Encyclopedia Britannica

11/27/13 Case Discussion:
Encyclopedia Britannica
Case Discussion:
Encyclopedia
Britannica
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Source: http://www.weitzcoleman.com/britannica1026lg.jpeg
Encyclopedia Britannica
Encyclopedia Britannica
• 1st published 1768,
Scotland
• U.S owned since 1901
http://www.searsarchives.com/people/images/Julius%20Rosenwald_96.jpg
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•  In 2009, a poll named
Britannica Encyclopedia one of
Britain's top Consumer brands.
(10th Place).
• Reputation and Reliability were
the top factors considered when
naming brand.
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http://www.spartacus.schoolnet.co.uk/USAbentonW.jpg
•  EB used to be a huge
publishing firm, and one of
the world’s largest
•  Also, highly respected produ
Contributors: Freud,
Einstein, Mencken, Ford,
DuBois, Trotsky, Houdini
•  1988: Encyclopedia
Britannica, price- $1200
– Profitable market leader
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houdini_ritratto.jpg
But Then, the Electronic
Onslaught
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freud.gif
•  1989 Compton’s Encyclopedia, 1st
to issue CD-ROM
•  Funk & Wagnall, became
– (Microsoft’s Encarta) $49.95
• A less comprehensive
encyclopedia
• But based on a CD instead of
books and much, much cheaper
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http://images.google.com/images?q=+Comptons
+Encyclopedia+&hl=en&lr=&start=0&sa=N
1 11/27/13 Q: How would EB price its
product using a cost-plus
strategy?
Q: Should EB adopt
penetration pricing?
Q: How would EB pursue a
value pricing strategy?
How elastic is the demand
for Britannica’s
Encyclopedia?
Q: How would EB use
break-even analysis and
elasticity to price its
products?
Q: How can EB optimally
practice price discrimination
among its customers?
2 11/27/13 Q: How can Encyclopedia
Britannica determine the
value, for pricing purposes,
of its various features?
In response,
Encyclopedia Britannica
tried different strategies:
1. 1992: Do nothing
2. 1993: Offer online access to
libraries for $2,000 per year
3. 1994: Offer consumers online
subscription for $ 120 year
4. 1995: Offer CD version for
$800 (then dropped to $200)
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6. 1999: EB put basic content on
website, information was
entirely free.
-Revenue supposed to come
through e-commerce etc.
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Q: How do EB’s
contribution margins effect
its pricing decisions?
5. 1996: EB near bankruptcy.
Company bought by financier
Jacob Safra, an encyclopedia
fan, for $135 mil. Sales force
closed down. Price of CD cut to
$90.
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7.  2002: Offered 4 Basic Versions
•  Online subscription $65/year for
premium online edition with many
discount plans.
•  $70 and $50 CD version
•  Print version, 32 volumes, $1200
•  Includes major updates and newer
articles
•  Free web browsing for bare-bone
information
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3 11/27/13 8. 2005
• Print version price raised to $1500,
bundled with yearbook and online
access
• CD-ROM price lowered to $35,
and content shortened
• Online $65/yr, with frequent
updates.
• For schools, group subscriptions
• But this was just the
beginning
• A new challenger emerged
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After 2005,
the free Wikipedia
emerged as a serious
factor
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Wikipedia
•  Launched in US in 2001 by Jimmy
Wales and Larry Sanger, editor in chief
of Nupedia, a free online encyclopedia
written by volunteers
•  Owned by non-profit Wikimedia
Foundation
•  Wales pays for all costs (only several
thousand $ annually), and Foundation
accepts donations
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Wikipedia Open Community
Model
• Access free to read every article
• Anyone can make edits to an
article
– No test for author’s knowledge
• Hope is that a large community
of volunteer editors will quickly
detect and correct any mistakes
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• EB could not compete against
Wikipedia, in terms of both
price and quantity of articles
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4 11/27/13 Wikipedia
•  In 2009 there were almost 3million articles in
the English language Wikipedia.
•  EB: 120,000
•  Numerous language editions of Wikipedia
• Translation
programs make
them partly
available in
English, too
http://en.wikipedia.org/wiki/Size_of_wikipedia
• Wiki model of volunteerism
has low cost (near zero) and
low (zero) price.
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Price of Access to EB
Content
Quality of Product
• In 2006, science journal
Nature compared scientific
entries in Wikipedia with
those in EB
• Found EB was only 30%
more accurate than
Wikipedia
The Source: Economist 1 April, 2006, “Encyclopedias: Battle of Britannica”
http://global.factiva.com/
Price
Price for Full Access to EB's Content
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1600
1400
1200
1000
800
600
400
200
0
1985
1990
1995
2000
Year
2005
2010
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EB Business Dropping
Revenues
Employees
1992 $586
1,100
1995 $400
800
1998 $300
400
2000 $275
300
2001 $275
260
2005  $225
[]
2007
$50
240
Source: Hoover’s Inc; http://proquest.umi.com/
• 2011: Britannica online visitors
(including Merriam-Webster
dictionaries): 450 thousand Daily
traffic to Wikipedia: 400 million
(800 times as much)
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5 11/27/13 • 2012: EB announces end of
print editions
• The 2010 final edition of 32
volumes will be sold on the
website for $1400 until stock of
4000 sets run out. Sold out by
2012.
http://www.dailymail.co.uk/news/article-2114646/Encyclopedia-Britannica-cut-print-edition--244YEARS.html?printingPage=true
Q: Is the media market
becoming characterized by a
price competition of established
giants vs. “free”?
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Q: Is the Encyclopedia
Britannica Story Unique Or
Prototypical?
Q: Can one compete against
“free”?
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