Logic of Costing CD-ROM and Other Databases for Institutions -Reply

[Dan Lester]

>>> "Clifford Urr" <curr at smtpinet.aspensys.com> 08/06/97
04:39pm >>>
Can anyone explain how institutional prices are arrived at for
access to a commercial database? That is, what is the logic
behind calculating pricing a college library of say, 500
students as distinct from pricing the same database for
access to one person? (This assumes any of the 500
students can get access to the database.) 
--------------------
Here are a few comments from a number of years with this
issue.  All my experience is in medium sized public
universities (ca 10-25,000 FTE).  The charges follow the first
law of business sales, namely "whatever the market will
bear".   I really believe it is that simple, and that for the vast
majority of products that is how the prices are set.  Yes,
there are basic costs to be recovered, and some desired
profit margin.  But all this is being developed in a vacuum by
people who don't know whether it should be $5,000 or
$10,000, and also don't know whether they can sell a hundred
or a thousand or ten thousand.  I've noticed that prices drift
downward more often than not, but in many cases they don't
do anything that makes sense to me.  

Examples:  I'll not mention products or companies.  All prices
are simplified examples and are not to be taken as accurate
price figures.

Last year a vendor of multiple CDROM databases had
products that followed this example:  

1 user, not networked, $2000
1 simultaneous user, networked, $3,000
2-8 simultaneous users, networked, $6,000

This year they changed the pattern.  The first two are the
same, but....
2-4 simultaneous users, $6,000
5-8 simultaneous users, $9,000
and so forth.  They pointed it out and praised themselves for
"not increasing prices".  Yeah, sure, whatever.  For us, on
some products, where 4 were adequate, they were right.  For
other products where we must have more than 4 users, it was
a terrible hit.  For our needs across a number of products it
averaged to about a 20 percent increase overall, which
naturally killed a few more journal subscriptions.  

For web databases, some charge the same schedules for
"simultaneous users" on the web as they do for CDROM,
which sounds good until you learn they determine
"simultanaeity" by cookies, which have a 30 MINUTE
expiration.  Of course this can mean that four users of a
product all leave at the same time, and the next users still
can't use it for a while.  Incredibly stupid.  They even have
claimed that it is "impossible" to put in a button to "exit" and
thus clear the cookie.  They must think we're really stupid. 
Hell, even I, a nonguru on such things, could write that.

On the numbers based on number of users in the university,
major, department, or whatever, there is again no
consistency.  Some want to base it on total FTE students
and faculty, some on students only, and some on headcount
(a major difference for most urban institutions).  Some want
you to monitor it so heavily that they are sure you're not
letting any non-university people use the product.  That is a
hassle, no matter how you implement it in a public building. 
Yes, that is a different issue for private school libraries, where
that is done at the entrance anyway. 

As to how they figure it, I've no idea, other than my original
suggestion, plus some theory that some "scientist"  or
"marketer" figured out..  And, naturally, they won't tell you the
answers, since it is company confidential, proprietary, etc,
which I DO understand.

There are other variations too, and I could mentiion a dozen
more,  but I'll only hit on one, particularly common among
ejournal publishers.  This is the basic "Cocaine Theory of
Marketing".  They express it much like they dealer saying
"hey, kid, sniff this stuff and you'll love it, and its free"
(naturally for the first little while only).  The journal publishers
are giving you "free access to the web based version of the
journals you subscribe to", and they indeed do.  Until next
year, of course.  A major physics publisher did this last year. 
Naturally, they now want an extra $200 a year for each
journal.  I'm the physics liaison librarian, and they loved the
full text at their desk.  But when they learned it was $1600
extra for this access this year, they said NO!.  They would
rather walk a couple of blocks to the library (or send their TA,
of course) than cut $1600 of other physics journals, as one
might expect.  

I guess all of this proves that neither the librarians nor the
publishers know anything about this, and certainly don't know
what the information is worth.

cheers

dan