The Wall Street Journal, Upside-Down

Have you seen those great offers from The Wall Street Journal, where you can get both the print edition and online access for something like $100 a year? Mark Potts made an amazing - and in some respects, alarming - discovery. For new subscribers, it actually can cost less to get both print and online than to buy online access only. After seeing his online renewal go up to $151, Mark searched around and found a subscription offer for $89 - but only if he took the print edition as well.

Mark reports that he's getting fed up with the Journal's pricing schemes, and is considering cancelling his subscription altogether. He doesn't want the print product. And now that he can get a lot of the Journal's content on his iPhone for free, he doesn't feel he needs the online access. "A publisher who disregards customers that blatantly — trying to force them to buy something they don't want to get something they do want — is just nuts," he writes.

Agreed. But there's still a nagging question: Why would the Journal turn its pricing model upside-down and risk alienating loyal customers?

The bottom line for most media companies is that print subscribers still are many times more valuable than online readers in terms of generating advertising revenue. Clearly, the Journal saw that cross-subsidizing the print edition makes economic sense as long as the subsidy is less than the marginal revenue it gains by "paying" an online subscriber to take print.

The strategy seems to be working, Mark's pending cancellation notwithstanding. Last month, Dow Jones proudly announced that it was the only major newspaper to grow its audited circulation last year.

So how does this relate to the nonprofit model? Seems to me the Journal is operating on the same assumption that works well for many nonprofit publishers: The print product, whether a glossy magazine, a newspaper or a monthly newsletter, is only one part of its value proposition.

Take the Smithsonian Institution and its magazine, for example. If you go to the subscription page, you see that the magazine comes with other benefits including discounts on shopping at the SmithsonianStore.com and the Smithsonian Catalogue, access to "exclusive, members-only tours and vacations to outstanding destinations," and a membership card "identifying you as a proud supporter of this unique cultural institution." Act now, and for your $12 subscription, they'll even throw in a Smithsonian umbrella.

The National Geographic and AARP operate on similar models. More than a product, they offer a relationship to their subscribers, members or whatever they choose to call their customers. At AARP, for instance, most members join for the benefits, but the magazine - paid for with the annual membership - is one of the benefits that keeps them coming back. Will this model work for everybody? Probably not. But it is a model that nonprofits seem to do better than most, and there could be lessons here for other publishers.

A postscript: Lest anybody think the Journal is going all squishy and nonprofitty on us, please note that they did issue a press release scolding The New York Times for publishing a story suggesting that the Journal's circulation gains were the result of discounting. From the release:

However, in 2008 the Journal moved away from deep discounting and raised the introductory offer and newsstand pricing by nearly 40%. Even with higher prices across the board, Individually Paid Circulation continues to grow in an industry that is largely shrinking.