This is number seven of The Basement Interviews, the introduction of which I am publishing on my blog. The full interview (including introduction) is available as a downloadable PDF file (see below for details). It is being published under a Creative Commons licence.
Building the Business Model
Vitek Tracz, founder of open access publisher BioMed Central, talks to Richard Poynder
Vitek Tracz was born in a Jewish shtetl in Poland during the Second World War. When the Germans invaded Poland his parents fled to Russia, and spent five years in Siberia. Those members of his family who stayed in Poland were killed by the Germans.
After the war Tracz and his family returned to Poland, before subsequently emigrating to Israel. Keen to attend film school Tracz later moved to London, where he settled. After making a number of films, however, he turned his hand to medical publishing, and went on to build a series of successful publishing businesses, including Gower Medical Publishing, Current Drugs and the Current Opinion series of journals.
Tracz quickly developed a distinctive modus operandi, creating mould-breaking businesses that he then sold on to large publishing companies like Harper & Row, Elsevier, and Thomson Corporation, invariably at very attractive prices.
Constantly on the look-out for challenging business ventures, by the late 1990s Tracz had become convinced that the disruptive nature of the Internet would make it increasingly difficult for STM publishers to charge readers to access scholarly journals, particularly as the focus of their businesses began to shift from selling print journals, to licensing large electronic databases like Elsevier's ScienceDirect.
For a start, researchers were discovering that they were now easily able to distribute their research for themselves over the Web. Since 1991, for instance, physicists had been self-archiving their papers in the arXiv repository; and there were growing calls for academics in other disciplines to follow suit.
At the same time, the "serials crisis" had sparked a tide of unrest amongst librarians, who were struggling to pay for all the journals and other scholarly information their faculty demanded; unrest that was beginning to coalesce around the incipient Open Access Movement.
Advocates of Open Access (OA) argue that in a networked world publicly-funded research should be made freely available, not sold as part of a paid-for online service. Their reasoning is that researchers give their papers to publishers, and do all the essential peer review work, without any payment. Once the print and distribution costs have been removed from the system, therefore, most of the costs of publishing have gone away.
Intrigued by the challenge this posed for STM publishers, in 1998 Tracz created the first open access publisher, BioMed Central (BMC).
What was radical about BMC was not so much that it was an online-only publisher, but that it had turned the traditional publishing model on its head: instead of charging readers to read scholarly papers, BMC charged authors (or more usually authors' funders or institutions) to publish them — by means of an article processing charge (APC) of $525.
By front-loading the costs in this way, BMC was able to meet growing demands that publicly-funded research be available outside financial firewalls, while still covering the cost of organising peer review, and marking up and editing the papers.
Having acquired a reputation amongst cognoscenti of the scientific, technical and medical (STM) publishing community as a creative entrepreneur with an uncanny knack for turning unlikely ideas into successful businesses (invariably by exploiting innovative technology), in launching BMC Tracz provided the OA Movement with a credibility not unlike that provided to the Open Source Movement when, in the same year as BMC was founded, IBM announced that it would support Apache, the Open Source web server software.
Importantly, Tracz had developed a plausible business model — one that was later also to encourage a number of traditional publishers to experiment with Open Access themselves.
In addition, by appointing the articulate and widely respected publisher Jan Velterop to manage BMC, Tracz was able to position the company as a spokes-organisation for the OA Movement, and thus an ally of those who believed that scientific research should be freely available.
With the assistance of Velterop, Tracz also became an effective behind-the-scenes advocate, encouraging, for instance, the then director of the US National Institutes of Health, Harold Varmus, to create the free literature repository PubMed Central, and recruiting researchers, librarians and key decision-makers to the OA cause.
It was quickly apparent however that, whatever its merits, OA publishing would never be the pot of gold that STM publishers were accustomed to. By insisting that authors assign copyright as a condition of publishing their papers, scholarly publishers had, since the war, managed to acquire exclusive ownership of a great deal of the world's research output — thereby enabling them to earn profits that most industries would give their eye teeth for.
Moreover, as publishers moved to electronic delivery it seemed that profit levels could be even greater, since publishers were increasingly no longer selling print journals that libraries could own in perpetuity, but temporary access to single papers in vast electronic databases containing millions of individual scholarly papers. Since libraries would never actually "own" copies of these papers, publishers could, in theory, charge users every time a paper was accessed. (In practice, publishers chose instead to major on "all you can eat" subscription licences. These, however, turned out to be even more controversial ).
Unsurprisingly therefore, rather than embracing OA, publishers were more inclined to conduct aggressive lobbying campaigns aimed at neutralising OA initiatives. As a result of publisher lobbying, for instance, PubMed Central was effectively emasculated before it even saw the light of day.
While Tracz believed that in time publishers would have no choice but to accept OA, it became clear that they were not prepared to give up the benefits of the subscription-based model without a fight. In short, it was going to require more than an interesting new business model to recruit them to the cause.
Concluding that the OA movement would therefore need to persuade funders and politicians to force OA on the world, in 2003 Tracz (with Velterop) set out to convince the then Chair of the UK House of Commons Science and Technology Committee, Ian Gibson, to conduct an enquiry into scientific publishing. After some serious wining and dining of Gibson this they succeeded in doing.
The resulting enquiry provided a publicity coup for the OA movement, and attracted the attention of politicians and research funders around the world. It also sparked a steady stream of further reports, declarations and, in some cases, firm commitments to OA.
In October 2005, for instance, the Wellcome Trust introduced a mandate requiring that all papers resulting from research that it funded were to be made open access. And in April 2006 the European Commission published a report urging European science funders to guarantee open access to research outputs. The Select Committee enquiry also undoubtedly influenced the growing number of US proposals.
When, in July 2004, the Select Committee report (Scientific Publications: Free for All?) was published, however, it was a mixed blessing for Tracz. For while it endorsed the principle of OA, it placed a greater stress on mandating researchers to self-archive papers they published in traditional subscription-based journals, than it did on trying to insist that they publish in new-style OA journals.
Comments one publisher, speaking on condition of anonymity, "The Select Committee didn’t give OA the mandate that Tracz was expecting, because late on in its enquiry it found out about the practice of self-archiving, and realised that an awful lot of Open Access can be achieved in that way."
Evidently the Select Committee concluded that, rather than make the politically-charged recommendation that authors be instructed to choose one business model over another when publishing their papers, it was enough simply to mandate them to self-archive their papers regardless of the type of journal in which they had been published.
No doubt to Tracz's growing frustration, subsequent OA initiatives have tended to follow suit, placing a greater emphasis on self-archiving than on OA publishing. This, for instance, was the thrust of the voluntary NIH Policy on public access to research introduced in May 2005, as it was of the American Center for CURES Act of 2005.
It is also the logical consequence of the recently proposed Federal Research Public Access Act of 2006 (FRPAA). The most radical US bill in support of OA to date, if enacted the FRPAA would introduce a mandate requiring publicly funded papers to be made freely available on the Web within six months of publication.
Moreover, unlike earlier US proposals, the FRPAA would not insist that papers are archived in a central repository like PubMed Central. Since this is likely to encourage federal agencies to mandate deposit in institutional repositories, it would increase the emphasis on self-archiving.
In short, while the many OA proposals are all potentially beneficial to BMC, they have increasingly tended to prioritise self-archiving over OA publishing.
In retrospect, this is not surprising. What has become increasingly clear is that researchers, their institutions, and research funders have more to gain — at least in the short term — from researchers continuing to publish in high-impact established subscription-based journals and then self-archiving their papers, than they do from researchers restricting themselves to publishing in low-impact OA journals, even though in the latter case responsibility for making the research available on the Web is taken on by the publisher.
More importantly, perhaps, there has been a growing feeling that wresting proprietary control from the grasp of large monopolistic publishers should take precedence over supporting new journals that, many frequently worry, rely on an "untested business model."
For Tracz this has raised two important questions. First, can a small private company hope to compete against a large multinational industry now worth around $8.5 billion when its very raison d’être is viewed by that industry as a serious threat to the status quo — particularly when that industry is canny enough to make concessions when necessary (by permitting self-archiving), and powerful enough to mount huge lobbying campaigns to defang OA initiatives?
What is indisputable is that the STM publishing industry has (to date) proved itself capable of hamstringing every single OA initiative proposed.
Second, can the publishing model pioneered by Tracz truly provide long-term sustainability? More specifically, can BMC attract and retain a sufficient number of customers to keep the company afloat — bearing in mind that in the world of OA publishing the customers are no longer academic librarians charged with buying traditional journal subscriptions, but the researchers who generate the content in those scholarly journals, and who do the peer review essential for maintaining quality control.
When he gave evidence to the Select Committee Enquiry in 2004, Tracz predicted that BMC would achieve profitability in 2006. This, he told British politicians, was based on the assumption that the company would need article submission levels to reach 2,000 a month before it became self-supporting. At that point in time, he added, BMC was receiving 500 to 600 papers a month.
How does the situation look today? Unfortunately, while the number of journals has grown to 158, submissions have reached only 1,200 papers a month.
In short, it appears that Tracz overestimated potential growth rates. Moreover, says an industry insider familiar with the BMC business, he also underestimated how much it would cost to produce peer-reviewed journals, even after print and distribution costs have been removed from the equation.
"Managing a peer review process demands a lot of man-hours," he explains, adding that since the number of papers submitted to BMC has grown more slowly than expected the company has also been unable to exploit anticipated economies of scale.
In short, Tracz made the strategic mistake of entering a new market with a significantly under-priced product. In an attempt to rectify the situation, therefore, in July 2005 BMC more than doubled its APC rate, from $525 to $1,400 (£750).
Clearly this was a risky thing to do, and around 60 BMC editors immediately rebelled, with many refusing to implement the rise. "Currently we charge authors £330 per article. Under the new contract this would rise to £750," complains Richard Feinman, co-editor-in-chief of Nutrition and Metabolism, and one of the editors refusing to sign the new contract.
Events came to a head in May 2006 when, without any consultation, BMC issued a new Code of Conduct for Editors. In discussing the document on a listserv, 43 dissident editors realised that they all shared a number of grievances, and so formed a committee to negotiate with BMC. This in its turn led to a bruising news story in The Scientist.
BMC editors, The Scientist reported, were not only angry about the price rise, but upset that the new contract would mean reducing the number of fee waivers that they would be able to offer contributors from developing countries. It would also require some editors of BMC's independent journals to sign over ownership of their journal to BMC.
"In the e-mails I have been receiving from other editors a common complaint I am hearing is that they feel they have to some extent been swindled," says Feinman. "We may be naïve, but we agreed to run journals with BMC that had certain characteristics, including an acceptable APC."
Other BMC editors, however, have been quick to brand the dissidents as idealists with little understanding of how publishing really works.
"I have always been, and remain, a strong supporter of Open Access, but I have always also stressed that someone must pay the bill, and that for OA to survive and fulfil its promises, it must adopt a financially viable business model to cover its costs," says Maged Kamel Boulos, editor-in-chief of the International Journal of Health Geographics.
David Lipman, director of the US National Center for Biotechnology Information, and co-editor-in-chief of BMC's Biology Direct, is also critical of the dissidents. Speaking to The Scientist he characterised their actions as "bizarrely emotional."
As the dispute spread to the Liblicense mailing list, however, it was also revealed that under the new contract editors would be paid a 20% share of revenues. This, argued critics, would create a conflict of interest issue for editors, and so breach the ethical standards of scholarly publishing.
To add to BMC's difficulties, Velterop had by now left the company, taking a new position as "internal champion" of OA at the STM publisher Springer in August 2005. Deprived of his authority and considerable negotiating skills the company has struggled to appease the irascible editors.
When the history of OA is written, the current contretemps will doubtless be viewed as little more than (as Velterop's successor at BMC Matt Cockerill expressed it to The Scientist) the inevitable "growing pains" of OA. Indeed, Feinman himself is keen to stress that the issues raised by the editors "are points of discussions, not bed-rock disagreement."
Adds Feinman, "I suspect most of the editors would be willing to accept the APC (at least tentatively) if there were no change in the waivers. The waivers are the life blood of the freedom we have as editors, and some journals such as the International Journal for Equity in Health exist primarily on contributions from developing countries."
Nevertheless, the event has served to draw attention to the inevitable tension between the idealism of many in the OA movement and the financial realities of scholarly publishing.
It has also led to some suspicion about Tracz's motives. "Most scientists are fed up with publishers making increasingly large profits out of the work of (largely) unpaid scientists as authors, reviewers and editors," says Neville Punchard, co-editor-in-chief of the Journal of Inflammation. "I think those scientists involved as editors hoped that BMC would not allow this to happen, but are now beginning to realise that BMC is just like any other publisher when it comes down to it, and has to make a profit."
What BMC has yet to achieve, he concludes, is a workable formula that can provide a "balance between OA (to keep editors and other scientists happy) and profit (to keep the owners happy)."
In other words, it has underlined the importance of creating an acceptable and sustainable business model for OA.
What has surely exacerbated the situation is that like many small private companies, BMC is not very accomplished at PR. And by appearing reluctant to consult and work with the editors it has tended to fan the flames of suspicion.
As Feinman complains, "In being asked to sign the new contracts we are being asked to do something that we don’t want to, but it was presented as if we apparently have no choice. BMC is treating it as though it were just a formality."
At times the company also appears a little paranoid about sharing information with those outside the company — as I discovered when I tried to update this interview, and when I tried to obtain a comment on the dispute with editors.
Unfortunately, this tends to give the impression that BMC prefers secrecy over transparency — an unfortunate public image for a company founded on the principle of openness. And it has come to seem all the more impenetrable and unresponsive to the outside world since Velterop left.
What this no doubt reflects is the character of the company's founder. For Tracz has always preferred working behind the scenes, and likes to maintain a very low public profile. As the industry insider, puts it "Essentially, I think he is a shy person, or at least a private one. He has a reluctance to personally take his ideas into the public arena. This is a pity because they would really benefit from being presented by him in public."
He adds, "I think more could perhaps be done on the diplomatic front, and BMC should involve the people who will be affected by its decisions, and who otherwise might misunderstand its intentions."
The need for a more user-friendly approach is likely to intensify as the company struggles to reach profitability. "I think BMC will need about $2,000 per article before it begins to make a profit," says the industry insider. "So I think it is inevitable that the article processing charges will have to increase [again]."
Cockerill, however, remains keen to project an upbeat picture of the situation. "We anticipate breaking even soon," he insists, "though not necessarily in 2006."
Instinctive emotional objection
But what happens if the APC does indeed have to rise to $2,000, and profitability still remains elusive?
This will, no doubt, depend on how Tracz views the company: is it a cause that he intends to see through to the bitter end, or just another business venture, intended — like his other businesses — to make him a lot of money?
Tim Hailstone, co-founder of Gower Medical (who has known Tracz for many years), believes that his adoption of OA was essentially "an instinctive emotional objection to the power of Elsevier."
The temptation, therefore, is to view his motivation as being on a par with IBM's decision to support the Open Source Movement: where the computer giant saw Open Source as a competitive stick with which to beat archrival Microsoft, Tracz perhaps viewed Open Access as a tool to subvert large STM publishers like Elsevier — although clearly in more of a David and Goliath way!
But is that right? What is it that really motivates Vitek Tracz?
"He is difficult to read sometimes, and so it can be hard to know what he is thinking," comments the industry insider. "Sometimes you think he just likes big ideas and is driven to realise them; at other times you feel he is evangelising not from a conviction, but because he is looking for an opportunity to make money."
Ask Tracz directly, and he denies that money has ever been a significant motivation. "I am perfectly happy not to have money," he says, "although it is nice to have it."
The publisher I spoke to, however, dismisses such claims with a wave of the hand. "Vitek can be very seductive, but under his charm he's pretty ruthless. He can absolutely judge his prey and adapt accordingly. So behind this charming dinner companion expressing interest in your work, and in your thoughts, you sense a calculator working away in the background, trying to establish whether there is any money to be made from talking to you."
Moreover, he adds, Tracz's complex corporate structure, and the elaborate financial arrangements he puts in place in order to maximise his financial gains when selling a company, belie any claim that money is not important to him. "His wealth is ultimately completely offshore; so when he sells a business, some of it will go to paying off a loan, and the rest will disappear overseas, to a bank in Switzerland, or wherever. It seems to be part of some amazing tax planning strategy."
Yet during his rare public appearances it is hard not to believe that Tracz is a man who has got religion.
When giving evidence to the UK Select Committee Enquiry, for instance, he spoke so quickly, so excitedly, and at such length that the chair Ian Gibson, pleaded: "May I ask you quite humbly to keep the answers a bit shorter, and answer the question? I understand the enthusiasm and determination, but I do not want to be here at midnight and I am sure you do not either, and we should like to get some more information from you."
Tracz is also at pains to stress that OA is more than just a commercial issue. While conceding that he is a businessman, and so believes that making profits is a legitimate activity for scholarly publishers, he adds, however, that since OA is plainly beneficial to society "there is an ethical reason for insisting that it happens."
Hailstone thinks that while he may have been powerfully motivated by money when he was younger, nowadays Tracz is more interested in leaving his mark on the world. "Vitek has got a lot of money now. I think he would quite like to be famous for something. He loves the idea that he could be the guy who was responsible for completely changing STM journal publishing. And he loves the idea that BMC is in some ways the spokes-organisation for the OA Movement."
But why does it matter what motivates Tracz? It matters because the danger facing OA today is that if he pulls the plug on BMC, then sceptics' claims that a viable OA business model is not possible will be seen to have been exonerated.
The threat is real. In the past, says Hailstone, Tracz has been happy to drop businesses if he sees no future for them — a fate, for instance, that befell Praxis Press, a clinical medicine web service for practising physicians that Tracz co-founded in 2002, but subsequently walked away from.
The fear therefore is that if Tracz were to abandon BMC, it could inflict serious damage on the OA movement. "Whether it likes it or not BMC, is carrying a lot of open access on its shoulders," says Feinman, "so it should feel an obligation to do things right."
In reality, of course, the logic of OA is sufficiently compelling that it is no longer a matter of if, but when — irrespective of business models. For while today's sanctification of market forces might appear to imply that "the market" will be the only arbiter of OA's fate, anyone with a historical perspective will know that most societies will always find a way of funding something if its social value is perceived to be high enough. The case for OA has now been argued so often, and so well, that it is surely a done deal.
Nevertheless, the failure, or abandonment, of BMC would certainly slow progress. The challenge for Tracz, therefore, is to keep the show on the road while the larger OA struggle plays out.
The problem, says Hailstone, is that Tracz is not actually very good at the day-to-day task of running a business. "Vitek is better at building businesses to a certain level than he is at running them. So he is very good at spending money on a business, but not actually very good at making money out of it."
The alternative, of course, would be for Tracz to sell BMC. Again, says Hailstone, this may not be possible. "I won't say that Vitek will never be able to unload BMC," he says, "but of all the businesses he has started I think it is the least likely that he will be able to sell."
Certainly eight years after founding the company, Tracz has apparently yet to find someone willing to take it off his hands, despite frequent rumours that a deal is on the cards. Maybe a sale is being negotiated right now. But we don't know.
If not, however, Tracz is surely entering new territory: unable to sell the company, he may have no choice but to soldier on. And without Velterop there is perhaps no one better qualified than Tracz to run the company. On the other hand, he will be increasingly conscious that subsidising BMC indefinitely is not a practical solution, even for a wealthy entrepreneur committed to a worthy cause.
Time will tell what happens. Clearly how history judges Tracz will depend on the way events unfold. "BMC," predicts the industry insider, "is likely to go through a patchy period, both with editors and the market, but these are growing pains, and I think it has a reasonable future. I do hope it succeeds, because it really has introduced a new paradigm."
Either way, he adds, "Vitek should have a star role in the history of Open Access, because he was one of the first to pick up the signals, and to get in touch with Varmus, and the other people who started PLoS (initially as a pressure group). He has also been talking to NIH for a long time. More importantly, he had the vision and the guts to do something about OA."
What is undeniable is that Tracz is not a typical entrepreneur, both in temperament and in style. With a reputation for eccentric dressing, for instance, he is a far cry from the well-groomed entrepreneurs that inhabit Silicon Valley.
Hailstone relates how, when he and Tracz turned up at the oak-panelled City of London solicitors to complete the sale of Gower Medical, Tracz arrived in a leather jacket, with his trousers tucked into a pair of boots. Due to his unconventional dress, says Hailstone, when Tracz asked where the toilet was, "the snooty receptionist thought he was a taxi drive and directed him to the public toilet across the street."
But as Tracz explained to a former employee, "Even if I were to spend lavish amounts of money on my appearance and attire I would always end up looking like a refugee."
To his credit, however, Tracz inspires a degree of loyalty and commitment from those who work for him that most Silicon Valley CEOs would die for.
Tracz’s various businesses are run out of an office block in Cleveland Street — in an area of London that artists and writers like Dylan Thomas and George Orwell, who between the two world wars frequented the Fitzroy Tavern in neighbouring Charlotte Street, dubbed Fitzrovia.
Across the street from Tracz's office is the Courtauld Institute of Biochemistry, one of the many buildings dotted around Fitzrovia that belong to University College London.
Tracz arrives three minutes late; an insignificant delay that nevertheless elicits solicitous enquiries as to whether I had been waiting long.
Dressed in a plastic macintosh, walking with a slight stoop, and with an air of distraction, Tracz could be mistaken for a down-at-heel civil servant fretting over a lost briefcase. With his mac removed, however, his clothes emit a more luxurious air, particularly the dark shirt with puckered cloth that, to my untutored eye, looks like seersucker.
His large office is sufficiently bare that it is immediately apparent that Tracz conducts his real business elsewhere; perhaps in the triangular house he built for himself with the proceeds from the sale of his first company? The regulation plastic furniture and workmanlike bookshelves contrast oddly with the wooden floorboards and tasteful wooden slats on the windows, the latter currently shutting out what travel guides like to call the "neglected charm" of Fitzrovia; neglected charm that today is suffused with the gloomy atmosphere peculiar to late autumnal London afternoons.
Dominating one corner of the room is a wooden architect’s desk — the very one perhaps on which Tracz designed his house? Pinned to it is a poster advertising an exhibition of drawings by the Polish graphic artist Andrzej Krauze.
On the other side of the office is a large desk dominated by an oversized computer screen and a keyboard. Apart from several rows of catalogues from art auctioneers Sotheby's and Christie's, the bookcases house little more than a few maps and a large chrome coffee machine. Tracz's first action on entering the room is to switch on the coffee machine and make a stiff shot of dark espresso.
At first restrained, Tracz becomes increasingly effusive as the interview proceeds. Evidently having concluded that what excites journalists more than anything else are good human-interest stories, practically every answer threatens to balloon into a series of increasingly amusing and fascinating anecdotes and observations. Sadly, it later transpires that many of his stories cannot be published, for reasons of commercial confidentiality.
Two hours later, his face flushed, Tracz's stories are still flowing. My tape, alas, runs out, and I have to rush to catch my train.
This interview with Tracz initially took place in December 2004, a shortened version of which was published in Information Today, in January 2005. A follow-up conversation then took place by telephone in April 2005. It was not possible to arrange a further update with Tracz prior to publication.
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