In the continued froth over paid vs. free models to support news organizations, the startup Journalism Online has taken a lot of heat before it even launches. Much of the reporting on the venture has been incomplete or has missed the nuances, and other details have gone unreported — all points made clear to me in an hourlong conversation I had with cofounder Gordon Crovitz in the company’s offices last month, on the phone, and in subsequent research.
Let me say up front that if this sounds like I’m a booster, I’m not. I don’t know — no one does — if Journalism Online will do all it promises. But I do think the company deserves a fairer portrayal of what it says it intends to do. And if the company is successful, it will have proven a business model with a strong paid component.
A lot of the coverage of Journalism Online has characterized it as simply an attempt to put up pay walls around content. Crovitz, and a business plan released online after our initial discussion, impressed on me that the venture is a more sophisticated attempt to help publishers find out whether and how they can charge for some portions of what they do. It’s the classic “freemium” model: Give your material to 95 percent of your users, and get the most avid few to pay for a premium or unlimited level.
“We managed to talk a few of our affiliates out of putting a complete pay wall around all their content,” Crovitz said. “I think we made the case to them that that was not the best solution.”
Instead, Journalism Online will recommend that they use technology provided by the company to figure out who the casual visitors are and who are the more loyal, engaged ones — those willing to pay. If it works, this will provide a tool to help content purveyors achieve the most optimal revenue mix over time. The hope is that affiliates — 1,000 publishers have signed up already, Crovitz said — will use the tools to optimize their publishing and technology and boost the proportion of loyal, paying fans from 5 to perhaps 10 or even 15 percent.
Revenue may come in the form of an annual subscription, monthly fees, per-story charges, or a mix of those and other services. By blocking free access to part of a site, advertising inventory will become scarcer, but also more valuable on a per-spot basis.
And as publishers switch users from print to online, the cost of publishing and distribution go down. “When it comes to online subscription revenue … it’s one area in which trading an analog dollar for a digital dime actually makes great sense,” Crovitz said, reversing an oft-stated publisher’s lament about online vs. print revenues. “Most newspaper circulation revenues don’t even cover the cost of circulation, whereas with digital revenues, these are virtual goods. There’s a very low cost to deliver an online subscription.”
The Wall Street Journal (where Crovitz was publisher), The Financial Times, Consumer Reports and others all employ variants on the freemium theme. It’s possible to work hard with search, referrals from friends and the like to get a good deal of the Journal without paying, but a reported million or more people have paid for the privilege of accessing the paper without the workarounds. The Financial Times takes a “metered” approach, charging people who consume more than a set number of articles in a given period of time.
With Journalism Online, publishers will be able to bundle different publications (someone might get a politics or sports package, for example) for one price. Users will also be able to subscribe to multiple publications under a single user ID. Working out the financial terms will not be Journalism Online’s job, though. That’s up to the publishers. Journalism Online will make its money by taking a 20 percent cut.
Journalism Online plans to launch a prototype this fall, putting their logo and a trade name (which Crovitz wouldn’t disclose) on select publishers’ sites.
Whether any and all of this works, as I have said in the past, depends on the execution. How well can Journalism Online manage and fulfill the many needs of hundreds (if not thousands) of different media organizations of varying sizes, formats, geographies, currencies, audience profiles and revenue streams?
Publishers are signing up because they have little to lose from a technology that shares whatever revenues it makes. If it doesn’t work, they will have paid nothing out-of-pocket. Meanwhile, Crovitz said, Journalism Online will advise publishers on how to optimize their mix. Crovitz noted it’s in Journalism Online’s interest to do so, to maximize its own revenue. But can the venture do that cost-effectively for myriad publishers who don’t pay an upfront fee?
Meanwhile, publishers do have to be careful about damaging their reputation by aggravating loyal followers or putting so much content behind a wall that page views (and therefore ad inventory) plummet to dangerous levels. Even Chris Anderson, author of the book “Free: The Future of a Radical Price,” acknowledged in a talk last week that “all freemium models involve limits on the free” portions, and that publishers constantly have to, like Goldilocks testing porridge (my analogy, not his), adjust the mix to figure out just the right amount to attract a large number of people, then entice the most loyal and interested to pay.
Done right, with constant adjustment, I think the model can work, at least for publications that have enough unique content. Crovitz, who joined the venture founded by American Lawyer founder Steve Brill with longtime media executive Leo Hindery, is certainly a good person for the job. When Crovitz was at the Journal, he brought in a bunch of statistical analysts to figure out offerings and pricing to keep the Journal going and got it on its way to those million online subs.
Still, the Journal, like the Financial Times, is in a unique position: It’s a must-read for businesspeople around the world, some of whom are able to write off or expense their subscriptions. It’s not clear that smaller, non-business publications, or larger ones that have eviscerated their newsrooms, will have enough of value to get a significant number to pay for enough of what they produce, especially when so much is available for free.
For those that do, though, Journalism Online is in a position to help and take a cut. As others have pointed out, in today’s Google, eBay and Amazon world, it pays to be the platform and not necessarily the publisher.