the audit

Why Pay $100 a Year for the Journal?

They're giving it away free on your phone
April 22, 2009

Amy Gahran over at Poynter points out something I’ve been wondering about, too: Why is The Wall Street Journal giving its content away—on mobile phones?

I downloaded the WSJ iPhone application last week and have to say it’s pretty sweet. The home screen is the “What’s News” column, which is organized and updated almost exactly like the same column on WSJ.com. You can switch screens to see what’s going on in the markets or editor’s picks. You can even save stories to read later.

In some ways the iPhone app is even better than the website. I took a look at the section for my old group, real estate, and the mobile app makes it easier to see the current top stories than the website does. The latter has an annoying “property search” feature taking up half the screen.

The app also makes it easy to find video and audio on topics you want—right on your phone. I can see lots of business people paying $10 a month for it to read in the back of black cars or cabs. Heck, I’d probably pay $5 a month on top of my print and website subscriptions. I mean, I just bought “Oregon Trail” on my phone for $5, for crying out loud. That could be a nice new revenue stream.

So why is the Journal giving it away for free? One of my oft-repeated themes on Why You Should Charge Online is that one of the near-term reasons to charge for digital content is not necessarily to grow revenue, but to stop revenue declines that come from people making the economically rational decision not to pay hundreds of dollars a year for the newspaper when the exact same stuff is online gratis. Forget ten years from now. You’ve gotta make it through 2010 first.

In Gahran we have a real-life anecdote of this rational consumer behavior:

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A month ago, as I wrote earlier, I was willing to pay $10a month to subscribe to The Wall Street Journal on my Kindle. I canceled that subscription last week, after the release of the WSJ iPhone application that provides free access to all Journal content.

The iPhone app carries ads at the bottom of the screen, but I don’t mind. I also get audio and video content from WSJ through the app.

Gahran asks what the WSJ is doing with its pricing. If she’s wondering (she writes for a blog on “the intersection of news & technology” at Poynter), I’m guessing a lot of the paper’s other customers (customers being a key word) are, too.

It sure doesn’t make sense to me. The Journal charges $150 a year to get a daily paper delivered. It charges $100 a year or so to read its website. It charges $120 to subscribe to its content on the Kindle, which is in black and white and has no video. But it gives away its mobile content, a product that’s in some ways better than the Kindle and in some ways better than its website, for free. There’s just one tiny ad there bringing (presumably) one tiny revenue stream in for the paper.

I understand this is probably a marketing thing to try to get a broad base of users quickly for the paper’s mobile app. And the app still has a ways to go. It doesn’t let you search for stories, for instance, or read older ones—maybe they plan to add those later for a fee.

Maybe. Gahran points to a Wired story reporting that Dow Jones says it wants to charge for “some” of the mobile content at some point but doesn’t know when. And I assumed that surely the paper kept back its most valuable content, the “Heard on the Street” column. Not so. Meanwhile, Wired says the Journal has been giving away all this content on the BlackBerry for eight months already.

“Eventually the app will likely follow the same model as WSJ.com, so there is a consistent experience across multiple platforms with respect to subscription content,” a Journal spokeswoman tells me. “We are still exploring options so no further details to share at this time.”

Wired has a good take on that:

We’ll see if the almost certain bad will of a giveth and taketh away revenue model is worth trying to put the content genie back in the bottle.

Also, you know what happens when your customers find out they’ve been paying good money for something other people are getting for free? It doesn’t make them happy customers, let’s put it that way.

In effect, what newspapers (and magazines) are doing is incentivizing their customers to go for their money-losing products. You know those Chinese food places, (on Fulton Street in Manhattan and in mall food courts across the land) that hand out sesame chicken samples on a toothpick outside the store? If newspapers ran Chinese restaurants they’d be handing out full meals out front for free while trying to get you inside to pay big bucks for the chicken-on-a-toothpick.

Newspaper websites are the worst kind of loss leaders in that they only—thus far at least, and as far out as any of us can see—lead to losses. The Journal‘s been different in that it rakes in tens of millions of dollars in subscription fees every year on top of the advertising it gets (notably, Journal print circulation has been steadier than most papers that don’t charge).

In March, WSJ.com unique visitors were almost half that of The New York Times‘s site because it’s figured out how to charge many while letting many more have relatively easy access to the site. It’s pretty brilliant, actually.

WSJ.com’s great advantage was that it charged from the very beginning—something other papers can only dream they had done. Its readers are acclimated to paying for Journal content.

That content is valuable. Hold the line, WSJ.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.