Straight and crooked thinking in the new media landscape
“What we really want is for people to choose the bundle or the digital only, but we don’t mind which. Both of them are equally more profitable to us than the print only option,” says Michael Brunt, CMO and circulation director at The Economist.
As things stand, The Economist has the best track record of the world’s prominent publishers in managing their digital conundrum. From way back, The Economist applied logic to the options presented. The logic always sounded like that Michael Brunt sound grab, delivered this month via a media industry blog.
At its core, The Economist believed in the value of its product – the value of its content. That is what distinguished its approach and marks its continuing strategy. As its management of the recent disposal by Pearson of its shareholding demonstrates, this news media publisher is the master of its own destiny. A very rare coincidence today.
The story gets better. Having built and sustained a strategy that relied almost entirely on product value, The Economist is making its digital transition with a result that others must shed tears at. Because the margin on its paid content is rising. Having built a truly global audience base with print, the decline of print is now offset by digital – at higher profitability.
(Image: Michael Brunt, CMO and circulation director at The Economist.)
Well capitalised, strong in its underlying performance, The Economist is just now branching out in digital ways. Way back at the start, this title stood aside from the rush to digital. In fact it took an apparently perverse step and increased its print circulation reach and, while at it, hiked its prices. Selling out of some diversions, like CFO magazine, The Economist focused on going global – in print. Unlike many peers, it chased global reach and profitability at once.
The message here is simple: strong incumbents are wise to step back and check the landscape before charging headlong into the digital wilderness. Publishers, among the first to face this tricky terrain, blundered at a digital rush into the land of the free. Only to find a desert where advertising had evaporated. Many are so wedded to crooked thinking they are still trying to farm the desert.
Belief in the product is a material idea for The Economist and the hallmark of its straight forward approach. Income from subscribers contributes twice as much revenue today as do advertisers, which only barely more than the “other” income they earn from its briefing business, conferences and “other”.
This is the foundation. Now they are able to choose the value paths from a very interesting array. An app that provides a morning news summary picked up 860,000 downloads before its first anniversary. Its radio podcasts are similarly popular. Recently it has begun to offer TV documentaries. Each and all with a solid base of marginal profit potential.Every step anchored in its core belief in the delivery of valued content.
The digital world suffered for a long time from the crooked thinking of early promoters. It was always obvious that the internet did not demand free offerings. It simply made obvious those whose offerings were commoditised. Publishers of news had the heightened problem of having built their businesses for advertising platforms rather than valued news products. They looked at the internet and saw huge audiences. But the internet showed many of them to be junk publishers. And then trashed their aggregated advertising audiences with ever bigger aggregations.
Perhaps The Economist will lead them out of the badlands. But they will need some true believers.
About the author
Michael Gill is the a former CEO of The Australian Financial Review, and Counsellor with global business advisory firm Dragoman.