What Caused Murdoch to Have a Change of Heart About Making WSJ.com Free?

Implications: News Corp has decided to dismantle, not demolish, wsj.com’s paid subscription wall. Weakness at the print Journal may be the real reason for the change of plans. At $1 a year, Barron’s is also facing some serious “paid” subscription challenges.

Analysis:

For months Rupert Murdoch has been talking about making wsj.com free. It looked like a no-brainer. And I, for one, thought he would do it.

But the problems News Corp (NYS:NWS) inherited at Dow Jones ensured that the decision to go free wasn’t that simple. And the talk is now turning to the “hybrid model,” where high-value content stays behind a paid wall.

What’s the difference between “hybrid” and “free”?

For a lot of readers, there is no difference. As The Journal itself reports, its free online content already includes: “breaking-news alerts and personal-finance and lifestyle content, as well as videos, blogs, podcasts and other interactive elements. This month, the Journal began offering free access to all of its Opinion section.” Plus: “online readers can come to the Journal's site from Google News and read any individual article free.” More free content will likely be made available in the months ahead. Meanwhile, a lot of “free” sites, already charge for a variety of content, including archives. All of which makes the difference between “hybrid” and “free” virtually meaningless for the more casual online reader.

However, wsj.com’s paid subscribers get access to a depth and breadth of financial information and research tools that go beyond what other free sites offer. It’s high-value stuff worth a lot more than the subscription price to those who use it. This is part of the rationale for the hybrid model.

Why does News Corp care about the distinction?

It may be that Murdoch simply enjoys the fact that he psyched out The New York Times (NYS:NYT), which recently abandoned its Times Select product and left The Journal as the only paid news site in town. The trouble with that argument: The Times has seen enormous traffic gains since it tore down its wall. Announcing that wsj.com is free – at least in terms of daily news content – would give the site a tremendous traffic and ad sales boost.

The real reason for the distinction – and the delay in making wsj.com free -- may be this: After years of disastrous consumer marketing efforts at Dow Jones, the print Journal’s paid subscription base has become so eroded it now needs the “value” of the online Journal to prop up its faltering circulation and readership. Because it has failed to market itself effectively – and entirely missed the opportunity to broaden its readership when it launched Weekend Edition in 2005 -- The Journal is now falling prey to the same circulation pressures as other newspapers. And this is where the paid site helps prop up the print edition.

“Bundled subscriptions” – where readers are offered the chance to buy the print and online Journal’s at a significant discount to the “regular” print-only price of $249 – are crucial to managing The Journal’s circulation level. (Current prices available on wsj’s subscription site: $79 for a year of online; $99 for a year of print; $125 for a year of both.)

In other words, if you want to subscribe to the Online Journal, you can add-on 6 days a week of the print Journal for just $46 a year (vs. $681/year for The New York Times.) For most people in business and finance that’s a no-brainer.

It’s all about ad sales.

Ad sales at the print Journal are still crucial to Dow Jones’ overall performance. And the image of The Journal as the essential daily paper for American business is crucial to that sales story. That’s why maintaining print circulation is essential.

Murdoch and News Corp – and the new Dow Jones management team – need more time to figure out how to fix what they acquired and market The Journal print edition more effectively.

Meanwhile, if you’re interested in the Journal, subscriptions are going cheap. And things are even worse at Barron’s, where a recent mailer offered the venerable weekly for just $1 a year with the purchase of a discount subscription to Smart Money.