Interview: Former WSJ publisher Gordon Crovitz on paying for online news

For newspapers that have seen their advertising revenue -- especially in classifieds -- cut in half or worse by the rapid acceleration of Internet news as an alternative, publishers are faced with a situation where they must transform themselves in order to survive. Just over the last few days, we've learned that Gannett, publisher of USA Today and The New York Times Co. are posting losses for the last quarter at an annual rate of as much as one-fifth, on account of declining ad revenue. Some may not be able to sustain similar losses through the rest of the year, and the Times Co. is threatening the shutdown of the Boston Globe.

Maybe newspaper publishers can save some form of their print media products, and maybe they can't; but in any event, they will need to find some way to make their online operations workable, because print alone will no longer sustain the newspaper business.

There are some who feel the newspaper business isn't necessarily entitled to be sustained. On the opposite side of that issue are congressmen who are proposing legislation to grant newspapers non-profit status, lowering their tax rates as a way of keeping them alive. But newspapers have been threatened before, first by the onset of network radio news in the late 1930s and into World War II, and second by the rise to power of network TV in the 1960s. They adapted and thrived, and one veteran publisher believes it's time for a repeat performance. He is L. Gordon Crovitz, formerly Publisher of The Wall Street Journal and currently partner in JournalismOnline.com, a venture founded with publisher Steven Brill and investor Leo Hindery whose objective is to save print publishers by giving them a single portal for cultivating alternate revenue streams.

Crovitz spoke at length with Betanews last Friday.

Scott Fulton, Betanews: I'll start with what I think would be the most important question that any business entrepreneur would probably be asked by [your partner] Leo Hindery if they were to have a meeting together: How much do you believe, in this economy, an Internet news reader would be willing to pay for a legitimate online news service?

L. Gordon Crovitz, partner, JournalismOnline.com: A lot has changed since the commercial beginning of the Internet. Consumers now are very happy to pay for digital downloads of music, they pay for ringtones, when they're playing video games. They're happy to pay for virtual shields and virtual swords. So consumers, unlike the beginning of the early years of the Web, are quite willing to purchase digital access, digital content, digital entertainment. I remember in the first years of The Wall Street Journal Online, one of the barriers we had was, people did not want to conduct commerce on the Internet. And PayPal and services like that have created trusted digital transactions, and has also created a transaction business online -- much easier than it was ten years ago.

Now, the situation for news publishers is pretty simple: Many news publishers, until very recently, thought that online advertising would continue to grow at 20 to 30% per year, and it's very clear that even though online advertising is a powerful driver of revenue, that in a cyclical downturn of the kind we're in now, advertising will not be as strong. And as a consequence, all the news publishers we've spoken to have said that they are looking at all of their revenue opportunity, including the prospects of charging some amount for access to content or other services.

Scott Fulton: Isn't part of the problem there, with regard to revenue from advertising, the fact that unlike any other news medium up to now, this particular online model is dependent upon advertising that comes from a couple of shared platforms that all these news publishers collectively rely upon -- Platform-A, Google AdSense -- so that revenue tends to flatten out the more popular [a publisher] gets?

Gordon Crovitz: Most news publishers derive the bulk of their online revenue from display advertising online, as opposed to some other category. And display advertising has been growing at the slowest rate, or even contracting. So that's become a much less reliable source of revenue, and [in cases] where it's the only source of revenue online, many publishers are finding it challenging to support a news staff.

Scott Fulton: You mentioned earlier that there are other online businesses which have successfully tested the waters, which suggests that there is some disposable income out there. I think your point is, that if there are some customers that are willing to spend money on the use of virtual shields and swords, maybe they'd be willing to spend some money on hard evidence and hard facts. But I remember that prior to the launch of iTunes, there was a lot of research and concern about, what is the proper level to be charging for a song? And that 99¢ figure wasn't pulled out of the air, that was determined through serious research as to the nature of the relevant market. So I'm wondering whether a similar amount of research is being put into your endeavor? In other words, do we know how much other expendable income there is out there, to be spent and that should be spent and that isn't being spent, on online news products?

Gordon Crovitz: Well, a couple of things: One, consumers do spend a lot of money to access news. They spend that money through print subscriptions, through cable [TV] subscriptions, and others. So people do pay to access news when asked. But the broader answer is, I think, the right model, the right price for one publisher won't be the right publisher won't be the right answer for another one. And part of our model is to allow publishers to set their own terms, their own price, their own products, because it will defer from one to another. What we'll be able to do is collect research and data on what access content services are successful and are popular among consumers, and be able to share that research with the affiliates that belong to our program.

So you're right, in the case of news, I don't think it's going to be one-price-fits-all by any means. And the opportunities we're offering news publishers is to work with them, to help them determine the best model for their brands and content.

Next: How does a publisher build an audience while charging that audience?