Murdoch Makes His First Digital Mistake

Rupert Murdoch is clearly the smartest "old media" CEO out there. He's run News Corp (NWS) like the entrepreneur he is, by taking big risks and generally having them pay off. His buy of Myspace for $500mm may go down as one of the best online buys ever and Myspace seems to be solidly established as the low brow social net of choice. It fits perfectly with Murdoch's taste in media. If Facebook is the New York Times, then Myspace is the NY Post.

I was very hopeful that Murdoch's buy of the Wall Street Journal would lead to the elimination of the one thing that is holding back the WSJ in the online world - the subscription requirement. But at Davos this week, Murdoch apparently said that the WSJ would greatly expand its free content, but that the subcription will remain and will be expanded to include new features and that subscription prices will increase. That reminds me of the NY Times' ill fated experiment with Times Select which they finally walked away from this year.

Here's the deal. Digital media is not about scarcity and never will be. That's the old media game. Online it's about ubiquity, about being part of the conversation, about links, authority, page rank, and if you are a news organization like the WSJ - its about anchoring the discussion.

The other day I wanted to find Jim Cramer's column about the threat of a deflationary spiral. I wanted to blog about it and link to it. Then I found out that Jim's column was at Real Money, Jim's subscription blog. I ditched that plan and went with another story to make my point. Jim's story was useless to me. I signed off on Real Money when I was the Chairman of TheStreet.com. I regret the mistakes we made at TheStreet.com (TSCM) with a paid content strategy and I learned from it. Never again.

Rupert will learn that lesson too. Apparently the hard way.

Update:

This showed up in my email inbox today:

Some TheStreet.com (TSCM, Strong Buy rated) investors have expressed concern about the possibility that Rupert Murdoch’s News Corp (NWS, not rated) could decided to make the WSJ.com site completely free-of-charge (today it's primarily a paid subscription service) ever since News Corp acquired the WSJ.com's parent Dow Jones last year. However, at the World Economic Forum in Davos, Switzerland, yesterday Murdoch said “The really special things [at WSJ.com] will still be a subscription service, and, sorry to tell you, probably more expensive.” From a competitive perspective, this should be viewed as a positive datapoint for TSCM shareholders. We note that the WSJ.com has just over 5MM monthly unique visitors to its site vs over 6MM at TheStreet.com.

Mark May
Principal, Equity Research
Needham & Company LLC

Comments

[Long-ShortGuy]

Fred,

Do you think that TSCM will ditch its subscription strategy and make Real Money free as well?

[Lisa]

Murdoch want to have his cake and eat it too -- and maybe he'll pull it off. WSJ.com is the most successful subscription product on the web, and in a recession most subscribers won't cancel, whereas online financial ad revenue could plummet.

It looks as though Murdoch will make much more of WSJ.com free, perhaps with a delay as Barron's has done. That's a smart segmentation strategy: give to away for free with a delay, but charge those who want it immediately.

[Frank Li]

Note that Felix Salmon thinks the WSJ.com will still basically go free:

www.seekingalpha.com/a...

[Long-ShortGuy]

BTW, I'm watching TSCM carefully -- I'm short the stock because it will take a serious hit if there's any downturn in the online financial ad market. Here's the compete chart on Stockpickr, which seems to have stalled since July:

siteanalytics.compete....#