News Corp's Wall Street Journal Will Give NYT And Yahoo! Fits

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Rupert Murdoch, head of News Corp (NWS), has spoken about some of his plans for The Wall Street Journal. At least one of his ideas could do severe damage to two companies which are already on the ropes. Perhaps that is why he wants to target them

Murdoch is taking about, among other things, increasing coverage of non-financial news and perhaps allowing on line readers to have free access to WSJ.com which is now available by paid subscription.

Think about what that would do to The New York Times company, which is already in deep trouble. News Corp could suck the life right out of the newspaper firm. According to the NYT 10-Q, revenue last quarter dropped from $820 million to $789 million. The company’s operating profit fell from $86 million to $43 million. The company’s little internet operation, About.com, grew revenue 27% to $25 million, or the numbers would have been worse.

NYT internet revenue rose 23.4% in the second quarter to $80.9 million. But, that includes About.com. The New York Times Digital sites ranked 11th in the US during June according to ComScore. They had 42.7 million unique visitors. So the revenue yield for an audience that size is modest.

If WSJ.com becomes free, its 800,000 plus subscribers could easily rise by a large multiple. If Dow Jones increases domestic news coverage and overseas business coverage, the website could easily take readers from NYTimes.com. And, the additional internet advertising inventory for WSJ.com could drive CPMs for high income traffic down.

Yahoo! (YHOO) has a problem, but for a different reason. The company had almost no revenue growth in the second quarter and operating income dropped from $230 million to $184 million. Yahoo! Finance is likely to be one of the big drivers of revenue at the online company. It is the largest financial site in the US, and it carries high cost-per-thousand advertisers including E*Trade and Schwab. These companies are willing to pay to get high net worth customers. LowerMyBills is probably paying less to be at Yahoo! Sports. If Yahoo! Finance readers had access to an improve version of The Wall Street Journal online, some of them would make it their first read.

A free WSJ.com could cost Murdoch a lot of money while he waits for ad revenue to replace what customers pay to access the website now. But, he can afford to wait. Yahoo! and The New York Times Company cannot. Their stocks are already off about 30% over the last two years.

Douglas A. McIntyre