A library director posted this on LinkedIn:
On June 5, Cengage Group (CG), Gale’s parent company, had its Q4 and full fiscal year investor update (link in comments).
Gale, which accounts for $195M of CG’s $1.54B revenue, experienced a rough Q4. What stood out to me in this update was an indication that what is happening at the U.S. federal level may be starting to impact academic libraries and the vendors and publishers they work with.
On CG’s Q3 earnings call, they indicated they expected Gale to finish the year only slightly behind FY23, due to funding pressure on U.S. public and school libraries, which would be partially offset by a solid archive sales pipeline and solid subscription renewals. Instead, Gale’s Q4 revenue dropped 20% YoY and 10% for the full year.
CG attributed the decline to “uncertainty in the … market related to federal actions, including reduction in funding and downsizing of key agencies,” as well as some renewals being impacted by “trade tensions between China and the U.S.”
Gale did not indicate what percentage of its revenue comes from database subscriptions versus print standing orders versus transactional archive purchases, but print revenue rose from 14% to 17% of total revenue. This matched its highest level since FY18 and is likely due to a drop in database and archive sales rather than a surge in print. Given CG’s earlier optimism about archive sales closing in Q4, this shortfall points to sharp declines in one-time transactions.
Stepping back, the question I have is whether Gale’s Q4 is the canary in the coal mine, a temporary deviation, or something unique to the nature of archival collection sales. Publishers and vendors have pointed toward subscriptions as providing them stability during this time of uncertainty - especially those with multi-year agreements. Clarivate made waves by announcing a move away from the transactional sales model, and perhaps they are sitting back and seeing this kind of result as vindication of that decision. But the disruptions happening at the federal level are leading to significant cuts at some of the largest and wealthiest higher-education institutions. This will likely impact those libraries’ budgets, and eventually a library is going to look to renegotiate a subscription or walk away when it ends. It already appears we may be seeing wariness to spend significant dollars on one-time purchases, which in my experience will almost assuredly lead to even more wariness to add subscriptions - especially multi-year subscriptions.
Gale’s Q3 to Q4 swing shows the level of volatility and uncertainty in the marketplace. As the year progresses, we will learn whether this was simply a blip or the beginning of a broader shift.