In the three years or so that media organizations have operated on-line news sites very few, if any, have made a profit. There aren’t many success stories to highlight. The best-known example of a soon-to-be profitable news site is The Wall Street Journal, which recently passed 200,000 online subscriptions.

Most on-line news organizations, however, are still struggling with generating revenue. Whether it’s The Washington Post, The New York Times, Los Angeles Times, ABC, MSNBC, or any one of a number of other top on-line news sites, a profitable bottom line is still several years away.

This is a very good thing. Yes, that’s right. A good thing. In fact, if it wasn’t, I would suspect that something was wrong. If on-line news sites face any real danger—besides the tendency to underreport major news stories in order to get them up on their Web sites first—it is the belief that a healthy profit must be made relatively overnight, certainly within the first two years. Imagine, if you will, that radio or television had been asked to do the same thing in their first few years of existence, when the number of people who owned radios or TVs were relatively small.

We are working in a very immature medium. Four years ago most people had never even heard of the Internet, and certainly not the World Wide Web. While it is true that we have come a great distance in a very short time, faster than any other medium, that does not automatically translate into instant profits.

Too many problems remain to be solved. Take, for instance, the public’s reluctance to pay for a product over the Net. Those of us who work in the industry may know that paying on line is more secure than giving your Amex to a waiter who disappears with it for several minutes, but attitude is everything. And the public doesn’t feel comfortable doing this yet. Combine this with the very real problem of taking subscriptions on line (ask The Wall Street Journal folks about what a headache that was), and we suddenly see that we may not even be ready to handle a huge flood of on-line subscribers if they did exist.

But then again, there is always The Wall Street Journal example. While I am pleased for the editors and reporters of The Wall Street Journal who have done a remarkable job, truth be known they have done more harm than good to the on-line news media with their sparkling performance in the subscription area. That’s because The Wall Street Journal is an exception, and not the rule, when it comes to making an on-line subscription-based service profitable.

For instance, it would be interesting to know how many of those who subscribe to the on-line edition of The WSJ are reimbursed by their workplace. (I am, for instance.) Another thing that works in The Journal’s favor is that it has a very specific orientation—the business of making money. And as someone I met at a recent conference said to me, the first thing people will pay money for is information on how to make money. (This is one reason, for instance, so many online sites—including non-news sites—are developing online investor sites.) The same situation does not apply to readers of general news. If you remove regional preferences from the equation, it can be argued that there are few real differences between a Washington Post, a New York Times, The Los Angeles Times, and even USA Today.

A more truthful and useful example of trying to use subscriptions as an on-line profit model is Slate magazine. Slate toyed with the idea of charging for content from its inception.The magazine returned to its plan of building a large enough audience to survive a gutsy move to paid subscriptions—which it did recently.

As of last count the magazine says that it has 20,000 on-line subscriptions. Not bad, but not good. Luckily, Slate magazine has an 800-pound gorilla in its corner, namely William Gates. At this pace Slate magazine probably won’t be profitable for another five years or so. But when you have pockets as deep as Bill Gates you can afford to wait. (Which is why he really might win in the end.) The same, however, cannot be said of other on-line news organizations.

So what do we need to do? Be patient. Continue to invest. Build audience. Reinforce journalistic standards so that people come to believe that a story they read on on-line news sites is just as journalistically sound as one they would read on crushed ink and dead trees. Remember that both the medium and the audience are growing up together. Continue to look for new ways to develop profit streams. Premium services, for instance, which could include access to on-line databases, more finely tuned push products, fee-based access to popular forums or chat areas, and similar ideas are all viable methods of developing revenue. Be imaginative.

Because here is another truth. The Internet and the Web operate under a completely different distribution model, one that cannot be reproduced in any print, radio or newspaper paradigm. We may never reach a time when enough will subscribe to an on-line news site to make it profitable. Information on the Internet is like water in the ocean. What you ask someone to pay for will always be offered for free by someone else. That will probably never change. So maybe we need to turn the problem around, and realize that if we’re going to make on-line media profitable, we are the ones who are going to have to change.

Tom Regan is Supervising Online Editor for The Christian Science Monitor’s Electronic Edition.

Most popular articles from Nieman Reports

Show comments / Leave a comment