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Online Wall Street Journal will be hybrid business model

Rupert Murdoch, head of News Corp. (NYSE:NWS-A) which recently completed the acquisition of the Wall Street Journal, said he is going to partially open up the online financial site for free, while keeping other content on a subscription basis.

The point between free and subsciption will be determined by content considered a commodity and which can be found on any financial Website, and content that he feels is "specialized" and worth paying for.

"We're sort of dividing it up. Those things that you can get more or less as a commodity on different sites about finance, that will certainly be free at the Wall Street Journal," he said.

"The really specialized (material) giving the greatest insights, that will still be a subscription service."

This is what I expected Murdoch to do, and I think it's a good choice for several reasons.

First:

The Wall Street Journal is the top financial publication. That gives them a unique place in the industry. Because of that, they are the bellwhether and will decide where things will go. Something another company does won't be noticed or make an impact like what they do. They won't lose subscribers if other financial content is free, that's already been proven with all the free business and financial content out there.

Second:

Like all mainstream media companies, they have the challenge of building up their digital properties - where all content will eventually end up - while at the same time continually generating revenue by their old means.

The problem is in most media and entertainment industries, the income generated by web content isn't replacing what is being lost from their old business models.

I think the Wall Street Journal has a unique product which will not experience that, at or near the levels of other media companies. They, probably more than anyone else, can successfully offer a hybrid model and get away with it financially.

They also should gain increased web traffic from opening up their general information, which can be linked to and commented on. If that causes a significant gain in traffic, they can use and ad-supported model there, while maintaining their subscription model for the more serious reader of business and finance.

So it's quite possible they may even generate more income while enjoying the subscription revenue at the same time. That is at least what the Murdoch decision is all about.

There's no reason to panic or cave in to the no-walls people. That is probably legitimate for the vast majority of online ventures and mainstream media, but the online Wall Street Journal has a unique property that offers them the ability to do this.

How many people using the Wall Street Journal on a subscription basis are going to drop it over the $99-a-year price? Not too many, if at all.

If this doesn't work for Murdoch, all he has to do is eventually open it up. To give up the guaranteed, predictable monthly revenue at this time doesn't make sense.

Third:

This is also a test run for the company. If they do generate significant traffic, and their subscriptions do start to fall, what they've done is ensured a fairly predictable ad-supported model already in place. If they have to drop their subscription model, they'll have things in place to build on.

So all around, this move by Murdoch makes the most sense. While the Wall Street Journal maintains its brand and place in the market, it can afford to make decisions like this and try some things before completely dropping significant income streams.

The upside is if they generate a lot of traffic from opening the Website up partially, they've actually created another strong income stream from ad dollars. They have absolutely nothing to lose by trying this over a period of time, and everything to gain.