skills, resources and responsibilities allows for greater development and long-term management than would be possible by focusing on purely internal agendas. Beagrie (2000) argues that such developments are "quite probably beyond the means of any single educational or cultural institution".

Reaping the rewards

To achieve sustainable development and future funding, digital content and services need to be embraced by their audience for their added valued. Digital resources will be slowly substituted as the main point of access to some traditional resources, and services will be developed based upon the existence of the digital version. The hope of many is that, as the services become used and valued, then the user will be willing to pay at least part of the cost for this added value or the convenience offered. This seems acceptable. The researcher, who no longer has to cross an ocean or continent to view the ancient manuscript central to his or her work, has saved considerable money, so logic suggests that they should pay for some of the cost of providing the service. The genealogist who no longer has to wade through reams of papers and microfilm to find their distant relative, but can do complex and comprehensive searches of a specific resource, might be willing to pay something towards the service. After all, users have always paid for the reproduction of library resources for personal access such as photocopies, microfilms or 35mm slides, etc.

The assumption that users will pay for added value is predicated upon that value being visible to them and their ability to compare it favourably with past methods. Content is the critical factor according to Seaman and "nothing brings people back like a well-selected, reliable, integrated and catalogued set of data" (1999, p. 15). However, the genealogist may not value the increased searching facility, if they trust their research skills greater than they trust the electronic resource or if they perceive the cost as being too high in relation to the cost of going to the physical resource for themselves. Also, in both scenarios above, the suggestion was that the user would pay something or a part of the cost of the service and resource provision, not that they would pay it all. Models for complete cost recovery are few and generally based upon a resource of such intrinsic value to such a wide audience (such as a great work of art) or on massive content aggregation, that the commercial imperative actually subsumes other information goals. It is thus unlikely that many organizations will be able to make convincing revenue-only justifications for their digital services, but this should not dissuade them from seeking contributions from their user base. The key question then becomes how should these be sought and what mechanism best suits the organization and the intended audience.

Several models have been offered for digital commerce. In synthesis these are:

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  Free Web site. Where the content is free and the advantage gained by the host organization is the prestige of providing such a valuable resource.

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  Controlled circulation subscription model. Where a registration is required in order to gain access to the resource. Professional bodies sometimes use this for access to their materials and the membership fees defray the costs of provision. Other examples are newspapers that may be using the information for market information and thus gaining advantage from controlled access to a proportion of the resource.

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  Subscription model. Where the user or organization pays directly for access to a specific resource or to an aggregated set of resources. Frey (1997, p. 31) points out that working out the charging level is critical and not a trivial consideration with "the Wall Street Journal Online, where over 750,000 subscribers used the site when it was free, but only 70,000 users subscribed to the site once a licensing fee was implemented". A disadvantage of this model is how visible it is, with the user/organization paying a lump sum in advance of any benefit received, making start-up risks high. If the users do not value the service enough to risk advance payment, then it will fail financially in a very short period of time without other sources of income. Subscription- based services must be supplying a critical mass of content in a key area to become viable.

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  Advertising subsidized models. In this model advertising revenue is raised from end user access to the resource, with adverts being displayed in banners or frames around the content. This model assumes a very high level of traffic by commercially desirable users for it to be viable, and thus may not be suitable for some content-based sites. Also, some organizations may find that advertising contradicts their charter or their users' perception of them and is thus counter-productive. The advantage of this model is that the user pays quite indirectly for the service and thus may feel that they are getting an excellent deal, while the host institution has fewer problems chasing payment for use. Portals can leverage high levels of usage to gain revenue, not just through direct advertising, but also through sale of limited proprietary products or services and through-sale, although this drifts into the domain of the transactional model.

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  Transactional models or pay per view. Where the premise is that the user pays for what they use. This usually means that a certain level of information is free and may convey satisfactory use to a wide number of users, but that charges start when the added value aspects are invoked, such as higher resolution images, full text output, quality prints or viewing streaming video. The main difficulty with this model is gathering the payments in as painless a way as possible for both the user and the host. The new popular payment modes, such as micro payments, may make this easier but the cost of gathering the money must always be factored heavily into both the marketing of the service and the amount to be charged for it. Anecdotal evidence suggests that some early implementers of the transactional model actually found that they were charging less for the product than it cost them to administer the payment process.

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  Broadcast models. In this model information based upon a user profile is "pushed" directly to their desktop without the user having to constantly interact with a resource or the Internet environment. This model is still based upon advertising revenues with Infogate the "antidote to information overload" as a prime example (see www.infogate.com/) or the Eudora e-mail system offering their full product, if you allow them to advertise within the application space as another (see www.eudora.com/). It is unlikely that this model will suit any but the most commercial of digital library developments.

These models are predicated upon the assumption that the digital library has something to sell. It is likely that this will be content-based at first and mostly of low market value to a global economy but, as more teaching, learning, cultural and presentational services are added and layered on to the content, then these will certainly become much more marketable. The inclusion of teaching packs and lesson plans in the Atomic Archive (www.atomicarchive.com/main.shtml), a site that explores the complex history of atomic bomb development, greatly enhances the other historical, scientific, photographic and video content presented. First and foremost, though, is the need for content and accessibility and from that point value can be added.

Reaping the future

The route to sustainability in the future is not going to be down a single path, nor will it be a simple process. The hybrid routes both for the future of the library service and for the models of sustainable development seem the most viable. Beagrie (2000) argues that "digitized cultural information, no matter how worthy, is not in and of itself commercially viable" and that the investment in its development, maintenance and delivery can only be achieved through initial non-commercial development funding or sustained by supply of value added services. This is certainly true of the "worthy" end of the cultural tableau and in other areas there is serious competition to the modern library from the dot.com e-libraries. These pressures stretch the library manager's justifications for digital library development in their own institution and their need to secure sustainable funding for all information services, whether e-based or traditional. The key remains the unique value of the content that could be presented and preserved and the unique modes of access that may be designed for the future. The justifications for investment are not going to be only financial, and strategists need to seek other tangible advantages for their organization to help justify the initial costs of development.

To develop in a sustainable way will require support at the highest levels of each organization and should be based upon long-term goals and returns rather than short-term gain. It is imperative that short-term technical solutions for short-term gains are avoided and that Internet-based systems do not risk the underlying valued digital assets by focusing on the immediate problems of funding or technical infrastructure. What appears impossible today might be tractable in the near future. It may be more strategically sensible to wait until the task can be done correctly than to jump in too early, wasting resources and potentially having to rework the project, because it is in advance of current possibilities. Library managers will need to bear in mind the opportunity costs inherent in chasing new technology, and ensure that they focus on core information goals.

The future is rife with possibilities for new fund-raising and charging models, with a constantly expanding potential audience. The rise of micro payment, especially in mobile telecommunications technologies enabling Internet access such as i-Mode and WAP, has been meteoric. Under this scheme the user pays a tiny amount per transaction direct to their phone connection supplier, which appears in their overall connection bill rather than constantly referencing a credit card number or other comparatively cumbersome payment method. Particularly in Japan, where ten million phones had Internet access utilising micro payment modes by May 2000, information provision will shift from how much it costs the user to be connected (Telco's or ISP charges) to how much the unit of data/information costs. With the further rise of WebTV, the sheer penetration into the general global population of access at potentially low cost to electronic information resources and services will lead to greater competition for revenue and for an audience in a truly global economy.

Acknowledgement

The concepts discussed in this paper are dealt with in more detail in Digital Futures: Strategies for the Information Age (Deegan and Tanner (2002)).

Bibliography

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Simon Tanner(s.g.tanner@herts.ac.uk) is Senior Consultant, HEDS (http://heds.herts.ac.uk ).Marilyn Deegan(marilyn.deegan@queen-elizabeth-house.oxford.ac.uk) is Digital Resources Director, RSC, University of Oxford. (http://www.qeh.ox.ac.uk/rsp/indexrsp.html).