 "Chris Stibbs")
Last month, the £328-million Economist Group changed hands. Pearson's 50 per cent stake in the iconic brand was bought partly by Exor SpA - the holding company of the Italian Agnelli family that also owns Fiat Chrysler. Exor paid £287 million to increase its stake in The Economist from 4.7 per cent to 43.4 per cent. The rest of the stake was bought for £182 million by The Economist Group, which consists of employees (present and past) and families such as the Rothschilds, Cadbury and Schroder. At 1.6 million in circulation (print and digital) globally and £60 million in operating profits in March 2015, The Economist has for long symbolised the power of a good, editorially driven brand. Vanita Kohli-Khandekar interviewed Chris Stibbs, group chief executive officer, at length in London. Edited excerpts:
In a world where the whole ecosystem that funds and serves good-quality news and analysis is disintegrating, what keeps The Economist ticking?
In the current media environment, if you want to be heard, you have to have a uniqueness of voice and The Economist has that. It is relevant, it is about free markets and we do all of this with quality journalism. Our target audience is huge - people who are intelligent and curious and interested in the world beyond their borders. Nevertheless, the world is getting smaller and distribution can help us reach anywhere. To help us in our focus going forward, about two and half years ago we went through an exercise to define, what defines The Economist.
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This exercise included me, the editor and the digital editor. And the five values that we stand for are, one, we (The Economist) are forward looking. Two, we are a trusted curator of events around the world. Three, we are not a disinterested observer, we actively advocate change. Four, we are global and, five, we are about world-class journalism. Our mission is about free trade and internationalisation, with a conscience and our values then help us define what we could be doing. So, if we do conferences, we will do one around say oceans (The blue economy held in Portugal, this June) or around gay and lesbian rights (Pride and prejudice to be held in London next year), as opposed to doing just any business conference. We have now started making films (which centre around the issues and the people the magazine writes about), there is an app, espresso, which gives you five pieces of 120 words each every morning on your mobile phone (a daily edition for smartphones).
What role does the ownership structure play in ensuring editorial independence?
On a day to day basis, it doesn't matter. In an indirect way, ownership status is very critical. Our independent voice is critical to those five values. So, when we advocate, there is no outside influence on the editor. And the whole organisation has been set up to sell based on those values. Commercial success breeds commercial independence and commercial independence is important for editorial independence, which in turn breeds commercial success… It is not about business versus editorial, but proprietorial influence has to be kept apart. If there is no commercial success then ownership independence is at risk and so is editorial independence. Our rules don't allow one owner to own a majority stake.
What does the change of ownership mean for the group?
It is too early to say. On a day to day basis, there has been no change. All media and businesses are in a state of constant transformation. Digital advertising is changing through programmatic. The ability to use social media could permanently transform your business. And what we need, therefore, is ownership strength and a board that understands the demands of that constant change. We swapped Pearson for Exor and both passionately believed in the brand. Pearson was a great owner but it is more focused on education. John Elkann (chairman) of Exor has bought into us understanding the challenges we face. Now, the ownership is more focused on this change and our values.
Over time, before Pearson became disengaged, we had tightened the ownership structure more, bringing things into the articles of the firm - like no one can own more than 50 per cent; no one can get more than 20 per cent of the vote.
How does this digital transformation change journalism?
That is where those five values come in use. The Ocean summit, the five-minute films… earlier we would have been closed to these because we are a 'weekly magazine'. The beauty of the digital world is that our uniqueness of voice doesn't change. The danger is when we try to become something else. For example, I am always asked 'what do you do to attract the millennials?' And I say our target group is, 'intellectually curious people'. This includes many millennials, but they may not come in through a weekly magazine.
Does there need to be a conflict between bringing out a good media brand and making money?
It takes time. Quality is not enough; there has to be uniqueness of voice. The challenge is to keep at it over time.
Will revenues catch up with the growth in digital traffic enough to fund quality news and analysis?
It is very challenging to grow a business out of a free content, advertising driven model. To do that you need a large scale of traffic and the odd firm, such as Buzzfeed, may do it. But for traditional publishers, there isn't enough traffic and scale. Earlier, there were advertising and circulation revenues. Now, it is necessary for consumer publications to have more than one revenue stream. The Economist online does well, but if that was all we had, we could not sustain the journalism we have. (The Economist gets $30 per thousand people reached online against $100 for print). Within two years digital advertising will become bigger than print. There is a transformation of the business from print to an integrated digital organisation. It is becoming a more complex organisation. So, for example we have a media services business that creates and populates content portals for firms such as Microsoft or General Electric.
What are the possibilities for The Economist to scale - given its focus?
There are seven million people who engage with The Economist in some form or the other every week. By innovating and creating more content and distributing it on different platforms, we can take that seven million to 30-50 million over three to five years. The beauty of the digital mobile is that we can scale our business by packaging it in whichever way audiences want content - as a daily, a film, a conference or a weekly.
How do you fight the tyranny of the algorithms which direct traffic online?
We keep trying to reach people in their daily lives. Somebody who has never read The Economist may see a video on Facebook (where we have six million fans) and get interested. (The group makes several short videos every week on topics ranging from 'Why London is an expensive city to build in' to 'Why the conflict in Columbia endures'). The days of control over your own distribution are over. Accept it, don't fight it. You can't fight the consumer. Google, Facebook have simply tapped into what consumers want.
How does consumption of The Economist vary in different parts of the world or even between the offline and online worlds?
Markets are an interesting concept. So, for instance, South Korea is a small circulation market, but Samsung and Hyundai buy our global circulation. India has a bigger circulation (40,000 copies) but no major advertiser buying into our global circulation. The top five markets (in circulation) for us are the US, UK, Canada, Germany and France. India is the sixth largest in circulation. We don't look only at revenues or copies sold in a market since we don't sell a domestic market, we sell a global audience . We have grown fastest in Asia, because it is looking outward to invest and, therefore, we have become important. In April this year, we launched a global bilingual review in English and Mandarin, aimed at Chinese readers.
Is there is a Hindi bilingual in the offing? Also, your take on the India market…
Most of our target readers in India are proficient in English. Between 2000 and 2002, we bet quite heavily to build circulation in India. We don't make money in India but we don't lose either. The challenge is twofold - the price point we can sell at in India is not profitable because we print outside. If we printed inside India, we would be subject to controls (26 per cent equity cap). What will make India big for us is some global brands looking outward (to reach a global audience).
The toughest markets you have been to…
Markets have been tough sometimes because we have been too Western in our approach. Now, Suprio (Guha Thakurta, chief strategy officer and India head of The Economist) is helping us figure out scale in developing markets. He gets developing markets. The US is tough because of price competition. China is tough because we get censored occasionally. But, we have to learn how to be The Economist and yet work locally.
