News Corp’s Dow Jones Closing Sets Up 2008 Ad Testing
Important Details: With the formality of Dow Jones shareholder approval of the company’s sale to Rupert Murdoch’s News Corp, the new intrigue begins. Midyear, the publishing world was fixed on the will they/won’t they question of whether the controlling Bancroft family would give its assent to selling Dow Jones to News Corp. At a 65% premium and with no other bidders in site, the family agreed to the $5 billion price and the closing was set for this month.
Recent guessing has been more operational, and of great import to the news publishing world: would the Wall Street Journal drop its online pay wall, widely considered the most successful internet paid news model, foregoing upwards of $60 million in annual revenue drawn from 900,000+ subscribers? Close to a million is an impressive number of subscribers, but News Corp CEO Murdoch has been outspoken in outlining the case for free access, expecting that opening the Journal’s business and high-end lifestyle content could attract “at least 10-15 million [visitors] in every corner of the earth.”
Murdoch’s expected move to make the Journal free has been seen by many as the end of the last major test of charging for business-to-consumer news content, as the internet advertising revolution ($20 billion annually, and the fastest growing medium in history) makes “free” the only business model out there.
The chances of the paid-to-free change happening quickly increased this week as top Dow Jones executives began clearing out their desks, starting with CEO Rich Zannino and Executive Vice President (and Journal publisher) Gordon Crovitz. In all, two to three dozen Dow Jones managers are expected to exit this year, clearing the way for News Corp to populate the executive suite with company personnel. First appointments: News International executive chairman Les Hinton will become the new CEO of Dow Jones, and News Corp-owned Times of London editor Robert Thomson will become publisher of the Journal.
Implications: There is lots of talk of change at Dow Jones and of wider synergies to be gained through the growing News Corp empire, connecting the Dow Jones assets to other News Corp strengths, with first in priority the just-launched Fox Business Network. But before the synergies begin, News Corp must first move to keep the house in order. It’s a nervous time at America’s dominant business news source, as leadership they’ve known is gone, and the calls and job offers from recruiters increase in number and lucrativeness. News Corp must prove first to its employees — and then its customers — that it will keep the franchise intact, and and not see it immediately infected with the kind of political and personal influences other News Corp takeovers have seen.
Then, there’s that “make it free” decision. Outsell believes that News Corp will move to make the Journal free online, as part of the company’s wider strategic goal to be the #1 business news player — delivered in print, online, by cable and satellite and mobile phone. That opportunity would only be hampered by a pay wall. Most interesting, we believe that News Corp will be asking advertsing questions about all of Dow Jones business units: the role of advertising in the “wires” business and in its Factiva B2B unit are sure to be explored. In short, Outsell believes News Corp will investigate these kinds of initiatives:
- Removing the WSJ.com pay wall: The upside is lots more advertising, presumably at a lower CPM, given that the company’s hard-to-parallel high net worth audience will be diluted. The risk is the potential pinball effect: as WSJ.com becomes free, it will become harder to get WSJ print subscribers to renew — the content after all will be free online. That’s an issue the New York Times is now facing in the wake of terminating its paid Times Select product. The pinball effect can be unpredictable and could take a further toll on print-side revenues.
- Monetizing Dow Jones wires with advertising: Just this week, Dow Jones Wires competitor Reuters announced an unprecedented deal with the New York Times’ International Herald Tribune (IHT). It will provide lots of Reuters content for the IHT’s business sections online and in print, getting paid in advertising revenue. The Associated Press has begun doing more revenue share deals, and we expect to see Dow Jones wires jump into that business as well, as traditional licence fees become harder to collect and traditional risk/reward equation gets adjusted.
- Testing Advertising within Factiva: The business news aggregator is a good business, but its revenue growth is moderate, 5%+ this year. As Factiva extends into more video and audio offerings, it is looking at how well its paying (per seat) customers will accept advertising. In addition, the recent teaming of Adobe and Yahoo! (see Insights 6 December 2007 Experiments in Advertising Span the Controversy Spectrum) in making contextual advertising work on PDFs is another step toward introducing ads into the business workflow, a lesson Factiva’s bound to test and apply.