Another Texas VC

Fellow Northwestern alum Ben Parr asked if News Corp should be charging for online news content on Mashable. The answer is a very obvious yes.

Rupert didn’t start in the “charge for news” camp, but was persuaded after he bought the Wall Street Journal. The folks at the WSJ have stubbornly refused to give away their content, and think they would need to quadruple their site traffic to get the same revenue they currently earn from online subscriptions. Management at the New York Times, which lost $62 million last quarter, loves to point out that they have tried to charge for content twice in the past few years, but both attempts were half hearted. The first attempt only charged international subscribers while the second attempt focused on columns and archives. WSJ on the other hand shamelessly charges for practically everything, and openly encourages their brethren to do the same.

Outside of the disappearance of classified revenue which used to contribute 1/3^rd of revenue, the underlying issue behind charging for content is the paltry CPM rate environment. Advertisers don’t pay the same rate online as for print newspapers. This is a little perplexing as the online ad units should have the ability to be tailored by customer segment by login information, although a somewhat compelling explanation can be found here based on reading duration and the newspaper to person ratio (although I think the ‘page read’ metric is pretty exaggerated).

Regardless, there is an even bigger problem with newspaper readership volumes which trumps the CPM environment. The New York Times constantly boasts about being the most read ‘newspaper’ on the web with 20 million online readers. Unfortunately that isn’t their segment anymore. Their real segment is ‘online information content’ where they are getting dominated by CNN.com (45 million). If you broaden the category to include folks like CNET (120 million) you suddenly understand that NY Times isn’t really all that dominant, but just a two-bit player in the web information game. You need to ramp to over 100 million uniques or charge for content in this world until CPM’s get higher.