The stock market seems concerned that FTSE 100 company Informa (LSE:INF) is in danger. But I think investors are overestimating the threat in a big way.
Right now, the worry is that the firm’s academic publishing division might be disrupted by artificial intelligence (AI). I’m an academic though, and I think the chances of this are close to zero.
What’s the problem?
One of Informa’s divisions is Taylor & Francis which publishes academic books and journals. Traditionally, this is where researchers go to find the latest developments in various disciplines.
This is a hugely profitable operation with low capital requirements. Research is commissioned by funding bodies, undertaken by researchers, published in journals, and then paid for by universities.
Taylor & Francis is also a big part of Informa’s overall business. It makes up around 20% of revenues and a bigger slice of operating profits, so it would be a big problem if anything happened to it.
The threat is that specialised AI research tools might disrupt this. If researchers can get a good enough impression of the latest developments from AI, will they still need journal subscriptions?
How big’s the problem?
I got my PhD just over 10 years ago and I’ve worked in academia since then. And from my perspective, there’s both a short answer to that question and a longer one.
The short answer is ‘yes’ and the longer one is ‘yes they will’. I don’t see a plausible situation where academics and institutions settle for anything less than first-hand access to the latest research.
In my discipline, students and researchers working on Plato’s Republic just have to read the original book. Reading a handbook or commentary on it isn’t a substitute – it needs to be the original.
That’s not because the secondary literature isn’t great – a lot of it is – it’s because the only way to get a proper understanding of the book is by reading it. And the same is true elsewhere in academia.
AI summaries
The issue is that summaries or overviews inevitably involve making decisions about which bits of the text are more important than others. Even an approach that purports to be neutral does this.
That’s not a criticism – it doesn’t come from any lack of diligence or judgement. It’s unavoidable and that’s the case whether the summary is put together by a human or by an AI agent.
In other words, the reason academics still look for first-hand research isn’t because there aren’t good summaries around. There are, but they’re not an adequate replacement and they never can be.
That means Informa’s publishing division is extremely difficult to disrupt. From my perspective, a world where universities stop subscribing to journals and academic publications isn’t realistic.
So… buy?
Informa’s shares are 16% off their highs and the driving force seems to be concern about AI. But in academia, there’s no substitute for first-hand research and I don’t see that changing.
The bigger risk – in my view – is the prospect of customers going out of business. Almost all UK universities are under financial pressure and a lot of them are in danger of closing altogether.
That’s something to keep an eye on. But while the stock market’s worrying about AI replacing journals, I think savvy investors might consider adding the stock to their buy lists.
