The Economist Group Ltd. Business Information, Profile, and History

Company Perspectives:

The Economist Group is the leading source of analysis on international business and world affairs. We deliver our information through a range of formats, from newspapers and magazines to conferences and electronic services. What ties us together is the objectivity of our opinion, the originality of our insight--and our advocacy of economic and political freedom around the world.

History of The Economist Group Ltd.

The Economist Group Ltd. is the owner of the prestigious Economist brand. The group's flagship is the Economist weekly "newspaper." Published for more than 160 years, the Economist is one of the world's leading economic, news, and political opinion magazines, with a circulation of more than 900,000 in the early 2000s. Approximately one-third of the British-based group's sales come from the United States. Other members of the Economist brand family include the Economist Intelligence Unit (EIU), a provider of business information and analysis, covering more than 200 international markets; Economist Conferences, which hosts roundtable meetings, conferences, and similar events for government and corporate groups in 50 countries; as well as a range of ancillary products sold through the company's Economist Shop in London and online. The Economist brand family accounted for more than 83 percent of the company's total revenues of £191 million ($342 million) in 2004. Other brands within The Economist Group include CFO, with its 500,000-plus circulation CFO magazine, and its CFO Asia and CFO Europe editions, as well as the CFO.com web site and CFO Enterprises product group. The Economist Group also controls the Capitol Hill-oriented Roll Call, said to be the second most widely read newspaper in Washington, D.C., behind the Washington Post. Approximately 82 percent of Roll Call's circulation of more than 17,000 is distributed free to Congressional and Senate members and their staffs. The Economist Group also has launched a similar publication, European Voice, targeting the European Parliament. The Economist Group has been 50 percent-owned by the Pearson publishing group, through its Financial Times Group, since 1928. The other 50 percent is controlled by a trust, in turned owned by a range of shareholders, allowing the Economist to continue its long tradition of objective editorial independence.

Liberal Opinion Setter in the 19th Century

The Economist stemmed from the economic and political upheaval of the rapidly industrializing United Kingdom in the mid-19th century. As the country's population shifted from a predominantly rural agricultural base to the growing number of large industrial cities, the country's political base also began to shift. Long dominated by the country's wealthy landowners, who used the government to pass laws to protect their interests, the British Parliament came under pressure to adopt its economic policies to reflect the country's new industrial reality.

Among the most-hated of British legislation favoring the landholders were the Corn Laws. Initially drafted in 1804, the Corn Laws significantly raised the duties on corn imports, favoring the growth of the country's wheat crop. Related legislation was drafted in 1815, following the end of the Napoleonic Wars, restricting wheat imports as well. The legislation proved highly controversial and the government was forced to deploy troops to protect Parliament members.

The high wheat prices led to high bread prices, particularly in the country's growing urban sectors. The inflated prices also placed pressure on the country's manufacturers to increase wages for workers hit hard by the high bread prices. Into the late 1830s, a series of poor harvests further put pressure on the population, as bread prices soared.

The situation inspired the creation of the Anti-Corn Law League in 1837. The league was joined by Richard Cobden, who entered Parliament in 1841. As a member of Parliament, Cobden was able to lobby his fellow members for a repeal of the Corn Laws. In 1843, the Anti-Corn Law League found a new ally in James Wilson, a hat maker from Hawick, in Scotland. A dedicated believer in the principles of the free market system, Wilson decided to publish a newspaper directed at the country's business class. Wilson called his newspaper the Economist, to underscore the newspaper's commitment to publishing only verifiable fact.

Although a staunch backer of the Anti-Corn Law League, Wilson's aims went beyond that single cause. As he wrote in the newspaper's prospectus: "We seriously believe that free trade, free intercourse, will do more than any other visible agent to extend civilisation and morality throughout the world."

By then, the Anti-Corn Law League had grown into one of England's largest and wealthiest political organizations, and Wilson himself was a close ally of the movement. In return, the Anti-Corn Law League became the newspaper's earliest backer, guaranteeing a large percentage of the Economist's initial circulation. Yet Wilson was careful to maintain the newspaper's independence.

The failure of the potato crop in 1845 and resulting widespread famine at last brought a repeal of the Corn Laws in 1846. If the Anti-Corn Law League no longer had a reason for existence, the independent editorial and financial policies of the Economist allowed it not only to continue publishing, but to become a prominent economic and political voice in the second half of the century.

Wilson himself remained editor of the newspaper until 1857. Ownership of the weekly nonetheless remained within the Wilson family, at first directly by the family, later through a trust, into the 1920s. The appointment of Walter Bagehot in 1861 marked a major milestone in the Economist's history. Under Bagehot, the newspaper firmly established its reputation for editorial integrity and independence. The newspaper also developed many of its most long-lasting features, not the least of which was its principle of anonymity. Instead of attributing bylines, the Economist sought a collective voice, one in which the focus was placed on the words, and not on who wrote them. Nonetheless, many of the Economist's writers enjoyed distinguished careers in government, journalism, and business.

Although specifically targeted at the British market, the Economist quickly became internationally recognized. Sales abroad, to Europe and to the United States, began as early as the late 1840s. The Economist Group's holdings also extended beyond its own title, with the addition of the Bankers' Gazette in 1845 and of Railway Monitor. The company continued to produce these titles through to the early 1930s. Another step forward for the company was its decision to accept advertising in 1888. Yet for this, the newspaper limited itself to the smaller market for business notices such as company meetings.

New Ownership Structure in the 1920s

Walter Layton was appointed editor of the Economist in 1922, launching a new era of prestige for the newspaper. At that time, the Economist remained under the control of the trust established by the Wilson family. Layton led a policy of buying up shares in the company. Yet in that he was soon challenged by Brendan Backen, a later ally of, and minister of information under, Winston Churchill, who had acquired the rival Financial News, the precursor to the Financial Times.

After a lengthy battle for ownership of the newspaper, the two sides reached an agreement in 1928. Under the terms of that agreement, Backen gained control of 50 percent of the Economist. The other half was controlled by the Economist's trust, which in turn was owned by a larger group of shareholders, including members of the Economist itself, as well as other prominent British financial figures. An important feature of the agreement was the guarantee that the Economist would remain editorially and financially independent.

The battle for control of the Economist drove up the group's value to all of £100,000 (the equivalent of just £4 million in the 2000s). This reflects the newspaper's rather restricted circulation: under Bagehot, the Economist's circulation stood at less than 4,000. By 1920, the company's print run had only reached 6,000. Despite these small numbers, the Economist remained a highly influential voice. It was also consistently profitable, for the most part.

Financial News Leader in the Mid-to-Late 1900s

Layton was succeeded by Geoffrey Crowther, who became one of the most influential editors in the Economist's history. Under Crowther, the Economist opened its pages more and more to foreign development, especially to the United States. By the late 1930s, half of the newspaper's circulation was being sent abroad. The company's international focus culminated in the launch of a new section, American Survey, dedicated to developments in the United States, in 1941.

Crowther also led a redesign of the newspaper into a more or less magazine format featuring a distinctive blue cover with the title in red. Yet the Economist continued to refer to itself as a newspaper--distinguishing itself from the rising number of news weeklies in the postwar era.

From 18,000 at the end of the war, the newspaper's circulation rose to more than 50,000 by the end of the 1950s. The year 1959 marked the introduction of a new and distinctive red logo. The following year, the Economist added full-color advertisements for the first time. The use of color remained limited, however, and the newspaper's first full-color cover appeared only in 1969. By then, the company also had built up a strong intelligence services component, called Economist Intelligence Unit (EIU), stemming from 1946.

Despite its somewhat stodgy appearance, the Economist steadily built up an international reputation--and readership. Circulation topped 100,000 for the first time in 1974. Driving much of the newspaper's growth was its ability to impose itself in the United States as one of the most important sources of news and information on the world's business, financial, and political sectors. By the early 1990s, the Economist had extended its readership into Asia as well, leading to the launch of a specially dedicated Asia section in 1987.

By then, the Economist had developed a second brand family, buying up U.S.-based CFO magazine in 1989. That title, geared specifically to the interests of chief financial officers, became a strong seller for the company, rising to more than 500,000 by the end of the century.

In 1991, the company attempted a new expansion effort. In that year, The Economist Group launched the first new company-developed title in its history, Treasury magazine. Targeting the U.S. market's company treasurers, the new magazine launched with a circulation of 40,000. These were provided free of charge, with revenues generated by advertising. Yet Treasury proved a short-lived effort.

The Economist had long been solidly if unspectacularly profitable. The appointment of Marjorie Scardino as company CEO in 1992 introduced more momentum into the company's balance sheet. By the mid-1990s, the Economist's profit had jumped ahead some 130 percent--propelling Scardino herself into the CEO spot of Pearson, then, as owner of the Financial Times, holder of 50 percent of the Economist. Before she left, Scardino had engineered the company's biggest acquisition to date, that of U.S.-based Journal of Commerce (JoC). Paying $115 million, The Economist Group added the 168-year-old JoC and other titles, including Florida Shipper, Gulf Shipper, and Traffic World, as well as industry directories and other products.

Scardino was replaced by Helen Alexander as chief executive. The Economist Group now began a new drive to extend its range of titles, as well as its international scope. The company by then published Roll Call, a magazine produced specifically--and, in large part, provided free of charge--for the Washington political market. The Economist Group then launched a sister publication, European Voice, targeting the European Parliament. The company attempted to expand beyond print media, launching the short-lived Economist TV.

Changes in the 21st Century

A slump in the U.S. shipping market forced the company to reduce the JoC's printing schedule, converting it into a weekly. By the early 2000s, however, with its own profits sinking quickly, The Economist Group decided that the JoC no longer fit its strategic objectives. In 2001, the company sold off the JoC to Commonwealth Business Media, a company set up specifically for the acquisition.

That year marked a major redesign of the Economist, including, among other features, the addition of four-color editorial content. The company also began developing a new range of products and services under the Economist banner, including a web site offering access to its Economist Intelligence Unit content. In 2002, the company added to its portfolio again, launching CFO Asia, targeting the fast-growing Asian markets.

The early 2000s represented a difficult period for the company, as sales and profits dipped. In 2002, the company initiated a difficult restructuring effort, letting go some one-third of its employees in a bid to restore profit growth. This effort paid off, as profits once again began to climb, despite continued drops in sales. By 2004, sales were down to £191 million, from £272 million in 2001. Nonetheless, circulation continued to build, nearing the 900,000 mark.

The Economist Group continued to add to its range of titles and services. In June 2004, the company launched a new title, a glossy, consumer-oriented annual magazine called Intelligent Life. The magazine, although published just once per year, was meant to help broaden the group's appeal beyond its core readership, in particular by attracting more consumer and female readers. After more than 160 years, the Economist itself remained one of the few globally respected news titles.

Principal Subsidiaries: (Brands and Titles) CFO; CFO Asia; CFO Europe; European Voice; Roll Call; The Economist; The Economist Intelligence Unit; The Economist Enterprises; The Economist Conferences; The Economist Diaries.

Principal Competitors: Berkshire Hathaway Inc.; Bertelsmann AG; News Corporation Ltd.; Cox Enterprises Inc.; Quebecor Inc.; Pearson PLC; Gannett Company Inc.; ABC Inc.; Tribune Co.; VNU NV; Reed Elsevier PLC; Hearst Corporation; New York Times Co.

Chronology

• Key Dates:
• 1843: James Wilson launches the Economist, in part to provide backing to the Anti-Corn Law League.
• 1888: The Economist begins accepting advertisements.
• 1928: An agreement to a 50-50 ownership structure between Economist Trust and Financial News (later Financial Times) is formed.
• 1941: A dedicated "American" section is launched as U.S. sales grow.
• 1946: The company launches its first intelligence activities, giving rise to the creation of the Economist Intelligence Unit.
• 1960: The first full-color advertisements are introduced.
• 1974: Circulation tops 100,000.
• 1987: A new "Asia" section is introduced.
• 1989: The company acquires CFO magazine in the United States.
• 1995: The company acquires Journal of Commerce.
• 2001: The company sells Journal of Commerce; a redesign of the magazine features full-color editorial content.
• 2004: The Intelligent Life glossy annual is launched.