Wall Street Journal
Image by Enrico Fuente via Flickr

In the midst of a national debate over the future of newspapers, the Wall Street Journal just announced that it will be introducing a “sophisticated” micropayment system for its content sometime in 2009. They don’t divulge the price (it’s described as “rightfully high”), nor do they describe the system components or process.

But the problems are obvious, and they harken back to the disruptive innovation lessons newspapers just can’t seem to learn:

  • Disruptors accept that markets are not known, and are even unknowable. They have an idea, and a “build it and they will come” mentality. The WSJ is attempting to milk its traditional market for more money. That’s the behavior of an incumbent who won’t heed the train whistle yet continues walking the tracks because they’re familiar.
  • The information WSJ has isn’t exclusive, so users won’t pay for it. Financial news is more of a commodity than ever. As soon as WSJ breaks an exclusive, a few bloggers will start propagating the news. Bloggers will do this because their incentives, while smaller, are sufficient and powerful. (And bloggers can do this effectively because, as the rule of disruption goes, “The [disruptive] technology turns out to be simpler, cheaper, and more reliable.”)
  • Profits and prices are lower for new entrants, so a price of “rightfully high” has incumbency written all over it.
  • The fact that WSJ management is recommending this makes me think they believe people in the past were paying for content. They weren’t. They were paying for delivery, finished goods, and reliability in addition to content. Radio has no challenges for delivery, finished goods, or reliability (except for satellite, which can charge a premium for nationwide consistency), and look how much we pay for radio content. Now, the devices we’re using are the finished goods, Internet reliability is high, and delivery is ubiquitous. Certain types of content, especially news, has been revealed to be less valuable than we thought.
  • The weaknesses of free information sources (e.g., there are so many of them, they propagate quickly, they have high churn and echo rates, they are written for microniche audiences) are really their strengths. Read the parenthetical again, and I think you’ll agree.

A related lesson from Web 2.0 streams from this last point, from Stan Schroeder at Mashable:

I see a very simple problem that will kill this idea right from the start. If you put a price – any price – on an article in the Wall Street Journal, people will not be able to share it. Sites like Mashable (Mashable reviews) won’t be able to link to it. Digg (Digg reviews), Twitter (Twitter reviews), StumbleUpon (StumbleUpon reviews)…any content behind a paywall will receive zero traffic from all these social sites.

No matter how low WSJ makes its wall, even if it’s just a curbstop, it will trip them up.

At first, I was sad to read about the WSJ’s decision. It looks like a step backwards. But given the changes at the WSJ over the past decade — how it’s strayed from objectivity and into conservative mouthpiece; how it’s become a business/lifestyle magazine as much as a news outlet; how it sold itself to a media conglomerate — I can’t say I’m going to have a long period of mourning.

Reblog this post [with Zemanta]
Kent Anderson

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.


10 Thoughts on "The WSJ’s Payment Curbstop"

The WSJ is an oddity in the world of online newspapers in that they actually have people (over 900,000 according to Wikipedia) willing to pay for subscriptions and most of their material is already behind a paywall. I’m not sure that selling individual articles will hurt this business model, and visibility in the blogosphere/twittersphere/etc is already limited. What’s more interesting is that Rupert Murdoch is apparently planning to start charging similar subscription fees for his other newspaper holdings. That’s where we’ll see if it’s a viable model, or if other newspapers sweep in to claim their readership.

The whole online newspaper business strikes me as something of a big game of chicken. The idea is that if I close off my content to subscribers only, then your newspaper, which is free, will instead be used by those same readers (who then won’t need to pay me). The newspapers that remain free are excited by this, as they expect to see their readership climb. The problem, of course, is that increased readership will still not bring them any significant additional revenue. So both will be doomed to failure, one with no readers and one with lots of readers and no revenue. It would probably take some illegal collusion between every newspaper in the country, a movement where they all went behind paywalls simultaneously, to get people to subscribe. Then, one assumes, the television news networks would try to move in and take their business, so perhaps that’s a non-starter as well. Another thought is the idea of charging for access to this week’s newspapers, and everything older than that is free. It leaves some access for the blogosphere, but those who want to stay current would need to pay.

As for paying for content, take a look at what’s happening with satellite radio, where after the Sirius/XM merge, the company is hemorrhaging subscribers. Most are blaming this on the inept handling of content after the merger, the homogenization and dumbing down of most of their programming. So at least in that market, people are/were willing to pay for quality content.

WSJ.com may be paid, but boy can you get a lot of it for free anyhow. Click around. You’ll see what I mean. But more interestingly, most everything on it I already knew about from radio, RSS, or Twitter feeds.

You’re absolutely right — it’s a no-win situation for mass media players. Mass media is losing its mass.

Sirius/XM posited as part of their appeal two distinct distribution advantages — 1. nationwide, uninterrupted coverage; 2. a wide variety of niche channels (distribution silos). Apparently, it’s not paying off for them after the novelty faded.

I was under the impression that the novelty hadn’t worn off, and the real problem is that they’ve done away with most of the niche channels. Most listeners seem to have a few favorite channels, and when the two systems merged, they got rid of many of them, and have over recent months, changed those that were left. It’s unclear why they’re changing their programming so dramatically, but basically, they’re eliminating the second, and probably more important of your listed advantages.

Oh, and the other issue facing satellite radio is that a huge chunk of their business comes from new car sales, which are in the toilet as well.

This week’s episode of NPR’s On the Media reports on a Senate committee hearing on The Future of Journalism. See Old and New Media Go to Washington (May 8, 2009)

One suggestion that came up in this meeting was to allow newspapers to organize (aka “collude”) in order to come up with a different business model. Non-profit status was one option.

As David Simon, former Baltimore Sun reporter and creator of the HBO series The Wire articulated:

“High end journalism is dying in America, and unless a new economic model is achieved it will not be reborn on the Web, or anywhere else.

While I obviously prefer getting high-quality free news, I recognize that free does not mean costless.

I think high-quality news comes from plenty of sources. Our local AM station is free to listen to, does a great job, and seems to be thriving. Just because the user pays doesn’t mean the journalism is good. Most news outlets are just echoing a few key stories of the day. Some do it better than others, but more and more, blogs are breaking the news (or people with cell phones). Look who got the best pictures of Sully’s landing on the Hudson — people with camera phones and unmanned surveillance cameras. No journalists needed.

Also, I seem to recall from my newspaper days that the page budget was set by the advertising sales staff. Journalists just filled in the blank spaces, cutting and trimming to fit, or padding for length. Nothing “high end” about that!

Where is the evidence that high end journalism is dying in America? Hasn’t it already moved to the web? The traditional places that Simon is used to finding it may be dying, but not high end journalism. Our j-school students sure don’t think so.

I love my local newspaper. I am saddened by the slim shadow of itself it has become. But I think Kent has it right here and I will miss it when it goes the way of the Seattle P-I and Rocky Mountain News.

Comments are closed.