Why Rupert Won't Make the WSJ Fully Free

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Number Crunching: CPMs and Unique Visitors

One figure that must have resonated for Murdoch as he pondered the switch is $100 million—the annual amount WSJ stood to lose. The Journal's online subscription revenues are reportedly about $60 million a year (from 989,000 subscribers), and advertisers pay a premium—to the tune of $40 million—for a closed subscription site with affluent, regular readers, according to one executive familiar with wsj.com's operations. Jeffrey Rayport, chairman of Marketspace, a digital media strategy firm, estimates that wsj.com's CPMs, or what advertisers must pay for a thousand ad impressions on its site, run as high as $60. By contrast, CPMs for Murdoch's other hot online property, MySpace, are only about 30¢. CPMs for other blue chip content companies with free sites tend to be in the $25 to $30 range, says Rayport.

According to data from ComScore (SCOR), wsj.com has an average of 2.8 million unique visitors a month. That number would need to increase by 133% to make up for lost subscription revenue, says analyst Michael Nathanson of Bernstein & Co. In the highly competitive online business news field, the break-even hurdle for Murdoch may have seemed too high. Yahoo! (YHOO) Finance, the category leader, draws 13.6 million unique visitors a month. Achieving page views on that scale for wsj.com, says Bear Stearns (BSC) analyst Spencer Wang, is "unlikely given that Yahoo Finance aggregates content from multiple sources [including The Wall Street Journal] and also has a large base of portal users to draw from."

Settled—For Now

Who knows? Perhaps Murdoch will experiment with this hybrid model for a while but eventually change his mind, as he has been known to do. The internal debates will surely continue with some die-hard proponents of the paid content model arguing, as they have since 1996, that because The Wall Street Journal delivers premium news and analysis, readers should have to pay. Others will counter that even though The Journal has proved to be a stellar online brand, the time has come to drop its walled garden, if it is to achieve the scale of the Net's top-tier players, even if revenues can't be made up initially.

"To win in this online category, you have got to be able to hold your own against Yahoo Finance," says Marketspace's Rayport. "And you are not going to be able to do that until you bulk up your audience." He believes Murdoch could drop the paid model without losing half of wsj.com's CPM, as some analysts have suggested would happen. "He could still charge $40, and I do believe his audience would grow tenfold," says Rayport. That's a bullish move Murdoch isn't ready to embrace—yet.

Lowry is a senior writer for BusinessWeek in New York .