The Economist: A traditional company in a new space
A few years ago, BusinessWeek was valued at more than $1 billion and in October 2010 it was sold for a mere $5 million. When buying Newsweek in August 2010, the buyer Sydney Harman confessed, “Break-even is a serious accomplishment, especially in this world, the world of journalism. I’m not here to make money, I’m here to make joy.” Print media is considered a dying business now but even in this environment The Economist, one of the oldest magazines in political, economic and academic news, is growing steadily. While most of the industry players have lost readership, The Economist has increased circulation 95% over the past ten years. Its circulation has risen another 3.3% from 2008 to 2009 while the largest news magazines lost more than 25% of their circulation, with Business Week losing 2% circulation and Forbes remaining steady with a 0.1% gain.
Readers subscribe to The Economist magazine because it offers long, well researched and analytical articles. Much like a textbook, readers spend a long time on each page studying the concepts and highlighting important points. The magazine commutes from the reader’s home to work and back.
While other organizations misread market trends and incorporated the sensationalism and lighter reporting that readers wanted to read online into their print publications, The Economist has maintained their journalistic integrity and refused to cut reporters. In this sense, other news publishers have helped to erect their own barriers to entry.
The Economist has been successful because it turned this inherent desire into an emotional hedge - mitigating the risks that online media poses by appealing to the sensibilities and sentiments of its customers. The biggest battle that new online media faces in capturing The Economist’s readership lies in the brand recognition and reliability that is associated with The Economist. The intrinsic problem for its rivals is that spending on marketing and increasing brand visibility is simply not enough - tenure is still an important factor in establishing a reputable news brand; you have to produce reliable journalism and you have to do it for a long time.
The Economist readership is also a unique reason for its success. At a median age of 48, the readers are older than the national average of 45. In addition, they are wealthier with an average household net worth of $1,666,000. Most readers are also well educated, with 89% having college degrees and 56% having post-graduate degrees. Additionally, they are influential in their place of work: 42% hold senior management positions.
This unique demographic is tech-savvy but has continued their patronage of the print magazine because they heavily depend on that which The Economist, in contrast to many floundering news publications, has never lost sight of: thorough reporting driven by a strong team of reporters. In addition, for a company that relies on advertising for more than 40% of its revenue, The Economist leverages its readership to set itself apart. Advertisers prefer The Economist because it allows them to reach an extremely powerful and wealthy audience that spends an average of two hours per issue. The popularity of the niche occupied by The Economist coupled with the unique readership has driven the magazine’s success during an otherwise troubling time for print media.
But The Economist’s deadline is looming. The next generation of customers represents the first wave of readers who have always had access to digital news. They are more technology dependent and will increasingly consume The Economist’s content online rather than in print. Readers spend 200 times more time on print versions as compared to the same source online. Not only does this diminished level of engagement undermine The Economist’s purpose in providing detailed qualitative analysis, but it also eliminates the traditional appeal in placing advertisements with The Economist.
As the shift to online news consumption continues to demolish large swaths of the print industry, news organizations must develop alternative revenue generating structures. The oncoming decline in print circulation and advertising revenues compel news publishers to explore innovation in the online space.
These looming strategic issues cloud the The Economist’s future with uncertainty. However, the recent purchase of the political magazine CQ Roll-call seems to be a perfect solution to survive this storm. Congressional Quarterly (CQ) is one of the precious few targets in the print media world that can bring together top level esteem for its product, a strategic fit with The Economist’s core competencies and activities, as well as a broad set of revenue-generating online technological tools.
With such a highly-regarded brand, The Economist can naturally only afford to associate itself with brands of a similar caliber. In this regard, CQ offers a seamless union. CQ is commonly referred to as “the publication of record” by those following Congressional affairs. Like The Economist, it is also reputed to provide unbiased, factual and quality reporting. These characteristics are a mirror of The Economist’s own reputation.
The CQ acquisition brings a complementary knowledge set to The Econonomist. Business and government have always been intertwined because each entity influences the actions of the other. The joining of these two news organizations will yield a heightened insight into those interactions, providing better, more up to date news for both of their news clienteles.
What sets CQ apart is its online strategy. By using the internet more effectively, CQ has steered ahead by providing real time intelligence on policy and congressional news to its customers. Most compellingly however, CQ has developed a suite of online tools available to all their users for a fee. For example, the tool CQ Schedules offers users a complete calendar of Washington’s policy events. These features are complemented by CQ’s meticulous collection of metadata on its articles, commonly referred to as tags. By tagging a list of topics an article covers, the archiving process is improved and stories can be quickly extracted to produce hot button issue special reports. These reports can be purchased by a relatively broad audience within the niche market generating new streams of income.
This practice can be hard to imitate because most publications do not have the resources to tag their content. Their reporters are generally carrying a heavy and urgent deadline-driven workload; they simply do not have time to trouble themselves with additional tasks. Additionally, this trend has been exacerbated at every media organization that has chosen to slash its reporting staff because it leaves the remaining journalists more overworked than ever.
This new monetization of online traffic represents a tantalizing opportunity for The Economist. In order to engage their growing online readership, The Economist should develop similar consulting tools targeting executives, business students, and managers. Leveraging their existing knowledge of business trends, the Economist can add value by allowing business leaders to apply Economist concepts and best practices directly to their existing business challenges. Internet tools and applications have proved popular in the political arena with CQ and have created a mini revolution in the mobile phone industry. The Economist needs to do the same thing, this time for business professionals.
Similar to CQ Schedules, for example, The Economist could re-purpose this tool and offer a complete interactive schedule of World Trade Organization events. Alternatively, after reading about business trends in back-office finance consolidation, a finance manager could download an Economist ‘app’ that analyzes their accounting functions and business size to determine if they should pursue this strategy as well. Ultimately, because The Economist covers such a wide range of topics, it could develop similar tools and surveys for people all over the corporate and political landscape.
Ultimately, like with CQ, these new tools will serve a fundamentally different customer need, occupying a space somewhere in between traditional consulting and in-house research. While not as customized as consulting, they will benefit from shared best practices, and can be offered at a fraction of the cost. The Economist could offer a premium membership with access to these tools, generating more interest in their pages while better serving their readership. This in turn will bolster The Economist’s core values in research and trend analysis, while at the same time bringing back essential revenue from online advertisers.
Once the radical Internet shift plays out, we will still see the same devoted Economist reader. But instead of carrying the latest newsstand copy and highlighter pen they will be plugging in to the website through a mobile device to get even better and more up-to-date analysis of global business and political events before sitting down at their desk to make decisions for their company based on tools they have purchased from The Economist.
1. Bloomberg wins bidding for Newsweek, http://www.businessweek.com/innovate/FineOnMedia/archives/2009/10/bloomberg_wins.html
2. An annual report on American Journalism,
3. The Trials and Economics of Newsweek,
5. The Economist Group – Annual Report 2010, http://www.economistgroup.com/pdfs/annual_report_2010_final_for_website.pdf
6. The Trials and Economics of Newsweek,
7. The Washington Post Company Agrees to Sell NEWSWEEK to Sidney Harman
8. The State of The Media
9. The Economist Reader Profile
This report was a group project for the Global Strategy class of Thunderbird School of Global Management Professor Nathan Washburn, Ph.D.