Murdoch Makes His First Digital Mistake

Rupert Murdoch is clearly the smartest "old media" CEO out there. He’s run News Corp like the entrepreneur he is, by taking big risks and generally having them pay off. His buy of myspace for $500mm may go down as one of the best online buys ever and myspace seems to be solidly established as the low brow social net of choice. It fits perfectly with Murdoch’s taste in media. If Facebook is the New York Times, then myspace is the NY Post.

I was very hopeful that Murdoch’s buy of the Wall Street Journal would lead to the elimination of the one thing that is holding back the WSJ in the online world – the subscription requirement. But at Davos this week, Murdoch apparently said that the WSJ would greatly expand its free content, but that the subcription will remain and will be expanded to include new features and that subscription prices will increase. That reminds me of the NY Times’ ill fated experiment with Times Select which they finally walked away from this year.

Here’s the deal. Digital media is not about scarcity and never will be. That’s the old media game. Online it’s about ubiquity, about being part of the conversation, about links, authority, page rank, and if you are a news organization like the WSJ – its about anchoring the discussion.

The other day I wanted to find Jim Cramer’s column about the threat of a deflationary spiral. I wanted to blog about it and link to it. Then I found out that Jim’s column was at Real Money, Jim’s subscription blog. I ditched that plan and went with another story to make my point. Jim’s story was useless to me. I signed off on Real Money when I was the Chairman of I regret the mistakes we made at with a paid content strategy and I learned from it. Never again.

Rupert will learn that lesson too. Apparently the hard way.

#VC & Technology

Comments (Archived):

  1. Harold

    Rupert knows how to make money. The numbers clearly show he can make more money by keeping his best stuff behind the paywall. He can launch 100 blogs tomorrow and be as much a part of the conversation as anyone else, but the simple ecomomics of the situation is: CPM rates are falling, there is too much inventory, the WSJ would have to do impossible traffic levels to equal the subscription revenue.Also defining this as being about “scarcity” is the wrong way to look at it. Scarcity is all about perception, and people are paying for, at a level that ads will not be able to duplicate. A two-pronged strategy is best, and Rupert, who knows how to make money, knows it.

    1. fredwilson

      until the stop paying because there is just as good stuff for free all over the internet. that’s the case already

      1. Harold

        Let’s see what happens. I do believe that for certain types of online content, subscriptions make sense. Certain parts of are perfect for them, so let’s see what stays premium, and how they do subscription-wise. Many people, especially those in the’s target market, are willing to pay what amounts to a nominal fee in order to have the content they want, how they want it. Blogs and other free pubs are great but are they as good? The perception, at least now, is no.

  2. mm

    While I’m sure you didn’t mean to cast a negative tone on’s business model (you did in fact stress “the mistakes we made at with a PAID CONTENT strategy”), I just want to make the point that has successfully adopted a free, ad-supported model that now represents 50% of revenue – and rising. Free ad-supported premium content is their main growth driver today, consistent with your view of the world.

    1. fredwilson

      i should have elaborated. i haven’t been invovled with for about 5 years. in that time, they’ve embraced free content and the results are impressive. that said, i’d like to see them take down the subscription for real money and get Jim back in the middle of the conversation

  3. jeremy

    fred,we started classes today and one class i am taking requires the wsj. our prof passed around a signup sheet for those that dont already subscribe. he said he spoke the wsj about online only subscriptions because he figured students would prefer that. the wsj told him that they did not offer this option a study and 70% of students, and 85% of non students only use the print version. im not sure where they did this study but that seems wrong to me.

  4. Alex

    I agree with your position. There is LOTS of free content on the internet. Everyday I come across new blogs that are simply incredible with respect to the depth and knowledge the authors possess. was/is a great business. But, what drives the success of that model today is first and foremost Jim Cramer’s public persona. A distant second, they have good writers.

  5. Andy Swan

    Great post. Since you brought up theStreet…… do you think that they are making a mistake in putting their “stock pick” newsletters behind a paid-wall?I guess I’m just wondering if you think that there is any online content that is “premium” enough to charge for it?I really enjoy when you bring analogies into your writing….it really clarifies your points.

    1. fredwilson

      yes, i think they are making a mistake by putting their stock pick newsletters behind a paid-wall.i think they’d be more succesful if they were free and ad-supportedfred

  6. Sam

    There might be free stuff as good as the WSJ out there, but it doesn’t have the branding to compete with WSJ. The have been successful at maintaining their premium image, and can get away with subscriptions…for the moment. Rupert will bring down the wall the minute that people think they can get something better for free

  7. Guest

    Fred,Can you correlate your opinion here of the wsj with your freemium post in Mar 2006?

    1. fredwilson

      i don’t think there is such a thing as freemium content

  8. gregshove

    WSJ brand is powerful, but reality for next 5 years at least is that google is the traffic cop – and your search rank represents your brand – and creates the lowest cost, highest qualified audience. And staying behind the subscription wall means the Journal will fight the coming battles with one hand tied behind their back.Case in point: our very narrow, niche site – – comes up consistently high in natural google for searches about private aviation and luxury fractional real estate – subjects that the Journal covers on a regular basis, especially in Personal Journal and Weekend. But their articles don’t show up. And we have built in 2 years a multi-million dollar advertising business via the audience that finds our content via google. And those ad $$ came from clients that advertise in the Journal.

    1. fredwilson

      great case in pointthanks for sharing

  9. Vijay

    Fred its just a matter of time WSJ joins the suite of others who followed the similar path. Let them get a taste of the crowd and I am in for sure they tear down the wall apart.

  10. John

    Maybe it’s part of the larger strategy of buying (eventually) linkedin and pairing it with the WSJ?

  11. John McGrath

    The NYTimes must be loving this.

  12. Toffer

    The WSJ is one of the highest quality newspapers around and they have been successful with their online subscription model for a long time due to the quality of output, their brand and credibility as a leading news source. People are willing to pay for that which comes as a surprise to me when there is so much other stuff available out there, and per Fred the NYT tried it and failed (and lost readers in the process). I think adding features will add core value to the product, which keeps current subscribers in the game and brings new ones on board – but to increase the fee seems like a move that will garner a negative response. I think they should feel lucky to have subscribers paying anything at all – its an anomaly for a mainstream paper, not a specialized newsletter (i.e. Cramer). Focus on attracting new subscribers by improving the offering versus trying to do both. Use ad revenue to pay for new features – use subscriptions to keep the lights on – use the online medium for reach. Its unfortunate but newspapers are suffering the same way music has due to online ease of publishing and sharing of information.

  13. Brian

    WSJ just made their opinion columnists free. This is exactly the opposite of times select. I believe all of WSJ’s blogs (mossberg, etc) are now free.I think the WSJ knows their audience. They use opinion and blogs to gain traction on the online world, and use paid subscriptions to deliver services to their business customers. WSJ is not a mass market newspaper, and I do not think they want to become one. The business market is just too lucrative to put at risk.In terms of making money, they have a pretty good track record compared to the rest of the industry. I would not bet against them.

  14. Rob

    Fred,I think you need to factor in the one scarce good that still exists – attention. Being part of the conversation, links, authority, page rank… those are all things that are not absolute. They are relative. They are based on what everyone else is doing and how you relate to them. Ubiquity requires more labor, because now journalists have to blog and comment and all that in addition to research and writing. So what you have is an explosion in content, a steady attention level, and online advertising that, truth be told, is probably not worth what people are paying. I don’t see how that is a model for long-term success, unless an advertising technology comes along that makes online advertising dramatically more engaging (better behavioral targeting, perhaps?)I think people will begin to pay for more online content in order to filter through the noise. Paid content has failed for most web companies because their brands are perceived differently than the WSJ. People pay for bottled water, even though tap water is free.And if I’m wrong, and content all remains free, isn’t it possible that content grows faster than ad dollars and attention, and that everyone ends up with lousy returns on content creation as a result?

    1. fredwilson

      Attention is scarce and ubiquity means that we collectively can crowd source up what we should be paying attention to.Those that decide to stay behind a wall cannot play in that game and will eventually losefred

  15. eric hebert

    That depends on what exactly is going to be offered. And I think it’s a bad investment strategy to put ALL of it out there for free. What if Google changes the algo, or something happens and their traffic tanks? What then? Maybe they’ll put together some cool business apps that are worth a subscription fee. Video content. Who knows? I think you’ll see WSJ turn into more than just a business journal.

  16. The_Critical_Advertiser

    So let me understand, you think the best long term business model is to have newspapers give ALL their content online away for free while they charge for it at the newsstands. Have you seen the state of publications these days? Punch the monkey advertising doesn’t bring results and therefore not enough online revenue.The solution lies within the Ultramercial model that saved Read their 10-Qs from 2003 to 2004 and you’ll see subscriptions doubled, unique visitors went up 1 MM and the Ultramercial Site Pass accounted for 47% of ad revenue. Every day the viewer had a choice: Pay the subscription OR watch an ad to “earn” access.The future savior of the publishing industry is in attention-for-content advertising. An honest to goodness value exchange invented by Ultramercial.The Critical Advertiser

    1. fredwilson

      Do you read salon?I don’t

  17. The_Critical_Advertiser

    Actually, no I don’t but I read Wired where they talked about the Site Pass model that I tracked back to Salon’s filings and Ultramercial. If you ask me, the New York Times took TimesSelect free in anticipation of Murdoch pulling down the paid wall at WSJ. That never happened and now the Times is faced with the same problem every other publisher and now social networks face; how to make enough money from ads people block, skip or ignore.How do you think the industry and viewers would react if content owners came out honestly and said: “Hi, we continue to strive to make our site as dynamic for you as possible. However, our main source of revenue are ads that people typically block, skip or ignore. We don’t want to trick, overlay or interrupt your experience to try to get you to pay attention to these ads.Instead, we are going to make a simply change. We are going to ask you either: Subscribe with no ads – OR – engage one full-screen ad to completion before gaining free access.Do you think consumers would understand 30 seconds of their time to “earn” access? Advertisers would finally get the guaranteed view they desperately are seeking outside of search.

    1. fredwilson

      The problem is that discovery and attention require being free so that search and social media can bubble up the good stuffSticking content behind a wall is a losing propositionWe’ve tried and lost a bunch of money with that model

  18. The_Critical_Advertiser

    Strategically sticking content is the key. This is not an all or nothing proposition.At the grocery store or newsstand you get to flip through the magazine but if you want to take it home you have buy it.Online you need to offer partial stories (a couple paragraphs) or maybe one free story. Then, to continue reading you either: Subscribe – OR – complete the ad to “earn” access. Trial & usage at the newsstand but now online.Attention-for-access is a far lower threshold than opening up your wallet and pulling out their credit card to get a two-week trial. More important it’s a totally different psychological experience. The advertiser is now the provider, not the misunderstood interloper.This also allows for all search and discovery, a taste of the material before buying. And if I never buy, so what. The publisher finally has a 100% opt-in, full-screen, two-way interactive ad to sell to advertisers. Big bucks.Ultramercial is the bridge between FREE and FEE that brings financial horsepower to online businesses… I took that from their website.