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Digital Libraries, Classrooms and Content

The Five Percent Rule

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The 5% rule

If you don't know the 5% rule, that doesn't mean it doesn’t have a profound effect on you. You may call it something else - the standing order rule, or the law of cumulative consequences - but here is how it works.

You are a librarian. You subscribe to 100 databases. They cost $100,000 per year. You and your faculty have made some wonderful decision selecting the databases and now all your needs are met. Then the next year rolls around and you discover that all your databases have increased in price by 5%. Luckily so did your database budget, so you pay the bill in full. Then the next year rolls around… and the next, and the next… each with a 5% increase.

Even if you are lucky enough to have a matching 5% budget increase every year, you will never be able to afford an additional database. And if your budget only grows by 3%, or not at all, or heaven forbid, it gets cut, then you either have to eliminate some of your databases or allow the database budget’s percentage of the overall budget to grow and grow. After all, you cannot subscribe to 95% of a database. It is all or nothing.

Here is how the 5% rule will eat you out of house and home in 25 years.

The following charts are based on a 1 million dollar library budget growing at a rate of 3% per year for 25 years and a database budget growing at a rate of 5% per year.

Expenditures over 25 Years


Note that in 25 years the database budget has grown from 10% of the overall budget to 16%. That extra 6% may not look like much in a pie chart, so let’s translate it into “books”. Let’s say the book budget bears the full brunt of the 6% that is lost from the remaining budget and that book costs, like database costs, continue to rise at 5% per year.

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In 25 years the cost of your 100 databases would more than triple to $322,510, as would the cost of books – up to $323 per book. Even worse, the amount of money available to purchase books would go down to $84,040 as the database budget gobbles up a greater and greater percentage of the book budget. Instead of buying 25,000 books over 25 years, the library would only be able to purchase 15,079.

The moral of the story is to beware subscriptions, standing orders, and monthly fees, whether you are a librarian or a consumer. If you still have your cell phones, Internet, and cable plans in 25 years, you may be dining out less and eating a lot more peanut butter.