Encyclopaedia Britannica - Its E-Business Strategy

S Sudhindra
Christ University Institute Of Management
31 May 2012

On 13 March 2012 the publishers of Encyclopaedia Britannica (EB) announced that the printed
version of the encyclopedia is no more. There will be only digital versions, namely, the online
and the DVD versions1. This announcement would certainly have evoked nostalgic feelings
among the millions of (perhaps now middle aged or old) readers who grew up on the beautifully
bound volumes that inspired awe, confidence and trust.
The printed version of EB did not go quietly. For a few decades, the publishers resisted the idea
that an entire encyclopedia can exist only in the digital format. The announcement now
indicates that the publishers have finally read the writing on the wall.
History & Competition
Encyclopaedia Britannica, published by Encyclopaedia Britannica Incorporated (EB Inc), is a
general knowledge encyclopedia, the first version of which appeared during the period 176817715. Ever since, it has been one of the most respected and comprehensive sources of
information all around the world. At the time of writing this, the 15th edition is on the shelves
and consists of 32 volumes with over 65000 articles4. It is available in three different formats:
the printed edition,

the online edition and the DVD edition. With the 13 Mar 2012

announcement, this edition would be the last print edition1.

EB has faced different categories of competitors during different periods of time. Initially for
more than 200 years of its existence, it faced competition from several generic and specialized
encyclopedias.

Colliers Encyclopaedia, Encyclopaedia Americana and World Book

Encyclopaedia were three significant competitors during this period. In 1950s, EB, with 24
volumes, 26000 pages sold for $675 whereas Americana sold for $600 and Colliers for $389.
The current prices (at Amazon.com) are $1200, $799 and $850 respectively. While during these
years EB was priced substantially higher than most of the competing products, it was able to

sustain its top position due to its image of being a trustworthy and comprehensive source of
information5.

However, especially during the 1980s, it was apparent that the younger

generation was looking for something different6. The general feeling, is, perhaps it was during
this period that EB could have had a hard look at their business model in the changing world.
Microsoft had approached EB publishers in the 1980s with an offer to bring out a multimedia
based encyclopedia. The offer was declined fearing a channel conflict7. Printed EB sales might
be affected. Channel conflict is one of the major issues that many brick-and-click businesses
face today. It causes heartburn among the traditional sales channel people and also makes
pricing strategies very complex. A senior official from EB Inc was quoted as saying The
Encyclopaedia Britannica has no plans to be on a home computer and since the home market is
so small - only 4 to 5 per cent of households have home computers we would not want to hurt
our traditional way of selling.6

Microsoft went ahead and bought out a competing

encyclopedia, Encarta, in 1993. Although Encarta was not really the first digital encyclopedia
(Grolier Encyclopedia predated it), it was a huge success mainly due to Microsofts distribution
strategy5.
EB Inc. on the other hand got into deep financial distress. After peaking to about $650 million,
Its sales revenue declined almost every year, and ended up at $325 by 1995. It was then sold off
to a Swiss financier for $135 million in 1996. A new sales strategy was put in place and the
entire book sales force of 500 was sacked. The price of the digital version was brought down to
about $300. The new management believed that things could be turned around. A press
statement8 from the new management said, Clearly, we don't have the dollars of Microsoft or
IBM, but our tradition and trademark are worth more than that. The reliance was still, rightly,
on their brand name. But it was clear by this time that the management had decided that their
business model needed revision. Was it a case of too little and too late?
To its credit, EB took fairly early steps as far as its online presence was concerned. Britannica
online was launched in 1994. The website hosted entire text of EB. This was however available
to only institutional users. As the web technology was taking off Britannica.com was launched
in 1999 with the entire Britannica text available to the general public9. At this point of time
there was no competition at all to EB in the online space. That changed in July 2001 when

Wikipedia was launched. It can be said that more than the actual product that is Wikipedia, the
idea of a free, online and community based encyclopedia was itself a serious threat to a
propriety encyclopedia such as the EB. The idea of a open-to-edit, free-to-browse online
encyclopedia was for the first time proposed by Richard Stallman in 1999.10
The Business Model of EB Who is my Customer?
Digital formats of an otherwise printed book are essentially new products. E-book versions of
most books have separate ISBN numbers, just like the paperback versions. But in general, the
content of the printed and e-book editions are same. The question of whether these two
products provide different value to the customer becomes important. Have a look at the
product description for the DVD version of the 15th edition of EB:
Designed for both adults and students alike, the Encyclopaedia Britannica Deluxe DVD is
the comprehensive reference and discovery tool that provides up-to-date, in-depth, and
easy-to-use information. Learn from Nobel laureates, historians, and noted experts in
one single source. No other software can match the depth, intelligence, and accuracy of
Encyclopaedia Britannica. 4
The product description for the last few printed copies remaining read as under:
Encyclopdia Britannica is proud to release the limited edition of the Renaissance
binding 32-volume print set with fewer than 175 sets available in the United States! The
renowned 32-volume set is bound in beautiful blue Cabra-fibred leather with gold color
accents and gilding along the top of each page. Each set includes an exclusive bound
numbered certificate of authenticity. 4
These two descriptions clearly bring out the differences in the value propositions for the
customers. While the ease of use is the differentiator for the DVD (and for the online version),
the beauty and richness of the bound volumes is what sets the printed version apart.
More importantly, the descriptions seem to be addressing different sets of customers. The DVD
versions are for adults and students who wish to obtain in-depth information, whereas the
printed version is for schools, universities, libraries and family homes. It maybe now easy to
appreciate why EB Inc were reluctant to switch their loyalties to the digital versions. Their
target customers were never the actual information seekers but mostly the institutional buyers

and perhaps up-market families who would proudly display the printed versions in their drawing
rooms. While EB Inc was holding on to this customer base, they might have ignored the
difference between a customer and a user and how the latter influences the former.
Public libraries and universities do not use the books that they stock. They make them available
to the actual users. It stands to logic that the preferences of users influence the purchasing
decisions by these institutions. The actual users are the students, teachers and the general
public. These will certainly include the users who are the target customers for the online and
DVD editions and the glint and richness of the printed version is not targeted at such users. The
ability to access from anywhere and anytime provided by the online version must have very
high value for the actual users of EB. Once that was provided, the market for printed and even
the DVD versions would be non-existent.
Competition
We also must contrast the value proposition of the EB digital editions with those of its
competition. Here the differentiator has always been the supposed accuracy and citability.
Encyclopedias in general are not considered to be citable sources of information for academic
research. Most of the universities do not accept articles from students with references from
encyclopedias. However exceptions have been routinely made in case of references from EB. A
quick search on Google Scholar reveals a large number of articles published in peer reviewed
journals having EB citations. The primary reason for such exceptions is that through careful
selection of authors for its articles, the publishers have created a perception that EB articles are
authentic sources of information.

Several articles have been actually written by Nobel

laureates. It is this image that has been the order winner for EB for the last two centuries. Thus
the printed version of EB was one of the first places any serious information seeker would look
during all these years, for any sort of authentic information. The competitions, such as the
Encarta and the Wikipedia have never had this kind of respectability. It has always been
believed that, for example, while Wikipedia did have a reasonably large user base, serious
students and researchers still preferred EB due to its perceived superior accuracy3. Somebody
had to put this perception to test.

In its 15 December 2005 issue12, Nature published the results of its research into the question
of whether EB is more accurate than Wikipedia. Competing articles from both the sources on
wide variety of topics were evaluated for accuracy by several experts. Nature claimed, on the
basis of results, that the difference in overall accuracy is not much and concluded that EB and
Wikipedia were equally accurate. EB Inc published a point-by-point rebuttal and questioned the
research methodology used by the Nature13 but the seed was sown. Even the idea that an
online encyclopedia that allows anyone, regardless of qualifications, to create or edit articles,
can have comparable accuracy to that of the EB was a major blow to the core value proposition
of EB.
Pricing Strategy
Blurring of distinctions between its own products and with others' products and a resulting
merging of the user bases might necessitate a change in pricing strategy. This is one area where
we see that EB has had cause for concern. The problem is not so much with the strategies of EB
as much as it is with E-Business in general. The problem is with the way customers look at a
product packaged in different ways.
Users in general do not like to pay for content on digital media as much as they do for content in
print9. And when the same content is available online, they would like it free of cost!. It may be
simply a matter of perception for the user but for a publisher this is a big issue as the major cost
component for any published content is the cost of creation itself.

The packaging and

distribution cost components do constitute a major portion but certainly cannot contribute to
the kind of discounting that customers expect. So how do propriety content publishers such as
EB compete against products such as Wikipedia that spends next to nothing to create content?
In other words, how can they make money? Can they take it from their readers?
It appears they cannot. Experiments world over for charging users for information content have
not been successful14. Paywall is a tactic that is being increasingly used by content publishers
such as the newspapers to charge their readers of their online versions. John Paton, the CEO of
the Journal Register Company said the following in response to the attempts by newspapers
such as The Times to charge users for content through the use of paywalls15:

One of the reasons I am so stern on paywalls and other walled gardens is because I
firmly believe that in the future content will go to the audience and not the other way
around. Smart, original content, tagged with advertising will gain value by being shared
through networks. Shared content equals influence. And influence in the new ecosystem
equals engagement. And engagement equals value to those advertisers and others
trying to reach that engaged audience.
The first step in coming up with a new business model is going to be separating revenue
generation from pricing strategy. Google does not charge its users for the services that they
use. But they do make loads of money. EB does not like to nag its serious readers with popup
ads and other distractions. There is a brand new strategy somewhere waiting to be discovered.
There is no evidence that EB Inc (or anyone else) has found that strategy. Even Wikipedia is
asking for financial contributions from its readers.
In spite of the fact that EB online website is the oldest online Encyclopedia and in any case EB
itself is older than any other encyclopedia that exists today, its online presence is dismal. We
see a lack of respect for history and there seems to be no first mover advantage. According to
Alexa.com rankings for websites world over, as on 28 Mar 2012, Wikipedia is ranked at 6
whereas EB website is ranked at a low 5950. There is an urgent need for them to rectify this. As
an acknowledgement that it is serious about this, EB Inc has made its online version available
free of cost for a short duration1. One week, is what the website says. What is the point if
online EB is made again fee-based after this duration, without coming up with something
radically different from what it has done so far?
They are likely to do it unless they finally realized that EB has but one future: to go online and
beyond. Microsoft got out of CD/DVD based encyclopedia business in 2009, unable to cope up
with competition from Wikipedia. Here16is what the software giant said:
People today seek and consume information in considerably different ways than in
years past.
They saw the writing on the wall long ago: online encyclopedias will eventually kill CD/DVD
formats. Then what are DVD versions doing in the EB e-store? Who is buying them? Will EB Inc
let history repeat itself, this time around with the DVD format?

The Future
A large number of businesses have been affected by the advent of digital technology. Some of
these are more vulnerable than the others due to the nature of their products. Businesses that
depend on content creation and distribution are vulnerable on two different fronts. While they
need to change their sales and marketing tactics like everyone else, they also have to develop
products in new formats. And new products will challenge the way these companies have
looked at the market for revenue generation. Again, those that adapt quickly and turn these
challenges into opportunities will survive.
The Nature study12 brings out one thing: EB is still a force to reckon with as far as the
information depth and accuracy is concerned. And it may be expected that EB Inc. will learn to
deal with disruptive technologies. One such indication is that the online EB version has been
made available for futuristic devices such as the tablet PCs. It is said that the future of content
business, such as the newspapers, is with devices such as the Apple's iPad and the Amazons
Kindle. But it is only one trick and EB will have to turn many such tricks. Some of the important
issues that EB Inc. will have to immediately consider are:
(a) What will be their portfolio of products?
(b) What will be their revenue model (and pricing strategy)?
(c) How will they leverage on their supposed superior accuracy and respectability (as users
dont seem to care)?
Will EB finally evolve into a great online reference encyclopedia that it so richly deserves to be?
Time only will tell. Hopefully, the wise men at EB Inc are feverishly working their heads behind
the closed doors and emerge with a great idea. Such an idea, combined with their great legacy
will surely make it possible. And that legacy, as quoted by EB Inc President Jorge Cauz, is this17:
To me, the most important message is that the printed edition was not what made
Britannica," Cauz said. "The most important thing about Britannica is that Britannica is
relevant and vibrant because it brings scholarly knowledge to an editorial process to as
many knowledge seekers as possible."

References

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www.britannica.com.
2. Associated Press. Fox News. Encyclopaedia Britannica to end print editions. March 14,
2012. http://www.foxnews.com/us/2012/03/14/encyclopaedia-britannica-to-end-printeditions/
3. Julianne Pepitone. CNN Money.Encyclopedia Britannica to stop printing books.March 13,
2012.http://money.cnn.com/2012/03/13/technology/encyclopedia-britannicabooks/index.htm.
4. Limited Edition Renaissance Encyclopaedia Britannica. May 07, 2012. Encyclopaedia
Britannica Store.http://store.britannica.com/products/
5.Auchter, Dorothy. Evolution of the Encyclopaedia Britannica: from Macromedia to Britannica
Online.Reference Services Review. Mar 27, 1999, 291-299.
6.PanagiotaAlevizou (2002). To wire or not to wire?Encyclopaedia Britannica versus Microsoft
Encarta.Educational Technology & Society 5 (1) 2002.
7. Daft, Richard L. Daft, J. Murphy, H. Willmott. Organization Theory and Design.10th
Edition.Cengage Learning EMEA, 2010.
8.Richard A. Melcher, Dusting Off the Britannica, BusinessWeek, October 20, 1997.
9. Clark, Susan E. In search of the right formula: Encyclopaedia Britannica ventures from print
to online to both. Reference & User Services Quarterly; Winter 2001; 41, 2; ProQuest Research
Library. pp. 135.
10. Joseph Michael Reagle Jr. Good Faith Collaboration: The Culture of Wikipedia (History and
Foundations of Information Science). The MIT Press, 2010.
11. Paula Berinstein. Wikipedia and Britannica. The Kid's Alright. So's the Old Man. APA
PsychNET. Vol 14. No 3. Mar 2006.Retrieved from
http://www.infotoday.com/searcher/mar06/berinstein.shtml.
12. Jim Giles. Internet encyclopaedias go head to head. Nature; Dec 15, 2005; 438, 7070;
Research Library pp. 900.

13. Encyclopdia Britannica, Inc. Fatally Flawed: Refuting the recent study on encyclopedic
accuracy by the journal Nature. March 2006. Retrieved from
http://corporate.britannica.com/britannica_nature_response.pdf.
14. Mathew Ingram. Gigaom. If a paywall is your only strategy, then you are doomed. Oct. 31,
2011. http://gigaom.com/2011/10/31/if-a-paywall-is-your-only-strategy-then-you-are-doomed/
15. Mathew Ingram. Gigaom. John Paton to news execs: Abandon the gatekeeper model. Feb.
21, 2012. http://gigaom.com/2012/02/21/john-paton-to-news-execs-abandon-the-gatekeepermodel/
16. Microsoft to discontinue Encarta. Reuters. Mar 31, 2001.
http://www.reuters.com/article/2009/03/31/microsoft-encarta-idUSLV28230720090331.
17. After 244 Years, Encyclopaedia Britannica going out of print. Indian Express. Mar 14 2012.