Murdoch Finally Succumbs To The Notion That Rich People Are Willing To Pay For Exclusive Financial News

Philip M. Stone January 29, 2008

There’s an old saying in the financial news world –“he/she who has the news first is all powerful, he/she who gets the news second is often powerless.” That’s why the likes of Reuters and Bloomberg make millions of any currency you care to name in selling their financial news first to those who are willing and able to pay for it. When the rest of us see most financial news for free on the web it’s way too late to make the buy/sell decisions that will provide the ultimate profits or stop the worst losses, for those who paid got into the market first.

A good example is share prices. They are available for free on multiple web sites around the world, but the numbers are delayed 15 to 20 minutes. The financial news providers make that information available, at a big cost, to their clients globally within a second of movement. That real-time share price information is available to the rtest of us on web sites globally, but only by paying license fees and the like for that privilege.

And when you see markets in such volatility as they have been for the past few weeks, where an announcement of interest rate cuts can move the Dow Jones by more than 100 points within a minute, then you really begin to understand what that 15-minute delay in getting share prices can do to the average investor who isn’t paying for real-time information.

It’s a fine line the financial news and information providers walk – what news do  they give away on their web sites for all to see, and what do they hold back as “exclusive” for their paying customers.  That quote from a CEO on the company’s future, whether projected guidance is going to hold and the like can result in instant trading. By the time that information is made available to the average investor the professionals have had their say.  And the professional investors, the banks and brokerage houses, certainly have the money to pay for that information, indeed they cannot afford not to pay.

So what do you do if you are Rupert Murdoch and you now own the Dow Jones Company, purveyor of financial information to the world, and publisher of the Wall Street Journal and its web site? With financial journalists around the world, and Murdoch’s pledge to increase their reporting numbers, wsj.com certainly has the power to break some financial news first, and that information can help its readers make more money, or lose less. wsj.com currently charges for that information, so why give that information away, as Murdoch was publicly suggesting as late as last November?

And Murdoch now seems to have bought into that argument -- why give away what you can sell for some pretty big bucks.  And that comes from a media mogul whose every fiber within him says that it’s the advertising model that works on the web for news and information, and not the subscription model. But the man also listens to trusted executives and he has now bought into the proposition that he can have both – give away financial information that is available to just about everyone anyway, but the really money-making information, the exclusives and the like that can help people make financial decisions before their compatriots, well, there’s a big value for that and to that one should charge.

Thus it was that Murdoch stunned the media world with his announcement at the World Economic Forum that wsj.com  wasn’t going all-free after all. “We are going to greatly expand and improve the free part of the Wall Street Journal online,” he told his audience at a panel discussion and then the kicker, “But there will still be a strong offering” for subscribers. “The really special things will still be a subscription service, and, sorry to tell you, probably more expensive.”

Free will likely contain personal finance and lifestyle stories, videos, blogs, podcasts, Wall Street Journal editorials and opinion pieces and the like. Where the tweaking gets dicey is what to do with the real-time news. Having Dow Jones news alerts in the free section would certainly add great value and draw visitors, and thus advertisers, but that is the type of information those with money are willing to pay to get first. How that editorial decision goes, and at what level of importance becomes the cut-off, will decide the free site’s true benefit.

The Journal’s web site now charges $99 a year for those who do not subscribe to the print edition, and $49 for those who do. That $99 figure is expected to become $119 a year by March (For those who want to beat the increases introductory offers of $79 as still being pushed on the Journal’s web site).

Although about the only daily newspaper that now charges a web subscription fee, its income is nothing to sneeze at – some $60 million annually. To give up that revenue for a couple of years or more in order to launch and build a completely free site may not make as much economic sense as Murdoch first thought. To make free really pay the web site would need to at least quadruple its unique visitors. Having paid $5.2 billion for Dow Jones, and promising further editorial investment,  is it really good business practice to immediately start giving up on a decent revenue stream for which the most optimistic forecasts say will take at least three years to make up with the advertising model?

Even in the advertising world the feeling seemed to be that a hybrid of pay and free was the real solution, the thinking being that about 70% of the site be free and 30% subscription. To raise the price of the subscription part, when there will be less information within it, means that that information has to be of real financial value and that means timely and exclusive, which the further investment in editorial will surely help.

For Murdoch to make a switch from his wsj.com November statement, “We expect to make that free” to his January turnaround to having a hybrid shows that the man also listens to his trusted executives – brings to mind the quote by an American industrialist at the beginning of the 20th century when asked about the secret of his success – “I surround myself with people smarter than I am”).

It had been known before the Dow Jones sale was complete that DJ executives, especially Gordon Crovitz, the Journal’s publisher, had strongly recommended that Murdoch not switch wsj.com to all-free but Murdoch was convinced that free was the way to go. With the sale complete Murdoch put in two of his most trusted executives from the UK News International, – Les Hinton to run Dow Jones and Robert Thomson as Journal publisher, and going through all the various numbers must have convinced them that the old DJ management may well have been right – especially given the possibility of global recession and what that might do to the advertising spend.

In addition, the Journal had been counting on big advertising bucks from the luxury goods industry this year and already the Christmas season showed the rich are beginning to keep their hands in their pockets  meaning that advertising spend may well decline. Maybe this wasn’t the time to mess something that really wasn’t broken.

All in all, it boils down in today’s financial environment to the old adage, “A bird in the hand (subscription) is worth two in the bush (advertising). And when things get better, if Murdoch doesn’t like the financial results of the hybrid he can always change his mind again.