An interesting article in Business Week about opening up the Wall Street Journal Online in the wake of the sale to Murdoch.

For The Wall Street Journal Online, going free will come at a high cost. The daily financial newspaper is one of the few major publications to successfully charge for access to most of its online content, earning roughly $79 a year from each of its nearly 1 million Web subscribers. Once incentives and other free offers are taken into account, some analysts estimate that the paper will bring in more than $65 million this year from WSJ Online subscriptions alone.

But soon-to-be owner Rupert Murdoch seems willing to sacrifice that revenue in return for the possibility of earning many millions more from online advertising. In an Aug. 8 earnings call for News Corp. (NWS), which plans to acquire Journal publisher Dow Jones (DJ) for $5.6 billion, Murdoch said both companies are debating making WSJ.com free, though there are no concrete plans yet. "I think it would be an expensive thing to do in the short-term. In the long-term it may be a wonderful thing to do," said Murdoch.

The dominant strategy among online publications is to attract as many millions of visitors as possible with free content, then leverage that mass audience to run ad campaigns for big brands. It's easy to see why newspapers have chosen this route with all the advertising dollars flowing online.

There is just so much information on the web, and as the article points out there are very few publications that have the ability to charge a premium for their content. Over time, as the web levels the playing field, this is going to shift. This is, as Rupert Murdoch said, a short-term and short-sighted strategy.

In many ways, it's the same argument I made about the full vs. partial feeds. In the short-term, you might see "higher margins" - that is, earn more per reader, but if you have more people reading then you ultimately have more room to scale.

To me, the single most attractive element with being virtual is the ability to scale on both sites of the content equation. With subscriptions, the bar is lower for me to consume your content because I don't have to worry about physically carrying around anything. And it's much easier for me to "accidentally" arrive at your content through a link on the web. In other words, as a content producer you have a greater chance of viral growth in views than you do with a physical newspaper or magazine.

On the content production side, there are significant costs for printing and distribution that are a relatively fixed unit cost. If you increase sales, these costs may lower, but you still have a per-unit cost. On the other hand, an online presence has a relatively fixed cost whether you're serving 100,000 pages or 100 million pages. (I say relatively because obviously you need more infrastructure and bandwidth, but this is not a O(n) ratio).

 Fred has long been one of the most vocal supporters of opening up the WSJ.

Sure, there's 900,000 paying subscribers. And they generate something like $75mm per year in revenue. Sounds like a lot? Maybe. But Marketwatch, which Dow Jones bought in 2004, was doing $80mm in advertising revenue back then.

...

I think if the WSJ went free online, got its content into the dicussion broadly, got indexed highly in Google, and fully participated in the web in all respects, it could easily see 10mm uniques per month and 100mm pageviews within a year (which might generate as much as $100mm in revenues). That should be the goal, not to remain a niche player in online finance.

Fortunately, it sounds like Rupert Murdoch understands these dynamics.


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