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

20112005 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

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

Margin over closest 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

54%

23%

23%

77% of new subscribers choose a digital product

(the most profitable)

Bundle

Digital

PrintS

AM

E P

RIC

E25

% H

IGH

ER

PR

ICE

FY17 average new QSS starts

The most profitable bundles now make up most of our

circulation

46

%

45

%

44

%

43

%

43

%

42

%

41

%

40

%

39

%

39

%

38

%

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%

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%

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%

33

%

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%

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%

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%

27

%

36

%

36

%

37

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50

%

18

%

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20

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20

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23

%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

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

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.

Price Rise

2.

RPC

Growth

3.

Mix of

Volume

and RPC

Growth

1

FY16 FY17 FY18 FY19 FY20 FY21

Our next price rise is scheduled for March 2019

Price

Year

RPC

Year

Mix

Year

Price

Year

RPC

Year

1

Who reads The Economist? 2

• 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-to-date

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

2

We can scale our marketing efficiently and profitably

WIDER

HIG

HE

R

3

We once recruited “subscribers through this type of marketing3

Today, are more likely to find them through digital posters, or TV

- 26 -

3

Our through online activity such as our brand response

campaign3

Creative effectiveness

Gold, 2016

We react quickly to world events, with new creative launched

in hours3

US Election

Brexit

UK Election

We also recruit via ‘experiential’ marketing, a remarkably

scalable and profitable channel3

Everything is tracked using the latest attribution software3

Cadreon

Visual IQ

Amobee

Facebook

Of course, social media is an excellent channel for acquiring

new subscribers

9.6M24.4M

10.5M

4.3M 300k

1.1k 1.2M

888k

3

As at August 2017

318k

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!