How long will the WSJ keep its pay model?

I'll admit it: it bugs me that Rupert Murdoch hasn't yet followed through on his plan to make the Wall Street Journal's website entirely free. It's the last big holdout in the all-web-media-must-be-free trend, and as the guy writing the book on free, people keep throwing it in my face. So I sighed when I saw in today's headlines that traffic at WSJ.com, with still just a small fraction of its content free, nevertheless grew by 45% last year, to 150m page views per month. Damn. Can pay really, well, pay?

Before we get into the data, let's revisit the argument for web media being free to consumers. It's simply that free sites get a lot more traffic than pay sites, and experience suggests that making money from advertising on a big user base is easier than making money from subscriptions on a small base. Why do free sites get more traffic, aside from the obvious reason of no barrier to entry? Because third-party sites (blogs and other news sites) will typically only link to sites that are free and Google only searches and drives traffic to sites that its crawler can get into. And on the Web, if you're not in Google and the blogosphere, you're not in the conversation; for much of the audience you simply don't exist. The trickle-down effects of such invisibility are felt in other aspects of your business, from customer acquisition to PR.

Here are the traffic figures for WSJ.com versus the New York Times, which went from the pay to free model in September of last year:

Both have grown over the past year, but in August last year, when both websites were behind pay walls, the NYT had about 5 million more users per month more than the WSJ. Now that the NYT is free, it has about 10 million more users per month. (Don't be misled by percentage figures; they always make growth from a smaller base look bigger).

If the NYT has the same 10-to-1 ratio of page views to unique visitors as the WSJ, those extra 10 million visitors account for an extra 100m page views, which at a modest $15 CPM, two ads per page and 50% paid inventory, are worth about $1.5 million a month, or $18 million a year. (Needless to say, that's just a back of the envelope calculation; the NYT may very well get a higher CPM)

Meanwhile, WSJ.com has subscriptions, which are nominally priced at $89. We don't know how many people currently pay for them, since that wasn't part of the latest press release, but last time the company reported numbers, there were about 1 million paying subscribers to WSJ.com. That's $89 million a year, right? Wrong.

Here's a screen shot from the WSJ's subscription page. As you can see, the recommended offer is the combo deal that leads to only a $10 online subscription fee. 

  

As the footnote in Dow Jones's last 10Q notes, "WSJ.com subscription figure now also includes subscribers who selected to pay for both the print and online products as part of a bundled offer and registered to use WSJ.com."

So odds are that the online subscription revenues are now closer to $10 million a year than $89 million as people go for the combo offer. It might even be less than the $18 million more the NYT makes with ads online (using the above napkin-scratching numbers). If the WSJ dropped its pay wall, would it get as much traffic as the NYT? Maybe not. But it would at least be betting on the faster-growing part of the market.

Indeed, there's good reason to think that the subscription numbers are not growing at all. Felix Salmon from Portfolio (our Conde Nast sibling) observes:

If you look at the Mediaweek story, there's one statistic conspicuous by its absence: what has happened to the number of subscribers to wsj.com over the past year. Betcha it hasn't grown at all, and that substantially all of wsj.com's new uniques are there for the free content only. (That would help explain why pageviews are growing much more slowly than uniques are.)

Felix is betting that the WSJ pay wall will come down, sooner or later. I agree. I give it 24 months.

Comments

[Nick]

Well of course the WSJ wouldn't have the same amount of views as the NYT if they were free. The WSJ doesn't have a style section or a food section or a weekly magazine or investigative political journalism (at least not to the same extent), all of which drive some portion of the traffic. Take a look at the NYT most e-mailed and ask how many of those articles would you expect in the WSJ? Maybe 1 or 2? Why are they even comparable in the way you've presented?

I'm not saying you're conclusion is wrong. I have no doubt that it isn't. I'm just not sure the argument (w.r.t the NYT) is relevant. I think a consideration of the differing demographics is critically important to the analysis.

[Vijay Goel, M.D.]

Chris,
As a subscriber to the online-only version of the Journal, I actually hope that Murdock continues in the paid model...I like the incentives it aligns him with and it makes sense if you think about the Total Cost of Ownership and the target audience.

My time is pretty valuable to me, and the problem I face with much of "Free" content is that it takes a long time to find good content that is reliably produced (for instance, how often is your blog updated?). I want in-depth coverage and perspectives in areas that most consumers could care less about. For me, paying for an aggregator of executive-level business content is cheaper than trying to sort through mass-media content to find it on other sites (Harvard Business Review is way more expensive). I even pay for quality reporting on my alma mater's sports teams (UCLA Bruins!), as there's no way a niche subject like my team could otherwise receive the type of coverage I enjoy.

If the WSJ goes free, that means it will have to increasingly cater to the mass market (or at least accumulate more folks in its target demographics). This is likely to change the editorial tone and change the type of content covered while bombarding me with ads.

From my perspective, its cheaper for me to just pay for what I want so I can move on quickly to my core business needs every morning. I think that you'll find business models targeting specific audiences move in that direction as the internet matures and focus/quality become the scarce commodities.

I predict that pay for enhanced access targeted at niche audiences will become a broader trend. Its been alive in nightclubs VIP lines forever. It was part of the first class travel model and has been extended to Clear. Hell, I've bet my life's savings on the trend, as I'm building a scaled solution to get enhanced visibility and access to niche services in health care (long waits in waiting rooms or appointment queues is a pricing (insurance payment) issue, not a necessary part of medicine and health providers are just as varied in their approaches as anyone else--people just have no way of finding out today).

[Francis Hwang]

Barry Ritholz addresses this at length, here:

http://bigpicture.typepad.com/comments/2008/04/murdochs-wsj-cr.html

Regarding free vs. pay, this passage from Ritholz's post is particularly interesting:

"The WSJ is, at present, a must read news source for the financial industry. At our NYU lecture, it was noted that nearly half of WSJ 2 million subscriptions are expensed -- meaning, the subs are a tool for the employee paid for by the office. NYT subs, by comparison, are expensed in the single digit percentages."

This is why the WSJ might conceivably hold on to the pay model: It can get its revenue from a vertical market that's willing to pay for perceived higher quality. Like Dr. Vijay, above. Or, like anybody who subscribes to HBO because they think The Sopranos or The Wire are way better than Dancing With the Stars.

In such a model, the metric of influence is different as well. The old WSJ wouldn't care about reduced linkage from blogs et al, because they care less about online conversation and more about talk around the water-cooler in the Morgan Stanley fixed-income department. In many ways, the world of finance does not invite broader discussion from the overall public: It's a community with a high cost of entry, in many ways subtle and obvious. Ritholz himself routinely links to WSJ articles behind the pay-wall, assuming, quite reasonably, that much of his audience will be able to follow those links.

Of course, that's the old WSJ. Looks like the new Murdoch WSJ may be slipping out of its niche, trying to take on the NYT for mindshare in New York and in the country, which might be good for Murdoch's ego as a world-shaking plutocrat, but might not be so good for business. Time will tell.

Me, I'm happy to read the Economist and pay full price for it, not because I work in econ or finance (I don't) but because I think it's phenomenal writing, the sort that's hard to get for free. Of course, I also pay for The New Yorker, New York Magazine, Wired, and Harper's. And I think The Wire is the best show on TV ever, so that should tell you what sort of a snob I am.

BTW, does anyone have any concrete numbers of the NYT's actual CPM? 'Cause every time I look at their ads, they really really suck. One of their articles today on Obama and Iraq has a display ad for T-Mobile, and one of the Google ads is "10 Rules for Stomach Fat". It's like when Excite was plastered with ads for webcams, only the animation isn't so seizure-inducing, which I guess counts as progress.

[hyokon]

I don't understand why you are trying so hard to prove that the world can have only the 'free' business model. There can be different ways to make money. Isn't embracing variety a critical element of the longtail?

[Julien Couvreur]

The price list shown above reminds me of the book "Predictably Irrational". One of the examples in the book was the pricing for The Economist.

The numbers were something like: Online for 60$, Paper for 150$ and Paper+Online for 150$ (same price as Paper-only).
Most people went for the expensive Paper+Online package.
The author conducted an interesting study, where only two of the above choices were shown: Online and Online+Paper. In that scenario, the Online-only deal was more popular.

That makes me think that the WSJ packages above may not be well priced...

[John Wilson]

Chris,

I think a large number of the subscriptions are being purchased by corporations. Where I work, 400 people have access to the WSJ.com online because we have purchased some kind of "Enterprise Package." I would never pay for the WSJ otherwise, but because of this deal I log on every day.

[Barry Ritholtz]

Let me repeat the suggestion I made so long ago:

Move the WSJ/Dow Jones archives out from behind the subscription-only firewall. Keep the most recent WSJ subscription only -- perhaps 7 days, but certainly no more than 30 days maximum.

Monetize the older content with ads, but maintain the $60 million is subscription revenue . . . .

[Rex Hammock]

I've written on this topic before (http://www.rexblog.com/2008/01/24/17457/) so I won't re-hash it too much. But the fact is, WSJ.com is merely nominally behind a cost-wall. Any article a Digg user clicks is made free instantly via that channel -- and one can subscribe to an RSS feed of those articles. Granted, that's a hassle in a world where we want one-click access to everything. However, it allows WSJ to provide bloggers and Digg users with a means to link to "free" versions of any article while still marketing their subscription model.

In other words, the Digg channel effect could be part of the explanation to how "free" content is helping them continue to grow their overal traffic -- while maintaining the subscription model.

[Dr Wright]

If it is working for them, why change the model? Very few newspapers can make it work like that.

Dr Wright
The Wright Place TV Show
www.wrightplacetv.com
www.twitter.com/drwright1

[Barry Ritholtz]

Rex,

Its more than Digg, its Google and WSJ Mobile also . . .

[Jason Armstrong]

I like the pay model. The information/presentation in the WSJ, sum total, is gold. I would prefer that the masses remain ignorant in these matters, so I can stay ahead of them.

[Ian Pratt]

The point on revenue for paid verse free traffic is of interest. Can a good subscription site make higher revenue than a free site can make on advertising?

The comment on ease to find is also of interest, what will the consumer trend be? Will the expectation of web=free disolve as online transaction comfort improves? or will clutter on the web ultimatley dictate a need to subscribe to paid sites for quality information?

Keen to know what you think of these emerging trends

[Karoly Domonyi]

Hi,

Your site is one of my favorites seen around blog explosion. Keep up the good work.
I enjoy reading your blog. It is great to find someone who can find the fun things in life!
I wish you all the best in all years.

With Regards,
Karoly Domonyi
http://www.Aries.hu
http://www.ariestrade.com

[Ali]

These people make so much money, it pisses me off

[peeyush]

A good observation. But with more and more data becoming freely available, segregation of good content can be achieved through paid content. Page rank is doing this presently, but it will get more difficult especially for the long tail. Would paid content then drive traffic.

peeyush
http://www.raftaar.com

[kabin]

thanks...
Kabin
Konteyner