The costs of scholarly publishing have become unsustainable for both research libraries and university presses. This paper discusses how the transition to electronic journal publishing changes the ways in which these two participants in the scholarly communication process begin to analyze and attempt to control their cost structures in order to remain economically viable. Libraries and their users will be reluctant to abandon a known archival format, and capital investments in the technical infrastructure needed to deliver scholarly information electronically may be made slowly. For publishers, the need to cover first copy costs and to continue serving a market demand for print will create a significant transitional period during which both print and electronic formats must be produced and funded. The transition to fully electronic publication, although likely to reduce operational costs for libraries slightly in the short run and significantly in the long run, creates potential revenue interruptions for presses. Many publishers have proposed pricing models for electronic journals that are based on existing print subscription prices and that include multi-year guarantees of price adjustments to cover both inflation and expansion in the content offered. Libraries are caught in the dilemma posed by many publishers' current pricing structures for electronic journals: the offer of a multi-year reduction in the rate of inflation in high-value commercial journals is attractive when compared to the anticipated inflation in print journals; yet accepting that model would protect a rising share of library collection budgets for high-inflation journals which would then rapidly crowd out other scholarly publications. The short-term measures that the library and press individually might rationally employ to maintain fiscal stability may have far reaching negative implications for the economic viability of the system of scholarly communication as a whole, particularly for the university presses. (Contains 22 references.) (AEF/Author)