College and Research Libraries CHARLES H. BELANGER AND LISE LAVALLEE Towards a Periodical and Monograph Price Index This paper examines the various steps and intricacies involved in tailoring a periodical and monograph price index to a university library and looks at a number of issues librarians are wrestling with in an attempt to balance their acquisition budgets. The authors describe the difficulties involved in applying a simple methodology such as a price index when the database is not geared to active decision making. Findings related to the shifting of funds from books to periodicals, the price-increase differential between domestic and foreign ti- tles, and prices paid by the library and those advertised by publishers are presented. THE PURPOSE OF THIS STUDY is not to rein- vent the wheel, as the field of economics has long discovered how to construct and apply price indexes to various commodities, includ- ing library materials. However, publishers and particularly institutional librarians know that book and serial price indexes gen- erally available to them must be used with caution because they represent national price patterns and should, under no circumstances, be assumed to depict individual library char- acteristics. 1 REviEw OF LITERATURE Library Role in I eopardy Few would deny the increasing impor- tance of information in our society as half of the working population is involved with in- formation industries representing annual ex- penditures of one-third of a trillion dollars. 2 This affluence of information coupled with tight budgets and rising library materials has Charles H. Belanger is director, Office of Insti- tutional Research, and Lise Lavallee is research economist, Office of Institutional Research , Uni- versite de Montreal , Quebec. The authors express special thanks to the library administration and particularly to the Technical Services Division for their collaboration. A note of gratitude is also ex- tended to]. Courval for her assistance in the data collection. The views expressed do not necessarily reflect those of the Office of Institutional Research. 416 I put great stress on major research library managers. 3 In fact, constituents of the uni- versity community still expect them to make libraries vital and dynamic centers of inspira- tion, information, and advanced research with an eroding dollar budget. 4•5 Traditionally, universities have been allo- cating approximately 5 percent of their edu- cational and general budget to library opera- tions;M however, this percentage distribution appears to have been used more as a convenient device to divide up funds than as the result of an evaluation of actual library needs. When institutional budgets were on the rise, library managers enjoyed years of expanding collections. 8 Today, they face a completely different set of circumstances: (a) most budgets have been frozen; (b) price in- creases of books and serials have gone up at a much higher rate than other university costs; 9•10•11 and (c) decisions are being made on serial subscription cuts and monograph purchase curtailment. 12•13 This situation leads to the obvious question, How is a li- brary supposed to remain an adequate and equitable interface between users and the ever-increasing production of literature when there is not enough money to meet the commitments of the previous year? Progress in Bibliometrics A survey of library science literature indi- cates a keen interest by library professionals in quantitative analysis since the publication of the Clapp-Jordan formula. 14 The main contribution of that formula was to intro- duce the notion of library materials alloca- tion as a function of the characteristics of the curriculum, faculty, students, and other sim- ilar factors. From that point on, followers have been hard at work identifying and refin- ing the variables most likely to result in equi- table funding. Departmental library usage and literature size were first considered by McGrath, Huntsinger, and Barber. 15 The importance that society and the university gave to the work of a department, as well as its size and composition, was established by Goyal. 16 McGrath gave strong indications that the various features of the curriculum and the academic disciplines should be a heavily weighted factor .17.1 8 Historical ineq- uities and collection evaluations are also fre- quently mentioned as subjective formula var- iables. Besides budgeting and allocation for- mulas, several other instruments designed to suggest directions in the decision-making process have become available. Just briefly, it is worth mentioning cost-effective analyses of library resource allocation, 19: 2M 1 forecast- ing library growth rate techniques, 22•23 liter- ature obsolescence scale, 24 and rank-order distributions of importance and usefulness of · periodicals derived from citation analysis. 25 As Pierce accurately pointed out, these statis- tical techniques have generally been met with a fair amount of skepticism because de- partment chairpersons felt there was a dan- ·ger that the results would be viewed as final decisions instead of guides. 26 Measurement of Price Increases In addition to the quantitative instruments mentioned, library managers have made ex- tensive use of price indexes and studies to jus- tify and allocate budgets. There are four commonly known periodical price studies: the first is the Clasquin or Faxon study, 27 published annually in October and reflecting the price-increase trends of periodicals pub- lished in the United States in the past three years. The second is the Blackwell Index, and is published each year in the May issue of the Library Association Record. 28 Since Black- well is a British agency, all prices are re- ported in pounds sterling only and, contrary Price Index I 417 to the annual Faxon study, the Blackwell In- dex includes foreign titles. The currency con- version problem, however, makes it less read- ily Usable. The third periodical price study, the Widener Periodical Price Index, was re- cently developed by Williams in order to have a better grasp on the price increases by country of origin. 29 Finally, Brown and Phil- lips make an annual update of price increases of American periodicals for as far back as a ten-year period. 30 On the monograph side, price studies are generally available under . the form of yearly increases; Publishers Weekly carries such comparative statistics. 31 No matter how useful these figures are to depict price patterns, there is ample justifica- tion for preparing local indexes. · The local mix of academic disciplines in conjunction with the differential rates of inflation across disciplines is an obvious reason. Statistics compiled by Brown and Phillips show that the average subscription price of an Ameri- can periodical last year was $30.37. 32 Fur- ther scrutiny indicates that chemistry and physics journals averaged $118.33 as com- pared to $14.67 for history. The proportion between domestic and foreign titles is also a determining factor; a case in point is the Un- iversite de Montreal. As one of the largest universities in Canada offering myriad aca- demic programs, the Universite de Montreal also happens to be a French-speaking school. Therefore, not only does it have to import, like most Canadian research universities, a great deal of the scientific literature from outside the country, but it must also try to accommodate students with a certain num- ber of French reference books and periodicals whenever feasible. These conditions increase immensely the probability of dealing with agents, paying more for postal services, and being at the short end of the currency conver- sion business, especially when the Canadian dollar stands at an unfavorable position vis- a-vis the already devaluated u.s. dollar. METHODOLOGY A typical price index is generally designed by comparing the observed price of a com- modity at a given period (t1, t2 ... , n) with the price of the same commodity at an agreed-upon base year (to). The construction of such an index necessitates a fundamental decision regarding the homogeneity of the 418 I College & Research Libraries· September 1981 commodity throughout the years. in other words, it must be ascertained that price vari- ations to produce an item are directly caused by fluctuating costs alone and are not the result of another mixture of components be- ing affected by different rates of inflation in the production process of that item. This de- cision is often an arduous one because of the difficulty involved in identifying the princi- pal component goods and in gathering hard data on them. Can one assert that the first edition of a book published in 1970 represents the same commodity ten years and three edi- tions later? This type of inherent problem ac- counts for the limited maneuvering range one is confronted with in this kind of study. Three major steps were involved in the data collection. First, it was necessary tore- construct the financial picture of the univer- sity, the library, and the acquisition depart- ment, and to establish relationships among them in terms of their relative importance and their annual evolution for the last ten years (base year= 1971). This process also served to determine the number of titles bought by subject area and the amounts of money used. Second, a sample of subject areas and titles had to be selected. Ideally, all subject areas and titles should have been included, but this route proved to be highly impractical since the needed information had to be collected manually. Therefore, it was decided that the sample should represent: (1) the four coun- tries that were the major sources of titles, namely, Canada, France, Great Britain, and the United States; (2) the four main catego- ries under which subject areas were clus- tered, that is, health sciences, humanities, pure sciences, and social sciences; and (3) the subject areas that constituted major expendi- tures by the acquisition department. The li- brary acquisition department staff was then asked to provide at least five periodical titles on the one hand for each of the twenty-four selected disciplines in each of the four coun- tries. This initial sample selection of 960 ti- tles, split equally between periodicals and monographs, was judgmental in the sense that all titles chosen by the acquisition staff were considered essential reference instru- ments to students in the subject areas. Usage and content were the key elements in the defi- nition and application of the term "essen- tial." Third, the differential between the pub- lishers' advertised prices and prices actually paid by the library was of significant interest. This information was gathered from catalogs of publishing companies and payment- history records of the library. 33 However, catalogs such as Ulrich's are not necessarily reliable since prices are not always updated. To cover for that possible loophole, prices were checked against those directly adver- tised inside most periodicals. Many invoice- related difficulties led to the elimination of a number of titles. Periodicals published less frequently than semiannually were dropped and so were the titles not paid on the annual subscription basis. Finally, when all techni- cal difficulties were resolved, a sample of 256 periodical titles distributed evenly across the cells was left. Aggregates of the total cost of the sixteen periodicals represented in each cell were computed in order to establish a comparison between publisher and library paid prices. Disparities between 1971 and 1979 prices were measured with a price in- dex, on the one hand for publisher prices, and on the other hand for library paid prices. Although the authors intended to cover both periodicals and monographs, it became obvious, during the data collection, that the lack of a manageable and consistent database on monographs would lead only to unreliable and meaningless results. The main problem arose from the hidden costs of book prices. Sometimes invoices did not indicate whether insurance, postage, and discount dollar fig- ures were already mixed with the actual book price. The size of purchase orders was an- other imponderable factor influencing the price of a book; by and large, the bigger the purchase order, the less expensive the book. Finally, the same book was often marketed by different companies from one year to the next. All these obstacles led to an imbroglio. Therefore, a more extensive case is made with periodicals while monographs are not treated in detail, but simply in very general terms. RESULTS The dollar figures presented in table 1 indi- cate that in the last nine years, the university educational and general budget has more than tripled to reach an index of 345 as com- pared with fiscal base year 1971-72. This percentage yield represents a yearly average increase of 43 percent in inflated dollars. This growth rate might, at first sight, appear phe- nomenal; however, during the same period, head-count enrollment went from 18,000 to 28,000, with large contingents of students registering in the more expensive professional programs. The library (329) and acquisition (335) budgets kept a slightly slower pace, al- though similar, than the university budget. Observed dollar amounts allocated for all li- brary expenditures varied between 5 and 6 percent, which is about the level of funding usually reported in the literature. Out of this total library budget, the share used to pur- chase periodicals and monographs ranged from 20 to 24 percent. A rapid overview of table 2 leads to a rather typical finding. Financial resources were invested in periodicals at a much higher rate ( 431) over the years than was the case for monographs (264). In fact, there was a com- plete reversal of the relative proportion of funds spent for periodical subscriptions and book purchases in the last five years. Al- though periodicals are now receiving the larger share of the new distribution, it is nothing short of astonishing to note that the number of periodical titles has begun to de- crease along with the sharp downtrend of monograph titles (79). When one examines the periodical price index figures assembled in table 3, the multi- faceted problem of subscription costs be- comes more obvious. The price of domestic journals has risen at a substantially lower pace than that of foreign titles. The fact that this finding has been corroborated by many authors in the literature is of very little com- fort because the Universite de Montreal Li- brary buys an estimated minimum of 75 per- cent of its periodicals from non-Canadian sources, and over 50 percent from Eu- rope. 34·35 Price increases have been particu- larly sharp for publications originating in France and Great Britain, let alone certain publications of very specialized fields, mainly in the health sciences, imported from robust-currency countries such as Holland, Switzerland, and West Germany. By all Price Index I 419 means, the reported figures must be inter- preted as conservative estimates. The varia- tion in inflation among subject-matter cate- gories exhibits differential rates. Canadian price indexes are quite homogeneous while those of the three other countries fluctuate considerably across categories. Table 3 also shows price indexes of periodi- cals as reflected by prices advertised by pub- lishers and prices actually paid by the library for the same titles. This issue is generally re- ceiving marginal attention in the literature despite huge differentials between the two sets of prices. Evidence demonstrates that the library is picking up a much larger bill than the publishers' price rates would lead one to believe. For illustrative purposes, French hu- manities periodicals have an index yield of 378, or 42 percent, per year according to the publishers' posted prices, while the same commodity recorded a price index of 490 for the library over a nine-year period, or an an- nual average of 61 percent. The allocation index that represents the evolution of dollar allotment by funding category was found to be generally higher than the indexes arrived at for each of the four countries investigated. This trend is not unduly alarming since the base-year data are not the same. A more di- rect relationship would have been possible if the library had had available records show- ing the relative proportion of periodicals bought by country of origin in each academic discipline. DISCUSSION OF REsULTS The astronomical inflationary rate suf- fered by most academic libraries in the past decade has left librarians searching for logi- cal, though often elusive, solutions. Many li- brarians have claimed that they were "the victims of discriminatory pricing stratagems" because libraries were charged more than in- dividuals for subscriptions. 36 That libraries are the most affluent group of buyers avail- able seems to be a well-established fact among publishers, and not much relief should be expected there. According to White, who has studied the profit taken by commercial publishers of scholarly journals, there has been no evidence to substantiate unreasonable operating profits. 37 The Cana- dian Consumer Price Index (CPI) for library Fiscal Year 1971-72 1975-76 1979-80 Fiscal Year 1971-72 1975-76 1979-80 University Educational and General Budget Amount ($000) Index 48,600 100 99,500 205 167,500 345 TABLE 1 UNIVERSITY, LIBRARY, AND AcQUISITION BuDGETS ($CAN.) UNIVERSrrt DE MoNTREAL Library Budget Acquisition Budget Amount Amount ($000) Index ($000) 2,910 100 600 5,150 177 1,250 9.570 329 2,010 TABLE2 PERIODICALS AND MoNOGRAPHS EvoLUTION OF BuDGET AND NuMBER oF TITLES Acquisition Budget Acquisition Budget Per . Mon . ($000) Index ($000) Index Per. o/o Mon .% 255 100 345 100 43 57 555 218 695 201 44 56 1,100 431 910 264 55 45 Index 100 208 335 Per . (000) 9.5 13.2 12.6 Library$ Omvemty$ 6.0 5.2 5.7 Number of Titles Mon . Index (000) 100 25.4 139 25.0 133 20.0 ALJuisition $ tbrary $ 20.6 24.3 21.0 Index 100 99 79 ~---------------------------------------------------------------------------------------- ·----------------------------------------- Price Index I 421 TABLE3 PERIODICAL PRICE INDEXES* ($CAN.) A CoMPARISON BETWEEN PuBLISHER AND LIBRARY PAm PRicES Canada Index Categories Lib . Health Sc. 217 Humanities 207 Pure Sc. 225 Social Sc. 229 •Price Index = !.!.= 1979 Prices to 1971 Prices France Index Pub . Lib. Pub . 190 363 298 194 490 378 171 400 365 182 419 313 material-related goods and services has in- creased sharply in the past years as revealed in figure 1. This tendency becomes even more noticeable when libraries are buying a large proportion of foreign titles because of the weakened Canadian dollar. For many years, most libraries have bene- fited from the subscription-agency services because agents would receive substantial dis- counts from the publishers and would pass part of those reductions to the libraries. How- ever, discounts to vendors seem to have been trimmed down and therefore agents are forced to charge more to libraries. In that context, the economic role of intermediaries should be reexamined to avoid paying exces- sive costs for currency exchange rates, ad- dress changes, postage services, and other handling charges. There exists a simple scheme that institutions must uncover to avoid paying twice for foreign money con- versions. For example, a Belgian agent could buy materials from France with French francs and ask the institution to get paid in Belgian francs; obviously, this double foreign currency conversion is likely to be costly. This year, the Universite de Montreal Library is buying more than ever directly from the pub- lishers in an attempt to reduce these extra charges. Still, certain periodicals and mono- graphs, mainly from France, are available only through agencies. Also, there is an edu- cated sentiment among librarians that when services provided by agencies are taken away, the regular library staff picks up the slack. Of course, this situation might result in greater productivity or it might give rise to additional personnel demand. In the latter case, salary increases of the past few years would probably provide enough incentives to examine the economic consequences of drop- ping subscription agencies. Allocation Great USA Index by Britain Index Index Funding Lib. Pub . Lib . Pub . Category 426 310 252 203 399 426 347 279 223 560 388 360 319 315 502 399 308 237 199 360 The toughest assignment that librarians have to carry out now is the preservation of collection development. As reported by . White and Fry, ten years ago libraries were spending twice as much on books as on periodicals. 38 Today, more acquisition dol- lars are being spent on periodicals even though the number of titles is on a downward slope in both categories. In many cases, this convenient shifting of dollars has allowed many libraries to maintain their current level of periodical holdings and to postpone the often unpopular but necessary decisions about canceling triplicate, duplicate, and even single subscriptions. While many li- braries were faced with this problem in the mid-'70s , it seems that this phenomenon has become more acute at the Universite deMon- treal, in the late '70s. How does one go about deciding to renew a subscription instead of purchasing a book? Generally, the line of rea- soning is based on the belief that periodicals are the main sources of research. Studies indi- cate that these decisions must be made on a subject-by-subject basis, as the importance of journals over books cannot be assumed. 31M 0 When confronted with tighter budgets, li- brarians' favored actions have generally been the following: (1) cut down on the placement of titles not previously owned; this seems to be an easier decision than to drop a subscrip- tion that has been automatically renewed for years, no matter the degree of evaluation made on the periodical collection; (2) cancel duplicate subscriptions; this action gives cre- dence to the belief that collection continuity is rated above information use; (3) delete for- eign periodicals, mainly those published in languages other than English. 41 These are the posterior criteria that practice has put in the forefront. It is suggested that few librarians and institutions would approve of these 422 I College & Research Libraries • September 1981 1971 = 100 2 GO 1 :J c 1 postage : book and printing paper year 197 C 1S 71 1~7 2 1 973 19 7~ 1975 19 76 1977 1978 1979 Fig. 1 Canadian Consumer Price Indexes for Specific Commodities guidelines if they were told to apply them. However, dissenters have little choice but to find more rational and equitable ways to al- locate diminishing funds to academic depart- ments. CoNCLUSIONS AND IMPLICATIONS This study produced the following major findings: (1) a drastic shift of library funds from books to periodicals has occurred in the past ten years; despite this transfer, the num- ber of titles is declining in both categories; (2) . foreign periodical titles, which constitute the overwhelming proportion of subscriptions at the Universite de Montreal, put a severe fi- nancial stress on the library budget; (3) peri- odical prices actually paid by the library are higher than those advertised by publishers, because of factors such as subscription agen- cies, postal costs, international exchange rates, and other handling services; and (4) if cost and resource allocation studies are to be conducted with a reasonable amount of accu- racy and investment in staff time, the present database cannot be used. Assuming that the drifting of funds from books to periodicals was a temporary mea- sure, the library management is heading for major decisions about which periodical titles should be continued and which should be de- leted. Although no formulas are available to make these decisions, a manageable informa- tion system capable of providing, on request, hard data on basic questions such as the num- ber and price of domestic and foreign titles by discipline and of establishing relationships with other variables such as the number and level of students, is a sine qua non to equita- ble resource allocation to academic unit and collection evaluation. Because of the high Price Index I 423 proportion of foreign titles purchased by the library, it is also suggested that an in-depth study be undertaken to examine the economic role of subscription agencies. REFERENCES 1. Frederick C. 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Sally F. Williams, "Construction and Applica- tion of a Periodical Price Index," Collection Management 2:329-44 (Winter 1979). 30. Norman B. Brown and Jane Phillips, "Price 424 I College & Research Libraries • September 1981 Indexes for 1979- U.S. Periodicals and Serial Services," Library ]ournal104:1628-33 (Sept. 1, 1979). 31. John P. Dessauer, "U.S. Consumer Expendi- tures on Books in 1978," Publishers Weekly 217:41-42 (Feb. 1, 1980). 32. Brown, "Price Indexes for 1979- U.S. Periodi- cals and Serial Services." 33. Ulrich's International Periodicals Directory (New York: Bowker, 1979). 34. White, "Publishers, Libraries, and Costs of Journal Subscriptions in Times of Funding Re- trenchment." · 35. Williams, "Construction and Application of a Periodical Price Index." 36. White, "Publishers, Libraries, and Costs of Journal Subscriptions in Times of Funding Re- trenchment." 37. Ibid. 38. Herbert S. White and Bernard M. Fry, "Eco- nomic Interaction between Special Libraries and Publishers of Scholarly and Research Journals- Results of an NSF Study," Special Libraries 68:109-14 (March 1977). 39. Harry M. Kriz, "Subscriptions vs. Books in a Constant Dollar Budget," College & Research Libraries 39:105-9 (March 1978). 40. McGrath, "Relationships between Hard/Soft, Pure/ Applied, and Life/Nonlife Disciplines and Subject Book Use in a University Library." 41. Herbert S. White, "The Economic Interaction of Scholarly Journal Publishing and Libraries during the Present Period of Cost Increases and Budget Reduction," The Serials Librarian 1:221-30 (Spring 1977).