washingtonpost.com
Web Sites Tear Down That Wall

By Frank Ahrens
Washington Post Staff Writer
Friday, November 16, 2007

Rupert Murdoch's announcement this week that he expects to stop charging for access to the Wall Street Journal's Web site is the latest example of a publisher giving up on the subscription-based business model -- a significant shift in the evolution of online content.

In recent months, the Economist, the New York Times and the Financial Times have all moved content out from "behind the wall," an industry metaphor for the location of paid online content.

Other publications, including the Los Angeles Times' entertainment listings, Salon and Slate (owned by The Washington Post Co.), have tried the subscription model but switched to free access. Others have settled on a hybrid plan -- for example, most of the stories in the print version of ESPN's monthly magazine can be read free on ESPN.com, but the site charges for chats with sportswriters and other Web-only content.

The lesson seems to be that online consumers will pay only for niche content of intense interest to them -- such as specialized industry news from trade publications, inside sports news, gambling tips, pornography and so on. As Slate editor Jacob Weisberg put it: It's all "pornography of one kind or another."

But most consumers expect free mainstream content, including news and mass-audience entertainment, whether they find it on YouTube or washingtonpost.com.

"Subscriptions thrive in an area where there's scarcity -- content that people can't get anywhere else," said Rafat Ali, publisher of PaidContent.org. "Other than that, you need an advertising-based model."

The shift toward free, ad-supported sites should prove to be more lucrative, said Murdoch, who plans to conclude his purchase of the Wall Street Journal before the end of the year. The Journal, with about 1 million subscribers, is one of a few publications that have made a business of selling content online. But the number of users could increase to 10 million to 15 million if the site were free, Murdoch told shareholders in a speech in Australia. That would mean the site could charge more to advertisers who want to reach that broader audience or any part of it.

The Economist, the British newsweekly, decided in June to stop charging for online content that was less than a year old. For Economist.com publisher Ben Edwards, there are benefits other than more eyeballs.

"Part of my job as publisher is to create the very best possible experience for people so they can advance into a deeper relationship with us," Edwards said. "Eventually, they can transfer over to be a print subscriber."

Although a stream of subscription revenue is a sound basis for a business, it can be limiting, Edwards said. Online is the fastest-growing advertising sector, increasing at an annual rate of 20 to 30 percent. By comparison, subscription-based businesses typically see single-digit yearly growth.

"I think the problem with putting a subscription around content is you don't get the growth," Edwards said. "You can't get scale. You can't get flexibility to match advertisers with your audience in an ever-more segmented way."

Britain's Pearson, publisher of the Financial Times, is changing its online business model not only to reflect the industry trend toward free content but also to acknowledge how people get content -- increasingly, through search engines such as Google, not by going directly to a publication's site.

As of October 1, online users of the Financial Times were able to read as many as five articles every 30 days without registering, and 30 without subscribing.

"FT.com wants to encourage new users access to the site without having to register or subscribe, reflecting the fact that many people first enter FT.com (and other Web sites) through links from aggregators such as Google or references from other articles," Pearson spokesman Charles Goldsmith wrote in an e-mail from London. Also, visitors to FT.com will get a "first click free" if they arrive at the site from Google or other aggregators, even if they have exceeded their monthly limit of free stories.

All online content providers face the Google factor.

For example, viewership of the home page of washingtonpost.com accounts for 20 percent less of the site's overall traffic than it did two years ago, editor James Brady said. Increasingly, users arrive at the site "sideways," from other sites, he said.

Web publishers say these users are less valuable because they tend to come to read one article and then leave, rather than exploring the site and being exposed to more advertising. About half of the users of the New York Times' Web site enter through the main page; the rest come in sideways, said Vivian Schiller, the site's general manager.

In 2005, the New York Times launched TimesSelect, a subscription service that put its columnists and archives behind a pay wall. When Web users searched for and found a New York Times column they wanted to read, they bumped up against the pay wall. Many users found it discouraging; Times columnists largely vanished from the Web conversation.

The Times in September abandoned TimesSelect, which had about 471,000 users who subscribed to the print version of the Times and 227,000 TimesSelect-only subscribers who paid the annual $49.95 fee. Over the course of TimesSelect's life, the service made about $20 million. But the Times Co. saw greater growth potential in taking down the wall.

"At the time we decided to launch TimesSelect it was the right decision because the power of search was not yet apparent," Schiller said. "I don't think anybody regrets it. Well, maybe some of the columnists."

But one former Times.com employee, who spoke on the condition of anonymity because the employee's new company may do business with the Times Co., said TimesSelect was opposed by the Times newsroom and Web operation, which believed it would cripple Web access to Times columnists. The former employee estimated that charging for columns for two years cost the company "tens of millions of dollars" in advertising revenue. Schiller said the company did an analysis of TimesSelect's performance before deciding to make it free, but she did not give a number for any lost revenue.

Weisberg noted that Slate tried the subscription model for about a year, beginning in 1997, but raising the wall lowered the spirits of Slate writers, Weisberg said.

"That meant the theoretical ceiling on people who would read anything you wrote was 20,000," he said. "The whole point of the Web was that if something you wrote caught on, it would be read by hundreds of thousands of people in a few hours. It was a drag for writers."

Slate dropped the wall and switched to an ad-supported model. This will be its first full year of profitability.

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