How subscriptions became a driver of profit at The Economist

Taking to the stage at FIPP’s recent World Congress in London, Michael Brunt was keen to share a key part of his job description when he joined The Economist in 2006: ‘Build the audience our advertisers want to reach.’

Brunt Congress ()

At the time the circulation business at The Economist was making a huge loss, yet it was not a huge matter of concern to the business because the circulation model was primarily designed to support advertising revenues. While that pivotal part of his job description remains unchanged in his personal file to this day, Brunt explains that it soon became apparent that, just like what was being experienced in the rest of the publishing industry, advertising revenues started to decline. “We needed to react to this disruption by building profits on our circulation.”

An important part of the turnaround strategy, explained Brunt, was to understand from subscribers what they liked about The Economist and then to establish if they were prepared to – “gladly” – pay more for it?

A survey revealed five interesting factors:

  1. As a “smart guide to the forces that shape the future”, The Economist predicts – “fairly accurately” – what will happen in the world and analyse the forces that shape it.  
  2. As a trusted filter on world affairs The Economist “distil the news in a finish-able package” – an antidote to information overload. “You can read the The Economist to the end but you cannot read to the end of the internet.”
  3. The Economist contributes to – and advocates for – positive change.
  4. Despite being London based, The Economist “always take a global perspective”.
  5. It’s a premium product that costs three to four times more than other similar publications but readers are happy to pay for it. “We produce quality and our readers find our journalism valuable and are willing to pay for it. We are reassuringly expensive”. 

Acting on these factors, they started to implement a strategy to grow circulation revenue. As a start, they benefited from the migration from print to digital by unbundling the web access a print subscriber would receive (for free) for being a print subscriber as early as 2011 – the same year they started to show a circulation income profit. From here the growth trend escalated.

“We now charge the same for a digital subscription as for a print subscription on the grounds that you are paying for the content and not the format.” 

On top of this, they were confident that they would be able to raise subscription prices without losing too many readers. In fact, despite price increases for both print and digital packages The Economist’s subscription numbers are up by around 100,000 compared to back in 2014.

Brunt said he is sure that this upward trend will continue because there remains a demand for what is being sold, especially in a world where fake news has created opportunities for publications with integrity.

Despite this bullish attitude, he did warn that the price inelasticity of subscribers “should be closely monitored”. Their research found that you could increase the subscription price “up to a certain point” without experiencing a decrease in value. “But if you increase prices over 20 per cent you will find that your decline in volume will negate the increase in revenue. We have also found that every time you put the price up, there will be a decrease in volume, so it doesn’t matter if you put the price up by 5 per cent or 20 per cent. We found that you should do a price increase infrequently and in a big amount. So the next price rise for us will not be until March 2019.”

This is because the business is run in three-year cycles, he explained. The first year will see a price rise, the second will see the business benefiting from revenue per copy growth and the third will see the price stabilise in the marketplace resulting in an increase in volume.

It is also important to know your audience well, explained Brunt. “Some of these (audience qualities) are things you would expect but it remains vital to fully understand the interests of your readers.

Economist readers are:

• Interested in political and business news from trustworthy sources;

• Want to be, and be seen to be, informed about what is happening in the world;

• Have a preference for quality brands, but are also environmentally friendly;

• Have an interest in travel, both for business and leisure;

• Have an interest in art, and want to be educated about it; and

• Interested in entertainment news and want to be kept up-to-date.

At the Economist people who align with the above criteria are described as ‘Globally Curious’. Brunt said their research has shown that there are 76 million of these ‘Globally Curious’ people in the world with a good enough command of English “to read The Economist comfortably”. This number is growing thanks to globalisation, growth of the English language and higher education standards.

“So we are in a situation that every morning when I wake up our target audience is slightly bigger than it was before. By 2025, that target audience will be 85 million… so we plan to be around for another 174 years,” he said.

You can see Michael’s presentation here.

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