Why the WSJ.com works as pay site

Bill Grueskin, the former managing editor of WSJ.com and now dean of academic affairs at Columbia University’s Graduate School of Journalism, writes about how The Wall Street Journal‘s Web site has been so successful despite the fact that it charges for access to many items.

Grueskin writes, “I see a lot of theorizing about why the Journal now attracts nearly 1.1 million subscribers. Some of it came from a discussion last week hosted by the Los Angeles Times which involved two friends of mine, Jeff Jarvis (author and journalism professor) and Alan Mutter, who writes this blog. I asked Alan if I could use his excellent blog to offer another perspective.

“There are a few common myths about how the Journal got to where it is.

“The most common is that, as Jeff says flatly in the L.A. Times debate, ‘Its subscription fees are paid on expense accounts.’ There. He just states it as if it is, channeling Jane Austen, a truth universally acknowledged. In fact, I recall several years ago that a Dow Jones executive said publicly that a survey of WSJ.Com readers showed less than a third of subscriptions were expensed. Of course, no one knows for sure, because subscribers aren’t required to disclose this to anyone other than the IRS. But the idea that the model is not replicable because of tax laws is unsupported.

“Second, Jeff questions, as have others, how much the costs of acquisition, retention and commerce management weigh against online subscription revenues. In fact, churn was never very high at the Online Journal –- far less than at most newspapers or magazines –- and the marginal costs of new online subscribers were pretty close to zero. Most of the acquisition cost amounted to some cheap advertising and a couple of percentage points to the credit-card company. Otherwise, unlike in the print world, there’s no additional cost in delivery, paper, ink or such.

“Third, many people dispute the idea of WSJ as a model because the site provides business information. There is both myth and truth to this. The truth is that, both emotionally and intellectually, readers can more easily find financial value (and justify paying a subscription) for a Heard on the Street stock analysis than a dispatch from the Baghdad bureau. Same goes for paying for someone plunking down $800 for a new refrigerator and deciding to subscribe to Consumer Reports. But if financial sites are such easy marks for subscribers, why are Fortune, BusinessWeek, Forbes, CNNMoney and even Bloomberg all free online?”

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