Commentary by Randall Rothenberg

WSJ ONLINE TAKES ON TRADE PUBLISHERS

And What We Can All Learn From It

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The recent carnage in the "new economy" magazine market -- Upside ceased operation after 13 years, Forbes closed the decade-old Forbes ASAP and a hobbled Red Herring announced its sale and downsizing -- should remind us there is a new-economy publishing model that works. It belongs to a bastion of the old economy, The Wall Street Journal.

Through all the strategic twists in media dot-commery of the past several years, the Journal and parent Dow Jones & Co. plugged away at a consistent business model that's an archetype for the rest of the media. Call it the "opposites attract strategy." It's predicated first on the belief that if you're offering something of value, you can and should charge well for it and, second, on the contrary contention: that considered free offerings will extend the relationship between brand and audience.

Mocked by Web-heads
"Dow Jones was mocked

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when it started the online editions because Web-heads said the Web had to be free," said Scott Schulman, president of consumer electronic publishing for Dow Jones. "But [Dow Jones CEO] Peter Kann stuck to his guns, and now we've got a group of online publications that are solidly profitable."

What occasions this observation is not the success of The Wall Street Journal Online but the launch over the summer of its online health industry edition. The company's first electronic industry vertical, it may well show how a branded publisher with an existing global infrastructure can profitably repurpose content, almost at will -- a dream since Disney put forth the Mickey Mouse wristwatch.

Three pillars
The Journal's online approach seems to have three pillars:

  • There are returns to scale online. Early e-entrepreneurs believed the viral and seemingly free acquisition of a mass audience would turn online companies into mints as costs diminished and the profit from each new customer became total. Although it turns out that physical goods, whose movement is facilitated online, are still subject to normal scale economies, news products do scale. "It's expensive for us to run WSJ Online. We have expensive technology and talented people," says Mr. Schulman. "But once we had the scale, infrastructure and people, creating something new wasn't a big deal. We did the health edition in a few months with existing resources."

  • You can find new competitors to conquer. The health industry edition and other industry verticals to follow are tackling fragmented trade publishers. "As a growth and marketing strategy, we thought, 'What if we could take this wealth of content, and package it and market it to other segments that might not be Wall Street Journal subscribers?'" asks Mr. Schulman. "While we're not a trade magazine publisher, this allows us to serve those segments."

  • The base builds the niche, but the niche also builds the base. Instead of worrying about cannibalization, Dow Jones embraced it. Subscribers to the health "e-dition" receive a "free" subscription to the full Wall Street Journal Online. While it's the Journal brand that supports the ability to go vertical, industry editions also build a new audience for the brand.

Perhaps there's a fourth prop: Don't be hard and fast. The Journal does give content away -- the conservative commentary of its print editorial page and its OpinionJournal.com. The right-wing site has introduced the Journal to an enormous audience of libertarian Web-heads -- the folks who had ridiculed its online strategy.

Talk about co-opting the enemy.

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Randall Rothenberg, an author and longtime journalist, is director of intellectual capital at consultancy Booz Allen Hamilton.

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