Will Pay Sites be Set Free?

By: Jennifer Saba When Rupert Murdoch's pursuit of The Wall Street Journal was still building, he suggested that he loved it so much he would be willing to let it go free. At least that's what he mused to Time's Eric Pooley. Murdoch went so far as suggest that he might aim to scrap the print edition and unshackle the online Journal of paid subscriptions: "No printing plants, no paper, no trucks."

Murdoch followed that with the million ? or, in his case, the $5 billion ? dollar question: "How long would it take for the advertising to come?" In any case, until that no-print day dawns, should WSJ.com ? arguably the industry's most successful online paid-subscription model ? be totally accessible to the masses? And what about other news sites?

Currently, WSJ.com operates as a hybrid. Premium content costs the reader money, but increasingly more of it is creeping out from behind the pay wall. In June the site launched a new non-subscriber homepage, making it easier to find all the free editorial. Explains newly appointed WSJ.com General Manager Daniel Bernard: "With the most recent redesign of the homepage, we took the opportunity to look at the content and discover who we are. We decided to re-evaluate how we are surfacing that content."

Non-subscribers now can easily find free blogs, podcasts, and videos without having to hunt and click through the site as much as they did before. Some content that previously wasn't free, like material from "Personal Journal," is now gratis, though Bernard says that was the case even shortly before the new homepage. But he says the premium content columns will remain for subscribers only, adding, "We are definitely happy with our hybrid model."

WSJ.com receives half of its revenue from advertisers and half from subscribers. "It's nice to have a diversified revenue stream," Bernard adds.

The online Journal might be doing well these days, but some advertisers and outside observers believe the site could pull in a lot more money if a subscription wasn't required.

David Verklin, CEO of Carat Americas and co-author of Watch This, Listen Up, Click Here: Inside the 300 Billion Dollar Business Behind the Media You Constantly Consume, tells E&P: "Advertisers follow audience." In his view, demographics aren't that important ? and the online Journal would benefit from a broader distribution. "Mass more than class," he quips.

Verklin contends that online advertisers prefer a bigger catch from a wider net: "The half they lose in subscription [revenue], they will more than make up for in advertising."

Barry Parr, a media analyst with Jupiter Research, thinks the Journal and The New York Times simply stuff content behind a pay wall in order to protect the print product. Parr thinks that buffer might be worth giving up in the short term, since in the long run "the print product is going to go through a readjustment anyway."

The online Journal counts about 983,000 subscribers. Its total circulation, which includes a portion of WSJ.com's subscribers, reached 2,062,312 this past spring. The Journal made slight gains; daily circulation was up 0.6%. However, it has been furiously discounting, with basement-price offers for both the print and online editions. Discounted copies surged 443% from 77,134 in March 2006 to 419,227 in March 2007, according to the Audit Bureau of Circulations.

Wachovia Equity Research Senior Analyst John Janedis notes in a report that year-over-year, the Journal has been losing unique visitors. According to comScore data in June, the WSJ.com's uniques fell 9.1% compared to the same period a year ago. Page views are down as well. For the same year-over-year period, they dropped 42.1%. (Janedis notes Dow Jones cites trends that differ from comScore data based on internal counts.)

"Online advertisers are still to this day looking for a measurable entity, and that is easier to do" with more people, says Shawn Riegsecker, CEO of the online media agency Centro. He guesses that the online Journal would have to net about 6 million unique users a month for it to make sense to open it up. Riegsecker says WSJ.com is able to charge premium ad rates because it is delivering a highly desirable audience, albeit one with limited reach.

Jupiter's Parr takes that one step further, saying that if WSJ.com were to become free, "Clearly there would be a lot more traffic on the site ? and it would still be a highly desirable audience."

But not everyone thinks the site's current model needs some tweaking. Brett Dennis, director of media marketing at T-Mobile, likes the idea that WSJ.com can charge users to read select content. "In the media world in general, we always look at some form of a paid subscription model" as a sign the consumer wants the product, he says. "I could see how it might be tempting to walk away from it, but what they have done has been successful in the marketplace."