Springer Science+Business Media (Springer) has announced the acquisition of the Current Medicine Group (CMG) from entrepreneur and open-access advocate Vitek Tracz.
A portfolio of healthcare publishing businesses, CMG has operations in the UK and the US. These include Science Press Publications, a London-based medical print publisher; Science Press Internet Services Limited, which offers web site hosting services, medical CD-ROMs, and an educational content and news service called MedWire; Philadelphia-based Current Medicine LLC, which produces medical atlases, and an image library called Images.MD; and Current Science Inc, which publishes a series of review journals.
CMG, says Springer, will complement and expand its existing medical programs, particularly in the areas of critical care and emergency medicine; primary care and family medicine; and geriatrics.
The acquisition will also give Springer access to an attractive new market — doctors and medical professionals. “Springer is of course already active in medical publishing," explains Springer CEO Derk Haank, "but the focus is mostly on academic audiences."
CMG's approximately 100 employees will all join Springer. However, since they address different markets the two companies' operations will not be integrated, and Abe Krieger and Jane Hunter — the managing directors of, respectively, the US and UK businesses — will continue in their present roles.
Financial details of the sale were not released. The Springer press release, however, states that during the last twelve months CMG's sales were around $20.5 million.
Build and sell
Why has CMG been sold? Because, explained Hunter in a telephone interview, Tracz's modus operandi is to build and sell companies, not to run them. "Vitek creates something, he builds it to a certain point, he sells it on, and then he reinvests in another business."
Or as Tracz himself put it when I interviewed him earlier this year, "I get bored quickly, and I get particularly bored once things are running smoothly."
Certainly Tracz's build-and-sell model has paid dividends over the years. He sold his first publishing business, Gower, to Harper and Row in 1984 for a very attractive price — enabling him to, amongst other things, build his fabled triangular house in Barnes. Likewise, he sold his Current Opinion journals to Thomson in 1996; his Internet business BioMedNet to Elsevier in 1998; and Current Drugs to Thomson in 2002.
Unsurprisingly, therefore, CMG managers have been preparing for a sale for some time. "The US and UK businesses used to be quite separate, but since we all do the same thing, and we use each others' content, it made sense to sell them as one unit," explains Hunter. "We have, therefore, spent the last couple of years building synergies within the group — a process that has seen our revenues and profits grow too."
For Springer, there are clear benefits to buying CMG, adds Hunter, not least the opportunity to work more closely with cash-rich drug companies.
Attractive alternative model
It is likely that the greatest benefit of CMG to Springer, however, will prove to be the sponsored publishing model that it has perfected. This consists of selling publications not to end-users or intermediaries like librarians, but to drug companies, who then give them to doctors and medical professionals as gifts.
The beauty of the system is that it offers CMG a profitable business, it provides medical professionals with information products, and it gives drug companies a range of excellent PR tools. "Drug companies need to be able to reach out to doctors, and they can do that by sticking a gift for the doctor in the hands of the rep," explains Hunter.
Moreover, she adds, since these are high-quality medical information products — books, journals, medical atlases, CD-ROMs, PDA content, and access to web sites — they are genuinely valuable gifts, not throw-away promotional toys.
Perhaps the significant point here is that users of CMG's information pay nothing to gain access to it. As open-access advocates, and increasingly research funders, continue to demand that research articles be made freely available on the Web, sponsored publishing will surely seem like an attractive alternative model to a company like Springer. Certainly, with its profits currently heavily reliant on selling subscriptions to peer-reviewed journals, its traditional business is looking more and more vulnerable.
The obvious solution to this threat, of course, is to embrace open access (OA), and adopt the OA author-pays model, where researchers (or, in most cases, their funders) pay to publish articles, which are then made freely available on the Web — a model pioneered by Tracz's OA publishing company BioMed Central (BMC), and by the Public Library of Science (PLoS).
The problem is that author-pays remains an unproven business model. When giving evidence to the UK Science & Technology Select Committee last year, Tracz predicted that BMC would be self-sustaining by the end of this year. This estimate, however, may prove to have been over optimistic. During the same session, Harold Varmus, co-founder and chairman of PLoS, said that he did not expect PLoS to be self-sustaining until the end of 2006. Moreover, when I interviewed Varmus recently, he told me that PLoS is currently in the process of reworking its business plan.
Given the uncertainties over author-pays, BMC has also introduced an institutional membership scheme. However, many have drawn unhelpful parallels between this and the much-maligned "big deal" solution introduced by commercial publishers some years ago. For this reason alone, institutional membership faces an uncertain future.
Nevertheless, clearly conscious of the shifting sands, last year Springer launched its own open-access option Open Choice. This allows authors to elect to pay $3,000 to publish in Springer journals, on the basis that their paper will then be made freely available on the Web. And as a further concession to OA, this August Haank appointed former BioMed Central publisher Jan Velterop as director of open access at the company. Velterop's job is to make sure that "open access gets the required attention both internally and externally”
It must be doubted, however, that Haank's sceptical views on OA, expressed to me in 2004, have changed significantly. As he put it then, "I remain sceptical about people's ability to undertake the massive redirection of money flows — both within each single institution, and within every country — that open access requires."
The problem is, however, that the world is moving rapidly to the point where it will not be possible for publishers to charge people to access primary research information. To continue in business, therefore, commercial publishers will need to find alternatives to the profitable subscription-based publishing model they have long enjoyed. In this light, CMG's sponsored publishing model is likely to have proven intriguing to Springer, not least because if applied to peer-reviewed journals it could avoid the "massive redirection of money flows" within research institutions that Haank referred to, and yet still deliver OA.
Whether the model can be adapted to peer-reviewed literature is not clear. But publishers face little choice but to explore all the options. Indeed, one might ask: "Since corporations are sponsoring more and more of the research conducted in universities, why should they not also sponsor peer-reviewed journals?" Likewise, if IBM can donate patents to further the cause of the open source movement, why should not companies help facilitate open access?
If such questions haven’t already occurred to Springer, once it has had a chance to examine CMG's business model in more detail they surely will. It is worth noting, after all, that PLoS has itself begun seeking sponsorship, although as a not-for-profit organisation it clearly has an advantage over commercial publishers when seeking financial support. The challenge for publishers would lie in convincing potential sponsors that there was sufficient value to them in sponsoring an open-access journal.
The likelihood is, of course, that a successful long-term OA model would include a range of different financial models.
What we do know is that Haank has to focus on bringing Springer back to the market via a long-anticipated IPO. This is a certainty because Springer — which was created as a result of the integration of the former BertelsmannSpringer and Kluwer Academic Publishers — is currently owned by venture capital companies Candover and Cinven, both of whom will surely want to exit the business in the near future.
Undoubtedly a successful IPO will require persuading investors that the company has a sustainable business model. The growing success of OA has put that in question. If nothing else, then, CMG may help Springer to convince investors that it is looking beyond its traditional business model, and that it is not putting all its eggs in one basket.
For Tracz, presumably, the sale of CMG provides vital new funding to enable him to continue the OA experiment he began when he launched BMC five years ago. As has been said elsewhere, OA is inevitable. Publishers, therefore, must now find ways of making it work, or get out of the academic journal publishing business.