Murdoch's free WSJ.com could hurt parts of Dow

By Kenneth Li and Robert MacMillan

NEW YORK (Reuters) - Rupert Murdoch's plan to stop charging for access to The Wall Street Journal's Web site looks certain to increase online profits but could hurt other parts of Dow Jones & Co Inc business.

Free access would open up one of the world's premiere business news sources to all readers, attracting a flood of online advertising revenue and spreading the venerable business paper's reach around the globe.

But the plan could undercut Dow Jones's Internet news archive Factiva and its Dow Jones Newswires, which offer Wall Street Journal content that is unavailable anywhere else, Dow Jones spokeswoman Christine Mohan said.

Dow Jones's Enterprise Media division, which includes Factiva and Newswires, contributed only 35 percent of revenue but accounted for 67.2 percent of segment operating income in the first nine months of the year.

"The exclusivity of Journal content provides value beyond the Web site," Mohan said.

The exact impact is hard to come by, but Journal Publisher Gordon Crovitz said at a media industry conference in October that Dow Jones reaps more than half a billion dollars in subscription revenue across the company's offerings.

News Corp Chairman Murdoch began touting the benefits of a free Journal Web site even before agreeing to buy Dow Jones for $5.6 billion earlier this year.

He made his most forceful comments in Adelaide, Australia, this week, when he told shareholders he wants to boost WSJ.com's 1 million online subscribers to as high as 15 million "in every corner of the earth."

Murdoch's remarks caught Dow Jones executives by surprise. Some disagreed with the plans, said sources familiar with the matter. Hours after the remark, Dow Jones's consumer media group revenue chief Michael Rooney told newspaper business magazine Editor & Publisher that assumptions the Journal's Web site would be free are "jumping the gun."

Rooney added, "You don't just flip the switch."

GUESSING GAME

The Journal would lose an estimated $63 million in subscription revenue by making its Web site free.

Recovering that in advertising sales would require boosting traffic by 130 percent, based on calculations by Reuters and Mike Vorhaus, managing director of Frank N. Magid Associates and a veteran media industry consultant to Dow Jones, New York Times Co's namesake newspaper and Time Warner Inc's online unit AOL.

Few doubt Murdoch's logic, given that as much as 80 percent of financial Web site visitors leave after refusing to pay subscription fees, according to Vorhaus, and given the rapid growth of Internet advertising.

But the analysis, based on variables such as average price for what WSJ.com charges for advertising and estimated traffic data provided by measurement company comScore, is more complicated, the Dow Jones spokeswoman said.