Building subscription revenue AWS
Building subscription revenue
An all too familiar graph. How is The Economist responding?
Our public-facing numbers don’t reveal our response
Annual Report, June 2017
But behind the scenes we have been transforming our circulation business
2005
2011
2017
Why is an obscure journal founded in 1843 still thriving?
1. We are a smart guide to the forces that shape the future
2. We are a trusted FILTER on world affairs
We distill news into a ‘finish-able’ package We are the antidote to information overload
3. We advocate for positive change
4. We always take a global perspective
5. Quality: our readers find our journalism valuable and are willing to pay for it
Margin over closest
USA
UK
AUS
India
$190
£179
A$560
$179
$20
£23
A$145
$54
$40
£45
A$146
$55
$70
£110
A$186
$138
$40
£85
$135
$101
$100
£120
A$203
$150
1.9x
1.5x
2.8x
1.2x
There are four ‘pillars’ to our circulation profit growth
A. Migration from print to digital reading B. Charging more for the print + digital bundle C. Raising prices D. Investing in efficient, scalable marketing
Print
23% 54% Bundle
Digital
FY17 average new QSS starts
23%
25% HIGHER PRICE
SAME PRICE
77% of new subscribers choose a digital product (the most profitable)
70%
60%
50%
30%
20%
10%
36% 36% 37% 37% 38% 38% 39% 40% 40% 41% 41% 42% 42% 43% 44% 45% 46% 47% 47% 48% 49% 49% 49% 50%
18% 19% 19% 19% 20% 20% 20% 20% 20% 21% 21% 21% 21% 21% 21% 22% 22% 22% 22% 22% 23% 23% 23% 23%
90%
46% 45% 44% 43% 43% 42% 41% 40% 39% 39% 38% 38% 37% 36% 35% 33% 32% 31% 30% 29% 29% 28% 28% 27%
The most profitable bundles now make up most of our circulation
100%
80%
40%
0% Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17
Revenue per copy is steadily increasing because we have raised prices - and because over half choose the bundle
Apr-13
Apr-14
Apr-15
Apr-16
Cost per copy is pretty flat (most of the fluctuations here are FX-related)
Apr-13
Apr-14
Apr-15
Apr-16
In combination, gross margin per copy has almost doubled in four years
Apr-13
Apr-14
Apr-15
Apr-16
Why are we so confident circulation profits will continue to grow?
1. Demand for The Economist remains undiminished
2. Our market penetration will remain low 3. We can scale our marketing efficiently and profitably
1
Demand for The Economist remains undiminished…
A. Content consumption outside publisher’s media
B. Consumers get tired of endless streams and return to brands
1
We have found our subscribers to be ‘price inelastic’ •
This means that up to a point, price increases will not result in proportionate volume declines
•
Therefore price rises increase profits and are worth implementing
•
But each time we raise prices, we have found that volumes are negatively impacted for up to a year
•
So infrequent, but large, price increases are more effective than regular, smaller increases
1
We now manage the circulation business in a three-year cycle
1. Price Rise
2. RPC Growth
3. Mix of Volume and RPC Growth
For each year in the three-year cycle we optimise the timing of price increases and balance marketing spend and contribution growth We are in a “RPC Growth” year, because we raised our prices in March 2016
1
Our next price rise is scheduled for March 2019
FY16
FY17
FY18
FY19
FY20
FY21
Price Year
RPC Year
Mix Year
Price Year
RPC Year
2
Who reads The Economist? •
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
•
Interested in entertainment news and want to be kept up-todate
2
We sell to less than 1% of the ‘Globally Curious’ There are 76M ‘Globally Curious’ with a good command of English
In 2025, there will 85M We are far from saturating the market
3
We can scale our marketing efficiently and profitably
WIDER
HIGHER
3
We once recruited “subscribers through this type of marketing
3
- 26 -
Today, are more likely to find them through digital posters, or TV
3
Our through online activity such as our brand response campaign
Creative effectiveness Gold, 2016
3
We react quickly to world events, with new creative launched in hours
US Election
UK Election Brexit
3
We also recruit via ‘experiential’ marketing, a remarkably scalable and profitable channel
3
Everything is tracked using the latest attribution software
Cadreon
Visual IQ
Amobee Facebook
3
As at August 2017
Of course, social media is an excellent channel for acquiring new subscribers
24.4M
9.6M
318k
1.1k
10.5M
1.2M
4.3M
300k
888k
One response to declining ad revenues: Robust circulation profit growth for many years to come
As a result, we plan to be around for the next 174 years!
An all too familiar graph. How is The Economist responding?
Our public-facing numbers don’t reveal our response
Annual Report, June 2017
But behind the scenes we have been transforming our circulation business
2005
2011
2017
Why is an obscure journal founded in 1843 still thriving?
1. We are a smart guide to the forces that shape the future
2. We are a trusted FILTER on world affairs
We distill news into a ‘finish-able’ package We are the antidote to information overload
3. We advocate for positive change
4. We always take a global perspective
5. Quality: our readers find our journalism valuable and are willing to pay for it
Margin over closest
USA
UK
AUS
India
$190
£179
A$560
$179
$20
£23
A$145
$54
$40
£45
A$146
$55
$70
£110
A$186
$138
$40
£85
$135
$101
$100
£120
A$203
$150
1.9x
1.5x
2.8x
1.2x
There are four ‘pillars’ to our circulation profit growth
A. Migration from print to digital reading B. Charging more for the print + digital bundle C. Raising prices D. Investing in efficient, scalable marketing
23% 54% Bundle
Digital
FY17 average new QSS starts
23%
25% HIGHER PRICE
SAME PRICE
77% of new subscribers choose a digital product (the most profitable)
70%
60%
50%
30%
20%
10%
36% 36% 37% 37% 38% 38% 39% 40% 40% 41% 41% 42% 42% 43% 44% 45% 46% 47% 47% 48% 49% 49% 49% 50%
18% 19% 19% 19% 20% 20% 20% 20% 20% 21% 21% 21% 21% 21% 21% 22% 22% 22% 22% 22% 23% 23% 23% 23%
90%
46% 45% 44% 43% 43% 42% 41% 40% 39% 39% 38% 38% 37% 36% 35% 33% 32% 31% 30% 29% 29% 28% 28% 27%
The most profitable bundles now make up most of our circulation
100%
80%
40%
0% Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17
Revenue per copy is steadily increasing because we have raised prices - and because over half choose the bundle
Apr-13
Apr-14
Apr-15
Apr-16
Cost per copy is pretty flat (most of the fluctuations here are FX-related)
Apr-13
Apr-14
Apr-15
Apr-16
In combination, gross margin per copy has almost doubled in four years
Apr-13
Apr-14
Apr-15
Apr-16
Why are we so confident circulation profits will continue to grow?
1. Demand for The Economist remains undiminished
2. Our market penetration will remain low 3. We can scale our marketing efficiently and profitably
1
Demand for The Economist remains undiminished…
A. Content consumption outside publisher’s media
B. Consumers get tired of endless streams and return to brands
1
We have found our subscribers to be ‘price inelastic’ •
This means that up to a point, price increases will not result in proportionate volume declines
•
Therefore price rises increase profits and are worth implementing
•
But each time we raise prices, we have found that volumes are negatively impacted for up to a year
•
So infrequent, but large, price increases are more effective than regular, smaller increases
1
We now manage the circulation business in a three-year cycle
1. Price Rise
2. RPC Growth
3. Mix of Volume and RPC Growth
For each year in the three-year cycle we optimise the timing of price increases and balance marketing spend and contribution growth We are in a “RPC Growth” year, because we raised our prices in March 2016
1
Our next price rise is scheduled for March 2019
FY16
FY17
FY18
FY19
FY20
FY21
Price Year
RPC Year
Mix Year
Price Year
RPC Year
2
Who reads The Economist? •
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
•
Interested in entertainment news and want to be kept up-todate
2
We sell to less than 1% of the ‘Globally Curious’ There are 76M ‘Globally Curious’ with a good command of English
In 2025, there will 85M We are far from saturating the market
3
We can scale our marketing efficiently and profitably
WIDER
HIGHER
3
We once recruited “subscribers through this type of marketing
3
- 26 -
Today, are more likely to find them through digital posters, or TV
3
Our through online activity such as our brand response campaign
Creative effectiveness Gold, 2016
3
We react quickly to world events, with new creative launched in hours
US Election
UK Election Brexit
3
We also recruit via ‘experiential’ marketing, a remarkably scalable and profitable channel
3
Everything is tracked using the latest attribution software
Cadreon
Visual IQ
Amobee Facebook
3
As at August 2017
Of course, social media is an excellent channel for acquiring new subscribers
24.4M
9.6M
318k
1.1k
10.5M
1.2M
4.3M
300k
888k
One response to declining ad revenues: Robust circulation profit growth for many years to come
As a result, we plan to be around for the next 174 years!
