Former Fortune managing editor Eric Pooley interviewed News Corp. CEO Rupert Murdoch for Time magazine and wrote that Murdoch’s threat to withdraw his $5 billion offer to acquire Dow Jones & Co., the parent of The Wall Street Journal, convinced the Bancroft family that controls the company to budge on their proposal.

Pooley wrote, “How does he respond to this bleak picture? By musing about investing even more in newspapers. ‘What if, at the Journal, we spent $100 million a year hiring all the best business journalists in the world? Say 200 of them. And spent some money on establishing the brand but went global — a great, great newspaper with big, iconic names, outstanding writers, reporters, experts. And then you make it free, online only. No printing plants, no paper, no trucks. How long would it take for the advertising to come? It would be successful, it would work and you’d make … a little bit of money. Then again, the Journal and the Times make very little money now.’

“In other words, he hasn’t decided what to do with the Journal, beyond investing in a beefed-up Washington bureau and more foreign bureaus, the better to challenge the Times and the Washington Post. He notes that the Journal leadership has tried to maintain the print circulation by not giving everything away online, but the percentage of heavily discounted print subscriptions is rising rapidly, a sign of ill health. WSJ.com has more than 900,000 subscribers, making it the largest paid-subscription site on the Web, but less profitable, Murdoch suspects, than it might be with a hybrid model — with free users driving ad sales and premium users willing to pay for high-end content. ‘But it needs to be studied carefully,’ he says.

“Murdoch sensed the power of the Web not so much as a user but as a businessman who watched the bottom line. In late 2004, he says, he ‘began to feel the erosion of advertising in print and even the stalling-out of ads on television. So I said, Better pay attention to this.’ He set up Fox Interactive Media in Los Angeles and started looking for something to buy. “

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