Wine Critics and their Discontents

The Principal-Agent Problem

You might think that the job of wine critic would be heavenly – traveling the world, tasting wines and talking and writing about them.  What could be better?  But there are downsides and trade-offs to the job.  One is that your credibility depends upon objectivity – if your ratings are thought to be biased, your advice is correspondingly discounted.  But, on the other hand, you need income to work as a critic or to publish magazines and websites and the most obvious source of income is the wine industry itself.  How can we trust wine critics when the potential conflicts of interest are so obvious?

This situation is not at all unlike that faced by candidates for political office, who receive money from “special interests” but still need to serve (and appear to serve) the general interest. It isn’t impossible to walk this tightrope, but it isn’t always easy either.  You probably can think of many politicians who have done it successfully and a few who fell off.

In economics we see this as an example of the principal-agent problem.  You understand the principal-agent problem if you’ve ever wondered if the cab driver was really taking the shortest route back to the hotel.  Although cab driver and rider have entered into a mutually advantageous contract, interests are not fully aligned and the fact of asymmetric information means you may not be sure that you are getting a fair deal.

Wine enthusiasts (the principals) hire critics (the agents) to give us objective advice, but we know that the critics may have their own interests as well as ours in mind.  How can we trust them to place our interests above their own?

It seems to me that all the wine critics I have surveyed confront this problem openly and honestly, although they arrive at different strategies to deal with the problem.  All the examples I will cite below are effective, in my view,  so I have come away from this little study well satisfied, but the fact that they are so different can create some confusion for wine enthusiasts who fail to read the fine print.

Parker and Vaynerchuck

Robert Parker’s solution to the problem of potential economic conflict of interest at the Wine Advocate is simply to refuse all advertising and to charge his principals fees for web access, hard copy subscriptions, books and so forth.  Who does Parker work for?  He works for us.  It is pretty hard to criticize this model, although interestingly he is probably the most criticized wine critic.  People don’t complain about economic conflict of interest, however, but rather that Parker’s particular idea of wine favors particular styles of wine and particular producers.

Gary Vaynerchuck at Wine Library TV takes a different approach.  His family owns a major wine retailer in New Jersey, so in fact he has a very direct financial interest in the sales of some of the wine he reviews.  Rather than trying to build a firewall between the wine critic business and the wine retailer business, however, he tries to be completely transparent about it and to accentuate his personal credibility as an objective reviewer.  Unexpectedly, this seems to work.  Reputation matters. Accepting the conflict of interest and being open about it is a risky strategy, but Gary pulls it off.

There was one case of a potential conflict of interest a few months ago that shows that he is not unaware of the risks.  The top wine in a particular tasting turned out to be a proprietary label of Gary’s store.  Apparently Gary didn’t know this when the tasting was recorded and when he found out he immediately took the video down from the internet so that he could not gain financially from his honest appraisal of the wines. We only know about it now because of his online apology and explanation.  I think this case shows just how very important it is to wine critics to maintain their reputations as honest objective agents.


Worth a Thousand Words

I’ve been studying how wine magazines handle reviews and the images that sometimes appear with them because it seems to me that a review that is shown along with a photo of the bottle or label is a lot more memorable than the plain text, so the choice of which wines to favor with an image is important..  Some of the magazines use these images to generate advertising revenue, others do not.  This is potentially confusing for readers who may mix up editorial content (the review) with paid advertising (the label image).

Britain’s Decanter magazine keeps its paid advertising and editorial wine ratings reasonably separated.  The top rated four- and five-star wines are featured with bottle photographs while the rest (three stars and below) have simple text listings. It is clear that the photos reflect editorial evaluation. Advertising pages bookend each set of ratings, but they are labeled “Decanter Promotion” so it is pretty clear that the wineries have paid for the space.

Wine & Spirits magazine has a different system (clearly explained in each issue).  After it has rated a group of wines it invites the wineries to purchase feature space in the form of wine label images that are included with the relevant reviews.  You might assume that the editors picked the wines to receive more attention this way, but you are wrong — stop assuming!  The label images are product placements and I appreciate Wine & Spirits’ honesty in revealing it.

Wine Enthusiast has a similar policy according to the explanation I found on page 182 of the September 2008 issue.  All the rated wines appear in long unadorned columns of reviews, but some wines also show up along with label images in the colorful pages that precede the main review text.  Some of these are top-rated wines, but others are not.  Like Wine & Spirits, producers are invited to buy image space in this section of the magazine, but only after the wines have been rated so that it is clear that they are buying the image space not the review — a good policy.

Wine Spectator doesn’t sell image space.  There are highlighted pages of wine reviews with labels at the front of the ratings sections, but these are editorial endorsements rather than paid placements.  Otherwise all the listings get equal treatment in the magazine.

Mixed Messages

If you see a bottle or label image alongside a review in Wine Spectator or Decanter, it means that the editors recommend the wine.  Label/review combinations in Wine Enthusiast and Wine & Spirits are product placements. Each publication is very clear about this to protect its reputation – and I believe them when they say that their reviews are not influenced by advertising.  But the fact that there is more than one system means that readers of Wine Enthusiast and Wine & Spirits and other magazines with similar practices may sometimes confuse paid product placement with editorial endorsement.

Solution?  I think all the critics cited above are honest agents and they have the right to choose different strategies to protect their reputations while generating needed revenues.  The burden falls on us, the wine buying “principals,” to understand what sort of “contract” we have with our critic “agents” so that we know when we are viewing paid product placements.

About these ads

One response

  1. This is a sharp and helpful analysis. I would add that one other important way to insulate critics against charges of “potential economic conflicts of interest” is to insist on blind tastings, as we do at Wine Spectator.

    There have been many studies proving the influence of the label (reputation, price, etc) on critical judgment. By ensuring that the critic knows neither the producer nor the price, the most important potential conflicts are eliminated. That way, the consumers’ interest in objective analysis is given priority not only over advertisers’ desire for critical validation, but also over the critic’s own inherent (and possibly unrecognized) biases or preconceptions.

    Thomas Matthews
    Executive editor
    Wine Spectator

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 1,898 other followers

%d bloggers like this: