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

[The FItzman]

The WSJ is much like CNBC - a tool for the ultra-rich to keep giving bad advice to individual investors and to push the far right wing propaganda to the wealthy "elite". They will both fall apart when the failed economic policies they peddle destroy the US economy. I have tried to get the WSJ to publish my energy policy paper for months and they simply won't do it. Meanwhile, oil keeps going higher and the S&P keeps going lower, and the folks who raped the US treasury are moving their money to Europe and other non-US places.

[User 222904]

What none of the execs -- at WSJ or NYT -- ever discuss is the cost of administering a subscription plan: the transaction fees, the accounting work, customer service personnel, etc. The execs always talk as if (or, in the case of NYT, talkED as if) 100 subscribers x $100 each = $10,000 profit. Uh, nope. It doesn't work that way.

NYT saw the light, and even went on to open up archives. Very smart. WSJ already makes their most useful tools free. And the stuff you have to pay for? None of it is useful in an immediate, actionable way. Here in the age of teh Intertubes, very little of it is even unique. For investors at any level, there's no real value in paying for WSJ content any more.

WSJ will face up to reality eventually, IMO, and do away with the paywall. It seems inevitable.

[anastos]

So CNBC is now a tool of the right wing elite? Will you people make up your mind about who's spouting right wing propaganda and who isn't? First it's Fox News, now it's CNBC....what, is NPR next on the hit list?

Did it ever occur to you that the WSJ hasn't published your paper because it sucks? (And, before you start in, yes I went to your website and read it....) And it isn't that I think you're a complete crackpot....I agree with most of the topics you've put forth. However, your treatise is written in a form that smells of "late night college bull session after a 12 pack and a joint." Make it sound less like an internet rant and you might get somewhere.

[Jerry Dill]

While they are still making money I think think that kind of blinds them to opening their site to all users. And with so many more users coming online why not just pay for an online subscription and get all the information right from your computer.

[CarlosSlim]

Why would anyone pay good money for GOP propaganda that Rupert Murdoch has been pushing out of Fox for years? It ain't selling anymore and it's starting to stink like yesterday's fish...

[Miller GD]

So after reading this article and recalling that my WSJ Digital sub just renewed, I checked the renewal price and it was $119. I enjoy the WSJ and find it pretty valuable but no way am I going to pay $30 extra for the privilege of keeping my subscription.

I called customer service to try to recoup the extra $30, fully intending on keeping my subscription. Imagine my surprise when they told me they could not refund me the $30 extra as the $119 was an automatic "renewal rate" they had no control over. The only way to get the new rate is to cancel the sub and renew again online.

I expressed my incredulity to the CSR but, surprise, surprise, she was less than empathetic to the idiocy of the advice she had just given me, specifically to cancel my subscription.

Ultimately, I told her to cancel it, refund my money, and now I no longer intend to sign up for the digital edition.

[leoz]

I agree with Chris Anderson. WSJ should be free to all the online users. Otherwise WSJ would lose a chance to grow its online user base.
When I read an article on WSJ web site, I will just switch to Reuters, AP or other web sites for the similar one if I can't get the whole article for free except for its summary.

[notsosmart]

cmon-you just dont need WSJ.there are so many free alternatives. im surprised by all this.