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> In 2015, the company earned $1.1 billion in profits on $2.9 billion in revenue... How in the world does a company like Elsevier accrue $1.8 billion in expens

> In 2015, the company earned $1.1 billion in profits on $2.9 billion in revenue... How in the world does a company like Elsevier accrue $1.8 billion in expenses? Apple's 2015 worldwide operating expenses were $30 billion [0], or about 17 times higher. Yet Apple's costs for manufacturing, retail, sales, payroll, etc. ought to be hundreds or thousands of times greater than Elsevier's; Apple has 115,000 employees [1], for example, while Elsevier only has 7,200 [2]. It just seems that if their revenue is really $2.9 billion, then even if we weren't in an age of nearly expense-free digital distribution, Elsevier's profit margin should be far higher than it is. What do they spend all that money on? [0] http://www.wikinvest.com/stock/Apple_(AAPL)/Data/Total_Operating_Expenses/2015 http://www.wikinvest.com/stock/Apple_(AAPL)/Data/Total_Opera... [1] https://en.wikipedia.org/wiki/Apple_Inc https://en.wikipedia.org/wiki/Apple_Inc. [2] https://en.wikipedia.org/wiki/Elsevier https://en.wikipedia.org/wiki/Elsevier Edit: My employee-count example is a bad one, since the ratio of employees for each is about the same as the ratio of operating expenses. But Apple has huge R&D, manufacturing, and retail expenses. Elsevier's equivalents must be minute in comparison.

nisa 10y ago
> What do they spend all that money on? Here is the most recent annual of their parent company: http://www.relx.com/investorcentre/reports%202007/Documents/2015/relxgroup_ar_2015.pdf http://www.relx.com/investorcentre/reports%202007/Documents/... I don't have the time nor knowledge to give a summary on this but it's quite interesting - e.g. page 8 - 50% of their income are subscriptions and 80% of these are electronic. The other 50% are "transactional" I guess that means fees. I can't read investor reports but I guess some answers are in there.
- gleb 10y ago
  Page 94 - Consolidated income statement
  - cmarschner 10y ago
    So, roughly, 50% cost of sales (print, inventory, online services), 40% salaries, 10% depreciation
- cakeface 10y ago
  A transactional expense may be purchasing a license to the online version of the content for perpetual access. Similar to how when you buy a print journal you can keep that forever. The way some online publishing sales work is that you buy this year's journals as a capital expenditure as for perpetual access. Then you usually still need to pay an much smaller hosting/access fee forever but you've essentially licensed the content forever. This works better for some libraries versus the subscription model.
nickpsecurity 10y ago
Terrible comparison. Best to look at other publishers. To start with, let's look at one with free labor for contributions and review. It costs $45.9 million a year. You might have heard of it: https://annual.wikimedia.org/2014/#s-6 https://annual.wikimedia.org/2014/#s-6 The next comparison would be finding a firm that does all of Elsevier's services. You start by knowing what they are. They're a part of Relx Group which describes its activities here: http://www.relx.com/OurBusiness/Pages/Home.aspx http://www.relx.com/OurBusiness/Pages/Home.aspx That's a lot. Elsevier itself mainly buys, accepts for free, and hosts research. They might pay reviewers. They also do commercial work for businesses. They also try to make money for shareholders. That always adds up. ;) Here's their annual report. http://www.relx.com/investorcentre/reports%202007/Documents/2015/relxgroup_ar_2015.pdf http://www.relx.com/investorcentre/reports%202007/Documents/... It has a lot of data but can't directly answer your question. For Elsevier, three things stand out as possibly high-cost items: 1. 17,000 editors reviewing the articles for 2,500 journals. Whoever manages journals plus editors already constitutes large cost. 2. 23% of the revenue is by print sales. A physical print adds real cost to things esp when we're talking big, technical reports and books. 3. There's in-person sales and sale agents for subscription models. Probably lots of sales agents. They'll likely take a commission. 4. The amount of money involved with publicly traded means there's going to be plenty of compliance, management, and executive overhead. On top of nice, executive compensation. These together would easily make it cost in $100-500mil a year range. Probably more. EDIT: As gleb said, the Consolidated Income Statement on PDF reader p 98 will tell you in detail what they spend it on. The above activities are common among these types of organizations, though.
- return0 10y ago
  - the 17.000 editors are almost all unpaid. The paid editors who coordinate the free work of others are typically very few per journal (e.g. Cell: 8 editors, Neuron: 6 editors) - The print sales, (along with most of their sales) come from bundling everything in large subscriptions that the universities are then forced to accept. 99% of the paper they make is not used. Most people download the papers and re-print them actually. (Not saying paper doesn't cost, but that people would not normally pay for such a useless thing)

nisa 10y ago

> What do they spend all that money on? Here is the most recent annual of their parent company: http://www.relx.com/investorcentre/reports%202007/Documents/2015/relxgroup_ar_2015.pdf http://www.relx.com/investorcentre/reports%202007/Documents/... I don't have the time nor knowledge to give a summary on this but it's quite interesting - e.g. page 8 - 50% of their income are subscriptions and 80% of these are electronic. The other 50% are "transactional" I guess that means fees. I can't read investor reports but I guess some answers are in there.

gleb 10y ago
Page 94 - Consolidated income statement
- cmarschner 10y ago
  So, roughly, 50% cost of sales (print, inventory, online services), 40% salaries, 10% depreciation
cakeface 10y ago
A transactional expense may be purchasing a license to the online version of the content for perpetual access. Similar to how when you buy a print journal you can keep that forever. The way some online publishing sales work is that you buy this year's journals as a capital expenditure as for perpetual access. Then you usually still need to pay an much smaller hosting/access fee forever but you've essentially licensed the content forever. This works better for some libraries versus the subscription model.

nickpsecurity 10y ago

Terrible comparison. Best to look at other publishers. To start with, let's look at one with free labor for contributions and review. It costs $45.9 million a year. You might have heard of it: https://annual.wikimedia.org/2014/#s-6 https://annual.wikimedia.org/2014/#s-6 The next comparison would be finding a firm that does all of Elsevier's services. You start by knowing what they are. They're a part of Relx Group which describes its activities here: http://www.relx.com/OurBusiness/Pages/Home.aspx http://www.relx.com/OurBusiness/Pages/Home.aspx That's a lot. Elsevier itself mainly buys, accepts for free, and hosts research. They might pay reviewers. They also do commercial work for businesses. They also try to make money for shareholders. That always adds up. ;) Here's their annual report. http://www.relx.com/investorcentre/reports%202007/Documents/2015/relxgroup_ar_2015.pdf http://www.relx.com/investorcentre/reports%202007/Documents/... It has a lot of data but can't directly answer your question. For Elsevier, three things stand out as possibly high-cost items: 1. 17,000 editors reviewing the articles for 2,500 journals. Whoever manages journals plus editors already constitutes large cost. 2. 23% of the revenue is by print sales. A physical print adds real cost to things esp when we're talking big, technical reports and books. 3. There's in-person sales and sale agents for subscription models. Probably lots of sales agents. They'll likely take a commission. 4. The amount of money involved with publicly traded means there's going to be plenty of compliance, management, and executive overhead. On top of nice, executive compensation. These together would easily make it cost in $100-500mil a year range. Probably more. EDIT: As gleb said, the Consolidated Income Statement on PDF reader p 98 will tell you in detail what they spend it on. The above activities are common among these types of organizations, though.

return0 10y ago
- the 17.000 editors are almost all unpaid. The paid editors who coordinate the free work of others are typically very few per journal (e.g. Cell: 8 editors, Neuron: 6 editors) - The print sales, (along with most of their sales) come from bundling everything in large subscriptions that the universities are then forced to accept. 99% of the paper they make is not used. Most people download the papers and re-print them actually. (Not saying paper doesn't cost, but that people would not normally pay for such a useless thing)