"The Economist" Beats Publishing's Blues

The Economist occupies an intriguing position as the already-shell-shocked publishing industry braces for more bad news on the advertising front.

First, magazines had to stop relying on the longstanding safety net provided by the auto industry. Now, they'll soon feel the pinch from the crisis engulfing such reliable advertisers as Merrill Lynch and Citigroup , according to the buzz at last week's American Magazine Conference in San Francisco.

True, the likes of Time Warner's Fortune and Money and McGraw-Hill's Business Week, Forbes and Portfolio swim in the same troubled waters, as these magazines most directly count on a steady flow of ad revenue from Wall Street firms.

The Economist, however, stands apart.

The magazine has climbed to the top of the heap because it's the smartest, wittiest and most urbane of the group. Its advertising is up 6% year to date, underscoring the point. The publishing industry all but expects the Economist to come up with a cure for the market's malaise.

"Magazines could be looking at a 10% drop in ad pages over the next six months," Paul Rossi, managing director and executive vice president of The Economist Group, Americas, told me during a break at the recent American Magazine Conference. "That's a fact I have to plan for."

What's particularly distressing to Rossi and his counterparts is that Wall Street's financial crisis has spread, encompassing such quasi-financial companies as General Electric. The way Rossi sees it, the trickle-down effect will next impact such industries as tourism-oriented magazines. "People won't be traveling as much," he noted.

Rossi, one of the most knowledgeable and straight-talking publishers in New York City, said publishers are hoping -- "praying" may be more like it, though -- that "green"-oriented companies can fill a void left by the auto and finance companies.

The companies involved in the explosive green movement -- dedicated to making the world more environmentally friendly and safe -- are the logical saviors for publishers. Both presidential candidates have professed to be in favor of creating jobs in environmental-oriented channels. The environment represents one of the few potential growth industries in the U.S. right now.

Advantage: Economist

Rossi believes that the Economist will be better situated in this tough market than most of its competitors. "We bring in a story of growth and success," he explained. "We give [advertisers] a sense of confidence."

Of course, every major magazine publisher says that sort of stuff during a crisis, but the Economist can back up Rossi's claims. Ad Age named the Economist as the year's No. 1 magazine in a ceremony at the magazine conference. The publication has been drawing plaudits for years for its insightful, global-oriented reporting.

I asked Rossi if he worries more about surpassing its competitors or meeting its own expectations.

"I worry about the other guys in terms of whether we have a healthy marketplace," he said. "I don't worry about beating specific books."

The Economist has been aggressively trying out new ideas. Rossi said the innovation of offering subscribers three-year subscriptions (as opposed to the much smaller time frames generally employed in magazine publishing) has worked "fantastically well. This enables us to serve our core audience."

It approaches its audience in a different way, too. "The underlying problem in magazine publishing is that many books think that the readers are less valuable than the advertisers," Rossi said.

The London-based Economist has flourished in the U.S. by focusing on building its brand in this country. The brain trust believes that the public will pay a premium price for something that it considers to be a premium product. The Economist carries a hefty price tag of $6.99 an issue, but it offers no apologies while appreciating the loyalty of its "passionate, engaged" readers.

"Once you've built a brand, you can put your prices up," Rossi said. The price of a single copy of a magazine "should be at the top of the range, not the bottom."

The Economist will generate even more interest when it gets around to endorsing a candidate for U.S. president.

Rossi said the magazine seemed to be "leaning toward [Barack] Obama at this point, but who knows?" He stressed that the selection "is not my decision."
By Jon Friedman