Would You Pay to Read This Story?

The Wall Street Journal makes millions from its pay website. Here are the secrets to its success—and what other papers can learn from it.

After nearly 15 years of giving its product away to younger and more technologically adept customers, while continuing to charge older and less-adaptable customers—that was never going to end well—newspapers may finally be coming to their senses about the imperative of receiving value for value delivered on the Internet.

Signs of this are cropping up almost daily: New York Times executive editor Bill Keller muses aloud about the possibilities for charging. Cablevision (the new owner of Newsday) says it will start charging somehow—perhaps in conjunction with cable-TV service. New Hearst newspapers president Steve Swartz announces Hearst papers will charge for some content. Meanwhile, newspapers that once insisted that their websites be free are now dead or dying in Denver, Tucson, and Seattle. And newspapers in Los Angeles, Chicago, Baltimore, Philadelphia, Minneapolis, and New Haven scramble to reorganize in bankruptcy.

Most Journal readers used to have their companies pay for their Journal subscriptions. But that hasn't been the case in more than 20 years.

In such a situation, it is important to separate facts from myths that have grown up around the idea of charging for newspaper content online. Having helped manage the Wall Street Journal, the largest newspaper to charge for content, during the early years of the Internet revolution, and more recently as the biographer of the Journal’s animating genius, Barney Kilgore, I hope I can help shed some light on these critical differences.

Fact: The basis of the Journal’s ability to charge a million subscribers for content is the distinctive value of that content. Not everything in the Journal is unique, but enough is—enough news and analysis that can’t be found elsewhere—that one million readers pay for it today.

That’s been the basis of the Journal’s appeal from long before the Internet was even conceived. In building the Journal from a narrow financial daily selling 30,000 copies daily, largely in Lower Manhattan, to a national business publication that sold one million copies from Portland, Maine, to Portland, Oregon, Kilgore understood that such a “second newspaper” could only succeed if its offering was distinctive from readers’ first (local) paper. Today, the Internet has, in effect, made all newspapers “second reads.” Kilgore’s disciple, Peter Kann, the Journal’s publisher from 1989 to 2002, instinctively sensed the need to charge on the Web while others were misled by the false mantra that “information wants to be free”—even while creating it continued to cost money.

Do we really believe that the Wall Street Journal is the only newspaper in America that publishes distinctive content? Of course not. The Rocky Mountain News is being mourned precisely because the opposite is true. But newspapers need to be relentlessly honest with themselves about what elements of their content are sufficiently distinctive to be worth money to readers. Then, as available resources contract, they need to channel their efforts toward creating more such content—and to devote less to efforts that aren’t distinctive, and that don’t create value sufficient to command value in return.

In doing this, they need also to confront a number of myths that have become widely accepted in the newspaper business.

Myth: Charging for content consigns a newspaper’s website to insignificance, and removes it from the “conversation” of the blogs. This has been exploded by the Journal in the 18 months or so since the Rupert Murdoch takeover. In that time the smartest move made by the Journal has been to create a hybrid model where nearly all Journal stories can be reached, for free, by way of a Google News search—and are available for links by bloggers—while the Journal site itself, as an integrated package, remains behind a pay wall. The result has been that the Journal has climbed the charts to now rank ahead of all but two free newspaper sites in terms of page views, according to web-information company Alexa.

Myth: The Journal example is irrelevant because most of its subscribers can write off their subscriptions as a business expense. Back in Kilgore’s day, it is true that most Journal readers had their companies pay for their Journal subscriptions. But that hasn’t been the case in more than 20 years, since the decimation in the ranks of corporate middle managers, and the widespread demise of “expense accounts.” The vast majority of Journal subscribers now pay for their own subscriptions, in print and online.

Myth: The amount of circulation income that can be garnered online won’t be material. It’s been more than four years since I saw the actual numbers, but all indications (and the most informed outside estimates) are that between $80 million and $100 million is now paid each year by readers for access to the Journal’s online edition. That’s more than the annual news budget of all but perhaps two or three newspapers in America. Moreover—and even more to the point today—circulation income continues to be all publishers’ best cushion against recession. That was clear in 1995, and it’s still clear today. Even before advertising began its secular decline (it actually reached all-time highs in 2000), we always knew that advertising is, and would always remain, a cyclical business.

The advantage of robust circulation revenue is why newspapers were long considered a better, higher-margin business than magazines. Most magazines had chased higher circulation numbers at the cost of lower subscription prices, figuring that advertising would more than make up the difference. The result was that each recession would kill hundreds of magazines, but very few newspapers. Thus Life magazine’s original weekly incarnation disintegrated as a business in the late 1960s, just as circulation volume reached an all-time high. More recently, magazines that had sufficiently distinctive content to swim against the tide by charging fuller prices for circulation, such as the Economist, were long recognized as stronger, more stable, more profitable businesses.

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Charging for online content may not be enough to save the newspaper industry, and it almost certainly won’t be enough to save every newspaper now in danger. But the time to reconsider newspapers’ online business model is long overdue. As that reconsideration gathers momentum, it’s critical that decisions be made on the basis of facts. In this dark economic moment, the truth is hard enough.

Richard J. Tofel was formerly assistant publisher of the Wall Street Journal. He is the author of Restless Genius: Barney Kilgore, the Wall Street Journal and the Invention of Modern Journalism, and now serves as general manager of ProPublica.