Today I was fortunate enough to attend a lunch where the speaker was The Economist editor-in-chief, John Micklethwaite. His talked was wide ranging but, not surprisingly, what interested me is the question he received about disruption in his own industry.
The Economist, of course, is faring well especially compared with newspapers. He attributed this to two factors. First, that The Economist was a ‘lean back’ publication where people read it cover-to-cover at their leisure (say, on a plane). Second, because of this, its readers would trust The Economist as a filter and in the digital age, the value of a good filters increased and they were fortunate to be one of those good filters. Now, what is interesting is that he saw The Economist not as a newspaper but as a magazine and said as much. Yes, he called it a magazine. The Economist always referred to itself as a newspaper even when its readers used to think otherwise. Now that has apparently changed.
There was a second aspect that Micklethwaite raised. He claimed that The Economist was agnostic as to how people read their content. He claimed that they didn’t care whether they read it on paper or digitally. Well, isn’t that interesting. To an economist, to me that was a claim that if the cost differential between print and digital was $x that would be the difference in the price consumers saw. The idea being that The Economist would earn the same margin regardless of the medium. You know, it was “agnostic.”
So I took a look at said pricing. For Canada, the digital only subscription was $129.99 and print subscription was $137.19, a difference of $7.20 annually. That seemed a tad low. When I moved to Australia, the difference was $146 per annum. Now that seemed more like it. Why the difference? Well, it could be that advertising is worthless in Australia and print advertising is worth relatively more than digital advertising in Canada. So while print costs may be higher they might be offset by higher advertising rates.
However, there are two clues that this isn’t really the story. First, consider the US. The difference between the print and the digital subscriptions is $0. As the print option includes the digital one, this is telling me that The Economist does not, in fact, have a digital option in the US. They want everyone to get the print edition even if they toss it in the bin except when they have a plane flight and need to for take off or landing. This is hardly agnostic behaviour. What’s more if advertising rates are higher for print than for digital units then all these people being shipped physical copies are polluting the advertising numbers there. Seems like a strange and value destroying thing to be doing.
Second, let’s delve into Australia more. Now you would think that the reason for the difference between print and digital there is because it is more costly to get physical copies distributed to Australia (even if they are printed there — although I think they are printed in Singapore). But the digital only price is $219 and the print price is a massive $365 (you know, $1 per day). So in a market where there would be huge incentives to promote the digital version, they charge almost 70 percent more for that version than elsewhere! Again, this could be because of an advertising issue but that does not seem plausible. Instead, what is likely going on is that it is more costly to sell the print version in Australia and so they price the digital version to ensure they do not cannibalise those sales.
Whatever the precise reason, The Economist cannot claim to be agnostic about print versus digital. One suspects that they are concerned about the iPad and what it will mean and a two year print subscription locks consumers in to favouring The Economist for that much longer. But I suspect that when reality sets in, The Economist will be as vulnerable to a pricing disruption as other sections of the media. Certainly, I wonder if they are doomed the day we are allowed to use iPads on take off or landing for planes (a policy that is hard to understand and impossible to explain to a child). That is the only reason I currently subscribe to The Economist.