Spreading the dismal science
The weekly magazine published out of London, the Economist, has continued to prosper in the last two years while other magazines stagnate or fold. Professors Oberholzer-Gee and Anand (Harvard) scrutinize its successful strategy.
Founded in 1843, the Economist is over one hundred and fifty years old but it is only in the last fifty that it has truly taken off. In 1920, it sold only 6,000 copies and it took fifty more years to cross the 100,000 threshold. But by 1996 circulation had reached 600,000 and ten years later had crossed the 1,000,000 mark.
How has the Economist succeeded in making it through the magazine crisis that began in 2008? The Economist has weathered the storm, for the time being at least. Circulation rose in 2008 by over 9% (to 1.3 million), while advertising revenue climbed over 25% (to $131 million).
The financial figures are correspondingly rosy. Turnover has grown at an average of 12% over the last three years and crossed the half billion mark in 2009. Profit has expanded at an even greater rate and the profit margin now stands at 12% of sales.
Strategic assets
One of the keys to the Economist’s success is editorial autonomy. The editorial team prides itself on not trying to guess what readers might want to hear. Rather than attempt to tailor the magazine to reader desires, the editors spend their time debating among themselves what to cover and how to cover it. One might call the editorial production process peer customization.
The most salient of the debates is the Monday morning meeting during which the editors argue about what issues and positions are to presented (in particular, in the Leader section). Debating societies are part of the old British universities and that tradition lives on in the Economist’s offices.
The idea of the editorial team as an autonomous intellectual community is reinforced by the absence of bylines. Just as the magazine ignores reader’s desires, it sidelines journalists’ egos.
The fact that the Economist is read throughout the world furthers the inclination to editorial autonomy. Trying to tailor a magazine to fit the desires of readers in Japan, Germany, the United Kingdom and the United States is well nigh impossible. And so the journalists are freed from catering to some prototypical reader.
Competition and business model
As a weekly news magazine with comparatively strong business and finance sections, the Economist’s competitors range from national weeklies such as Time and Newsweek to business magazines such as Business Week and Fortune. Unlike Time and Newsweek, it has a geographically global (rather than an American or British) perspective. And unlike Business Week or Fortune, it has a thematically global perspective, since it offers more coverage of politics, technology and the arts.
Its business model is also very different. The model is founded on comparatively high cover and subscription prices, two to five times that of its competitors. This has resulted in a much higher proportion of circulation revenue, with advertising revenue contributing more to the bottom line and less to cost coverage.
The Internet and e-readers
The Economist is still in an early stage of developing its online operations. While there has been experimentation, the online edition has, by and large, been a spinoff of the print edition. Some exclusively online features have been developed. Perhaps the one most in keeping with the argumentative mindset of the magazine is the Economist Debate, inspired by the Oxford Union.
While the web is not viewed as a substitution threat for the magazine, e-readers are. Unlike the web which is really only good for information snacks, e-readers are better at providing an information meal. Accordingly, the e-reader strategy should be more important than the online strategy.
So far in the 21st century, the print media has not offered many success stories. Nor has the science of economics. There is a bit of British irony in the fact that a weekly magazine named for that dismal science should be prospering when both generalist magazines and the dismal science are reeling.
Reference:
Harvard 9-710-441
“The Economist”
Professors Felix Oberholzer-Gee and Bharat Anand, Lizzie Gomez
Harvard Business School
Published August 2010
