Sustaining digital resources: revenue models
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OVERVIEW
Identifiying an appropriate revenue model (or models) for a digital content project or programme is key to its sustainability and development, particularly at a time when institutional budgets are under ever-closer scrutiny in a challenging economic environment. The Strategic Content Alliance commissioned Ithaka to undertake work on business models and sustainability resulting in a multi-year investigation of innovative funding models to sustain digital projects. The results of their studies illustrate the varied and creative ways in which leaders of digital initiatives, particularly those developed in the higher education and cultural heritage sectors, are managing to identify sources of support and generate revenue.
Revenue models
The two reports prepared by Ithaka, Sustainability and revenue models for online academic resources and Sustaining Digital Resources: an on-the-ground view of projects today take a broad look the issues surrounding the mechanisms for pursuing sustainability in not-for-profit projects. Whilst the focus is on online academic resources (OARs), projects whose primary aim is to make content and scholarly discourse available on the web for research, collaboration, and teaching, the advice and guidance is transferrable across the public sector and beyond.
A range of revenue models is identified, taken from those currently operating on the web in both non-for-profit and commercial sectors, accompanied by an analysis the key factors that operate in each model, along with benefits and risks. Full detail and discussion forms the content of the report Sustainability and revenue models for online academic resources and the brief descriptions here are taken from the report. Examples of each model are also offered. The extracts are licenced under a Creative Commons Attribution-No Derivative Works 3.0 Unported Licence
Revenue option criteria
The Ithaka report suggests that the first place to start is to develop a set of criteria against which to evaluate revenue options. These criteria may include:
- Alignment with the mission of the project: Can we implement this model in a way that is consistent with our core values and mission?
- Fit with the project staff’s capabilities and strengths: Do we have the ability to implement this model?
- Demands on staff time and focus: Will implementing this model distract us from the activities that are core to our mission?
- Investment requirements: Do we have the resources to implement this model?
- Level of risk: Can this model be implemented with an acceptable level of risk to our finances and reputation?
- Ancillary benefits: Would this model enhance our reputation or create opportunities to deepen relationships with key constituents?
Direct beneficiaries pay
The methods of revenue generation outlined here deal with the perceived value of the resource in the eyes of direct beneficiaries and the factors that drive their interest to support it financially.
Subscription or one-time payment
In the subscription model, the publisher typically assumes a certain financial risk up front, funding the time and effort it takes to select and prepare the content for publication, as well as the operating infrastructure (marketing, distribution, technology) needed to make that content available. The publisher then seeks to recoup as much as possible of the cost in subscription fees, paid by individuals or institutions. The risk is that the fees will not cover the costs; the potential upside is that they may far surpass it.
Examples
JSTOR a not-for-profit database of academic journals and other scholarly resources
Pay per use
One variant of the ‘user pays’ model is pay-per-use, where the user can either purchase specific pieces of content (eg article or download) or gain access for a limited amount of time (eg by the hour, day, week) rather than buying access to a bundle of content for a sustained period of time, as in a traditional subscription model. Pay-per-use then functions as a way for content owners to reach secondary groups of customers who do not require unlimited access to a digital resource.
Example
Ancestry, a genealogical records resource.
Contributor pays
In the contributor pays model, the publisher seeks to recover costs up front by charging fees to authors or other content contributors in the form of publication or hosting fees. The implication of using a contributor pays model is that a primary beneficiary of the project is the author, who wishes to make his content available on the web and pays the OAR to provide this service. The OAR is responsible for providing the technological and organisational infrastructure to publish content online. Another type of contributor pays model is when an organization chooses to have content it owns hosted on another site. Many scholarly associations pursue such a model, where they work with an electronic publisher to hold and disseminate content. Libraries are increasingly considering this model for making some of their specialised content available to users.
Example Public Library of Science, a nonprofit organization of scientists and physicians committed to making the world's scientific and medical literature a freely available public resource.
Indirect beneficiaries pay
These are methods of generating revenue from those who do not use the resource itself, but instead derive value from having access to those who do, or from affiliation with the mission of the program. Such beneficiaries include those that have a purely commercial interest, for example promoting sales or generating leads in exchange for advertising dollars, partners who value association with the mission and the access to the users or some other assets created by the venture, and host institutions that see the project as a means to advance their own goals.
Host institution’s support
Universities and colleges allocate resources based on their organisational goals and missions – building a new program area, attracting better faculty and students, enhancing alumni relations, raising awareness of their collections, etc. Projects must be consistent with the mission and then make a case to their host organisation as to how they create value for it.
Example
Stanford encyclopedia of philosophy
Corporate sponsorships
Corporate sponsors pay non-profit organisations money or in-kind resources for the right to be associated with the non-profit – and reach its core audience – in a variety of ways. This can be seen as an implicit endorsement of the company and/or its products and services. A non-profit seeking corporate sponsors must understand the needs and goals of the companies it targets, and be able to make a case for how it can create value for them.
Example
MIT Open Courseware, sponsored by Ab Initio.
Advertising
Advertising is almost completely absent from academic websites. This is probably due to concerns about the potential commercialisation of scholarship and scepticism regarding whether advertising could be a successful strategy for OARs. It is also not permitted by some funding bodies and institutions. In its basic mission – connecting sellers with potential buyers and communicating a persuasive message – online advertising is very much like its traditional (offline) media counterparts. Advertisers seek out ways to communicate a message as efficiently and effectively as possible to those people they most wish to reach. They choose formats and publications based on their understanding of the readership, listenership, or viewership that those vehicles offer, with the hope that the audience 'delivered' to them 1) is likely to see the ad, and 2) is likely to be interested in the content of the ad.
Example
Find my past, a genealogical records resource.
Philanthropic funding
The endowment model is well established on college and university campuses in the United States as a way to sustain the institution as a whole, special projects, and faculty chairs. It is less common in other countries. Building an endowment entails accumulating enough capital that an activity or operation can be supported by the income from investments and interest on that capital, without tapping into the funds themselves. Once an endowment is established, organisations typically spend approximately 4% to 5% of the endowment’s total value per year. This means that in order to fund operations on an ongoing basis, projects need to raise approximately 20 times the annual operating budget in endowment.
Example
Walt Whitman archive.
Licence content
The intellectual property that many online resources own is itself a tremendous source of value, and sometimes this value extends beyond the users of the site, to other organisations and companies who have different ways of using it. A licensing or syndication model involves granting one or more outside organisations permission and responsibility for distributing the outputs of a project. Revenues are generated for content owners in the form of royalties. Projects can choose syndication as their primary route to market, or as a supplementary outreach vehicle. Many newspaper companies, for example, create revenue primarily through advertising and subscription, but also generate a steady stream by licensing their archive of older articles to commercial databases which aggregate similar materials and offer them to educational institutions.
Example: The University of Oxford’s Bodleian Library, which is partnering with ProQuest on the John Johnson collection archive of electronic ephemera.
Case studies
The second reportSustaining Digital Resources: an on-the-ground view of projects today looks in more depth at these models through a close analysis of twelve illustrative case studies. These are listed below for convenience and an abstract for each is at Sustaining digital resources: case studies.
Related Digipedia links
Sustaining digital resources: case studies
Sustaining digital resources: Ithaka toolkit
Further information
Kevin Kelly. Better than free.
Michael Rappa. Business models on the web.
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