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Presentations of Business Models


Libraries and museums have taken several innovative approaches to extend the reach of their collections and services online. Conference participants heard about six of the most interesting of these approaches, ranging from two enterprises that have been providing access to scholarly journals online for several years to new initiatives that are based on collaborations among institutions. The conference organizers asked the speakers to outline the elements of their business models, describe how they were developed, and predict their prospects for the future. Presenters addressed the following questions:

  • Origins: What were the origins of the enterprise, what was the vision for the project? Which potential partners were approached?
  • Business models: What business models were considered? Which were rejected? How is success measured? What obstacles have to be overcome to achieve success?
  • Change: How has the business model for the enterprise changed over time, and what additional changes are foreseen?
  • Lessons learned: What have we learned? What advice would we give to others in starting out?

Projects in Scholarly Publishing

JSTOR: Archiving and expanding access to scholarly journals

The JSTOR project was originally funded by The Andrew W. Mellon Foundation to test the feasibility of storing out-of-print journals in electronic form, thereby improving access while reducing storage and preservation costs for libraries. Established as a 501(c)(3) organization in August 1995, JSTOR was charged from the outset with developing a sustainable economic model.

JSTOR’s mission is to provide a means for the scholarly community to take advantage of advances in information technology. The primary objectives are to

  • create and build a comprehensive archive of important scholarly journal literature
  • improve access to older, hard-to-find articles
  • work to the benefit of all participants in scholarly communications-publishers, libraries, students, and scholars

To this end, JSTOR acquires rights from publishers to full runs of selected journals in the humanities and social sciences, digitizes the content, and makes it available on the Web through institutional site licenses. Metadata and abstracts are double-keyed, and text is scanned using optical character recognition (OCR) to enable full-text searching of the articles. In addition, page images are scanned as 600 dpi TIFF files to represent faithfully the content and layout of the print edition. This provides comprehensive coverage, improved searchability, and archival fidelity to the original. Access is free at the point of use.

Assessment. In discussing the development of JSTOR and its business model, JSTOR President Kevin Guthrie began by recalling lessons he had learned while researching a book on the New-York Historical Society. The history of the near-failure of the Society, he said, forces one to reconsider the traditional definition of “assets” belonging to a not-for-profit organization, the need to match the sources of funds to support collections with the uses of those funds, and the critical importance of mission and governance to the success of any enterprise, whether its aim is to turn a profit or to keep its doors open for research, exhibition, and cultural enrichment. Perceived assets can actually be financial liabilities if there is no revenue flow associated with them, and when funds that seem adequate to support them prove insufficient because their allocation is restricted and they cannot be applied to operational needs. The governance structure of nonprofits is also critical to their success or failure, because without board members or trustees who are actively responsible for fiscal decisions, an organization is vulnerable to neglect.

The JSTOR model has so far resulted in good and stable relationships with publishers, libraries, and funding sources. To protect publishers, yet fulfill its archival responsibilities, JSTOR has developed a “moving wall” of access in which the archive adds issues to the database that are generally five years old or older. Publishers retain the rights to the content of their journals, and their current revenue stream is unaffected. The site license agreements are nonexclusive. Moreover, libraries retain access to content in the event a publisher withdraws the license, and users are not charged for access. JSTOR’s fee structure reflects the costs of archiving. There is a one-time archive capital fee and an annual access fee, assessed according to the size of the subscribing institution. Foundation support has been sought to subsidize the cost of digitizing new collections and, to a limited extent, of providing access to institutions without resources. Three key marketing decisions were made when JSTOR was created: There are no upfront royalties, no agents or distributors, and no advertising. Overhead is kept to a minimum by using the Web to disseminate information about scope, prices, participant lists, and similar issues.

JSTOR defines economic self-sustainability as the point at which, if it stopped adding journals to its database, it could reliably maintain its archive with the resources on hand and the annual contributions made by participating institutions. Success is gauged by the number and range of participating institutions, as well as by the level of confidence that participants have in JSTOR’s archiving promise. In other words, are member institutions discarding print copies in the full knowledge that they can rely on JSTOR? The enterprise gathers statistics about use and disseminates that information broadly, in part to measure success and in part to build awareness among users about their own behaviors.

Obstacles: Archives or Access? The chief obstacles that faced JSTOR at the beginning stemmed from its attempt to use a new model for doing business. It was difficult to get publishers to license their back files and equally difficult to convince libraries to sign on for the license, often because they were expecting a consortial pricing model. While JSTOR’s ultimate mission is to change ways of thinking about the economics of archiving in a digital realm, it remains a challenge for JSTOR to build trust as an archiving agent in the library world. Most libraries see it as a great delivery system, not an archive, although anecdotal evidence suggests that this image may be changing, at least among academic libraries that do not see themselves as libraries of last resort.

JSTOR has not changed its business model, but it has adjusted some elements, such as the fee structure. It abandoned its intention to license current issues and has not offered per-article pricing, though it is considering doing so in the future. Perhaps as a dubious sign of its success, JSTOR received several buy-out offers during the dot-com frenzy.

Prognosis. The advent of distance education and online learning might necessitate a change in JSTOR licensing practices. For example, there is a growing demand for licensing to independent scholars. Were JSTOR to do that, it would have to redefine its core mission from being first and foremost an archive to being primarily a provider of access. Nonetheless, it cannot ignore the demand for access. Will JSTOR agree to link to other content providers to facilitate research? Will it lend expertise in digitization to others, perhaps as a consultant? There are a growing number of opportunities to engage in activities that are not now defined as part of JSTOR’s core mission but that may well be worth pursuing. Mr. Guthrie cautioned that focus is essential to success, and that any activity that distracts a not-for-profit from its core mission is risky and must be considered very carefully.

HighWire Press: Adding value in access and delivery of scientific journals

Michael Keller, publisher of HighWire Press and Stanford University librarian, stated that the mission of Stanford University Libraries’ HighWire Press is similar to that of JSTOR, but that it differs significantly in scope and methodology. HighWire aims to enhance scholarly communication through advanced network and information technology and to encourage innovation based on the mutual needs of publishers, editors, and researchers. This aim is consistent with the university’s mission to disseminate information to support teaching and research. Because the press is based at Stanford, HighWire is attractive to publishers. They benefit from the additional exposure that HighWire brings as well as opportunity to experiment with the added features that distinguish electronic versions from print versions. HighWire aspires to “contribute to a marketplace correction” in scholarly publishing by improving the posture of scholarly societies and of other groups that it deems responsible publishers.

HighWire Press focuses principally on life sciences and medical journals, but has a developing list of social scientific journals as well. HighWire also provides Internet publishing services for the online third edition of the Oxford English Dictionary and for a slowly growing list of knowledge environments. Its focus is not on archiving, but on providing added value in access and delivery systems. It emphasizes full-text delivery service and the development of software and hardware to facilitate it. With economic sustainability a goal from the start, the planners studied journal “use decay.” They found that frequency of use was highest (100 percent) at publication. It declined rapidly after three months (to 13 percent) and reached a 7 percent plateau after six months. In October 2000, Stanford University Library declared that the Internet editions of the HighWire journals constitute the journal of record, and its business focus on services, not archiving, was thus reinforced.

Business Model. HighWire Press’s business relationships are exclusively with publishers. Because libraries and individuals pay according to use, licensing is not an issue. This model demands that HighWire work simultaneously with a variety of business models; it cannot require publishers to conform to a single pricing approach. Some journals provide free access to back files; others provide access only to abstracts of current articles.

The success of HighWire Press can be gauged by several factors. Qualitatively, there is positive feedback from publishers and customers. Quantitatively, there is a measurable increase in online traffic, more publishers are interested in joining, and journals on HighWire are receiving more manuscripts from authors.

Obstacles: Expansions and Competition. Obstacles to success remain. Some are connected with rapid expansion: a growing content backlog, strain on technical capacities, and competition for qualified personnel are the most conspicuous. HighWire has also come under increased pressure to sell its software or to sell the service outright.

The current and future success of HighWire Press rests on its ability to concentrate on its core mission. It must not be distracted by the possibilities that crop up from time to time-possibilities that, while compelling, would compromise the effectiveness of the press in the long run. Before embarking on the venture, the team at HighWire Press spent a year studying the most frequently cited science literature and homing in on what made that literature successful. They surveyed users in the beginning and continue to gather usage data that, with the consent of the publisher, are made available to the university. The enhancement of research, teaching, and learning-the ultimate goals of HighWire-demands a businesslike approach to opportunities and a disciplined approach to growth. HighWire’s ability to create demand for the services it offers carries risk, and any strategy for growth must follow the same sound business principles that a for-profit firm does. From the beginning, HighWire Press has been seen as a business, not as a project or an experiment.

New Enterprises

International Center for Photography/George Eastman House: Collaboration between two world-class collections of photography

Anthony Bannon, director of the George Eastman House (GEH), and Willis Hartshorn, director of the International Center of Photography (ICP), described a pioneering collaboration between these two organizations, which have common interests and complementary strengths. The purpose of the collaborative effort is to “strengthen fund-raising presence, work together to gather, organize, and share information, foster the exchange of staff, share in the development of exhibitions, educational programs, and collection databases, and undertake joint planning and marketing.”

The ICP has a well-established exhibition program, a museum photography school offering one-year certificates and master’s degrees, and a range of public programs. The GEH has nearly 400,000 photographs representing the entire history of the medium; an extensive collection of photographic equipment, moving image, and publicity stills; and a comprehensive library of photographic books, manuscripts, and journals. The GEH also offers graduate and postgraduate programs in photograph and film preservation.

Assets. When the partnership was initiated, in fall 2000, senior staff of the two institutions took a careful look at their respective resources and goals and realized that neither could achieve independently what could be achieved by using technology to mesh institutional strengths. Central to the collaboration is a shared conception of research materials as an asset-not only the photo prints but also the “deep” documentary information accompanying the collections. The institutions have compatible missions, organizational structures, and long-range goals. Rather than compete for resources and staff, they decided to cooperate, with each contributing expertise in its area of specialization. They determined that programs would take precedence over collection ownership, and delivery of core services would take precedence over individual profits.

In the near future, the two institutions will focus on a core set of initiatives. They include a series of joint exhibitions that will feature both permanent collections and thematic topics; a joint Web site, which is currently under design; and development of a joint cataloging system.

The collaboration is not a merger. Each institution will retain its own staff, facilities, and collections. Senior staff from each will meet several times a year, much like the institutions’ boards of trustees do, to plan shared programs and exhibitions. The jointly maintained Web site will permit searches for collection data from both institutions, based upon mutually accepted standards and shared technology. The collection data will include linked documentary resources such as object information and image, manuscript notes, secondary texts, biographical entries, and exhibition histories.

Several factors are seen as critical to the success of this enterprise. Both institutions need to examine their priorities and decide which are most consonant with the collaboration’s goals. They must then commit resources (including additional staff) to achieve them. Communication among all levels of staff is necessary. Success will be gauged to a significant degree by how much can be delivered to the users-not just digital representations of master photographs but also the curatorial research that supports decisions about collection management and interpretation.

Obstacles: Two Cultures. The potential obstacles to this partnership derive largely from traditional museum culture and assumptions about roles and responsibilities. The barriers are, in other words, human, not technological. The alliance proposed runs counter to the curatorial culture of individual research and interpretation. It was the joint technology group that developed the most creative approaches to collaboration during the planning of this joint venture; this is an important lesson for the future of the enterprise. Concerns about control over the collections, a fundamental operating principle in curatorial practice, will diminish over time. Resistance to change can be overcome by opening communication between institutions and, more important, across domains. The process by which progress is monitored is designed to engender communication; under it, the organizations will conduct regular surveys of users, staff, and board members. Mr. Bannon and Mr. Hartshorn underscored the importance of involving their board members and emphasized the responsibilities that board members are assuming in this partnership.

Questia Media, Inc.: For-profit service provides content and tools for undergraduates

Questia Media, Inc., President Troy Williams spoke of the development of this online research service whose goal is to facilitate undergraduate research and writing. Questia offers content and formatting software to its subscribers at various rates. The database offers subscribers unlimited, full-text access to about 50,000 titles (no textbooks) from 190 publishers in the liberal arts and is growing. Questia acquires the rights from the publishers, so users do not need to be concerned with copyright issues. Texts are provided one page at a time and retain the layout of the print edition. The formatting software allows subscribers to create hyperlinked references, citations, and bibliographies in a variety of styles. Publishers are pleased with the controlled access feature, which discourages downloading of entire texts. Individual subscriber’s accounts are maintained on the Questia server, so work is accessible from any location with Web access.

Prognosis. This project was based on extensive market research. The undergraduate community was chosen as the target group because it is 10 times larger than the graduate school population. The liberal arts curriculum is the focus of content development because the textual resources are well established and widely available; the texts also retain their value over longer periods of time than do those in other fields. During the market research, students were “shadowed” to observe their research habits; some students kept detailed “research diaries.” During an environmental marketing scan, Questia staff realized that there is a vast disparity in the levels of online resources available to students, depending on geography, economic resources, and even time of day. Given that all students must do research and write papers, Questia decided that a service that could locate information quickly, cite it correctly, and consolidate the results in an acceptable format would be highly prized. The students said that they would be willing to pay a reasonable price for such a service. The pricing model that Questia developed provides a core database of texts free of charge for certain purposes (for example, to teachers who may wish to verify a student’s citations or to students during a preliminary source search). Subscribers pay for the added value of the research tools needed to craft a paper. Mr. Williams said that his original dream was to lower the barriers that students face in starting a paper and to make the proper use of footnoting and bibliography a simple matter.

Obstacles: Critical Mass. Acquiring rights from publishers was the most difficult and expensive aspect of this project. During its initial research, Questia found that it would have to spend $70 million to achieve basic coverage in the liberal arts. This eliminated the possibility that the project could consider operating as a nonprofit organization. While the service is in essence educational, its start-up capital requirements demanded a for-profit model.

Gateway Services

Art Museum Network: Providing gateway services to the museum community

The nonprofit Art Museum Network (AMN) was founded in 1996. Based at the Whitney Museum of American Art, it is a gateway Web site that provides links to information at about 180 art museums in the United States and Canada and at 40 other museums throughout the world. The site includes a directory, as well as links to educational and program resources, for each member of the network. It also provides access to the Art Museum Image Consortium (AMICO), a database of selected images contributed by the member institutions; access to the Excalendar network of exhibition information; links to partners such as the Association of Art Museum Directors (AAMD), the online ticketing agency TicketWeb; and access to a museum shop site. The exhibition calendar includes current and advance schedules and can be searched by region, institution, or keyword. While museum professionals form the core target group, this information is also of interest to tourists and local residents looking for special-events information.

As described by Maxwell Anderson, director of the Whitney Museum, the AMN began as a listserv and was intended to make it easier for AAMD members to communicate with one another. The project grew as the demand for information grew. It soon became clear that the AAMD members could cooperate with each other on this project because it fell wholly outside their normal spheres of competition-funding, collections, and donors.

AAMD’s goal has been to provide a service that could support itself, but not necessarily to make a profit. The business model is designed to generate interest and traffic, not revenue. It is accomplishing its objective: The archival information in the AMICO database and exhibition calendars generates considerable traffic on the site. AMN does not rely on income from site licensing or reproduction rights. Searching the site is free, but the AMN does receive commissions from ticket and museum shop sales made through the Web site. In this way, the network expects to continue operating on a cost-recovery basis.

Future partnerships are being considered with for-profit operations whose mission is consistent with that of the AMN. One possibility, for example, is a partnership with the Reuters News Agency in which the agency would provide news items of interest to the art museum community on the AMN Web site. The AAMD board of directors approves and maintains control of all content. Participating museums are not concerned about tracking benefits to participants over the short term. It has been agreed that benefits will accrue in other areas (e.g., better public relations, more visits). This holds true for AMICO as well.

AMICO is seen as a crucial network component providing high-quality digital images of museum objects through a single site. The AMICO library of more than 50,000 images is available by subscription. It is attempting to build on existing museum digitization projects. Museums differ widely in their readiness to share their collections and information about them. AMICO intends to allow digital content to be produced locally and allow decisions about global access to content also to be made at the local level. Although building to some extent on existing museum digital activities, AMICO aims to provide structure and leadership for member museums that are unsure about how to proceed in digitizing their collections.

AMICO faces a challenge common to consortia, namely, how to convince directors that the activity should be a priority for their institutions. AMICO identifies itself as a mission-driven nonprofit that does not promise members that they will gain financially from participation. It has been difficult in some instances to get museum directors to share information. One of AMICO’s selling points is that digitization projects carry a big risk of failure when undertaken alone. Institutional leaders who become involved in digitization wish to avoid costly errors, and joining AMICO is seen as one way of tapping into existing expertise in this area. The deployment of standards for scanning and description, for example, is a boon to museums of all sizes. AMICO’s partnership with the Research Libraries Group has permitted expansion of the test image database using a standard delivery system. This would not be possible through individual institutions’ Web sites. AMICO does not intend to be an exhaustive source of information about museum objects, and its member museums are encouraged to view participation in AMICO as a starting point for developing their own digital collections.

Fathom: Academic partnership offers gateway to online courses

Launched in November 2000, Fathom is a for-profit partnership of 13 universities, libraries, museums, and publishers in the United States and the United Kingdom. It provides online courses and access to the resources necessary for related research. The president of Fathom, Ann Kirschner, explained that the company was established by Columbia University to ensure a space for high-quality content on the Web. The venture is currently exploring distance learning to further the university’s educational mission.

Fathom’s structural model is a hybrid; a board of directors handles business decisions, and an academic council is responsible for content decisions. The partners select the courses that will be offered only after the academic council has evaluated them. A percentage of each tuition fee is earmarked for Fathom’s marketing expenses. Because faculty members at the participating institutions are not able to offer courses independent of their home institutions, the institution, not the faculty member, owns the course. Fathom offers access to more than 800 seminars and, for a fee, links to distance learning courses that have been selected from the member institutions’ curricula.

Collaboration among Fathom members has gone beyond pure technology. The collective reputations of the member institutions are seen as enhancing the value of the courses offered, and the universities see an opportunity to forge and strengthen connections with alumni interested in lifelong learning. Fathom user profiles also provide the institutions with better targets for marketing.

The shareholders in Fathom are the institutions that have signed a standard agreement and have licensed the use of their logos. Columbia University is the biggest investor in the enterprise, with most of the other participants contributing content, not funding. Contributing institutions receive a commission from sale of each online course. Member institutions identify nonfinancial benefits as more important than the as-yet-insignificant financial rewards. The universities see this as a way of providing new audiences and tools for their faculties-a wider platform for their teaching and research, with digital resources to do things outside the classroom setting. While the current focus is online courses, future services may include educational travel tours, full online texts, and a tie-in to the British Broadcasting Corporation for multimedia content.

Among the lessons Fathom has learned is the how to set the right price and length for courses. Research has revealed that some people interested in distance education experience “sticker shock” upon discovering that an eight-week course costs more than $500. To respond to this concern, Fathom is developing shorter, less expensive courses (e.g., a one-week course for $100) that can help build its customer base. The company’s goal is to become profitable within two or three years. Fathom sees the greatest potential for growth coming from alumni of member academic institutions, “occasional learners,” and groups such as the American Association of Retired Persons, which offer members opportunities for learning and professional or personal development. Fathom is considering developing a newsletter that would go out to alumni-a new method of linking core constituencies.

For some large public institutions, Fathom offers a way of disseminating public programming to audiences they would not reach through their own sites. The participants also said their institutions see Fathom as a type of risk management. They are striving to develop new core capacities and skills, especially in their curatorial staffs, and Fathom seems an ideal way to engage in experimental outreach and interpretation activities that are not possible within the normal constraints of the institutions. One potential benefit of these collaborative projects is an updated concept of curatorship that encourages other partnerships and yields new definitions and professional competencies. In contrast, a research university that recently joined Fathom sees it as a resource to assist in developing the university’s technological infrastructure and the human infrastructure among persons with like interests.


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