Reed Elsevier is the biggest faller in the FTSE 100 after the European Commission backed calls for free access to publicly funded research.
The publisher has fallen 11.5p to 521.5p on the EC comments on Tuesday, given it charges subscriptions for its 2000 journals and would seem to be vulnerable to freely available research. But analysts at Exane BNP Paribas said the EU policy was a damp squib:
[It] is unlikely to have any impact on publishers' revenues in the next ten years. The EU is a small player in global research funding - it funds an estimated 8% of all public research spending in the EU27, or less than 3% of global scientific literature.
These developments are in line with our discounted cashflow assumption, which sees open access dominating in 2022 and having no impact before. Even in an open access-dominated world, publishers would continue to generate profit on the value they add to scholarly communications (managing the peer review process and article formatting). In an unlikely worst-case scenario, where the open access pricing pressure is not offset by volumes – Elsevier currently monetizes only one-third of the articles it receives as two-thirds are not accepted for publication – we estimate the market is missing at least 50p per share of value for journal assets. We remain outperform ahead of likely solid first half results due on 26 July.
Elsewhere, Severn Trent has slipped 6p to £16.98 after an in-line trading statement, with rival United Utilities down 10.5p at 687.5p.
