April 18, 2005 - (WhatTheyThink.com commentary by Dr. Joe Webb) - Dr. Joe Webb has commented on news about Dow Jones recent earnings. The New York Post published a story stating that Wall Street Journal's online business is more profitable than their traditional business. Dr. Joe wonders if we have reached a turning point... (the NY Post article can be found here - http://www.nypost.com/business/42637.htm ) The second sentence is a shocker: "...its fledgling online operations earning more money for the first time than the flagship Journal and the weekly Barron's..." You read it right, online is more profitable than traditional. I still wonder if www.wsj.com is being allocated its deserved share of fixed costs; that's for the accountants and analysts to decide. It is certainly conceivable that wsj.com would be more profitable from a production perspective. I would not be surprised if the print version economics ran something like print and postage at $1 a copy, assume 300 issues a year (WSJ & Barrons), and you get $300. The annual subscription is $356 for the two publications in mailed hard copy. That leaves $56. They charge $84 for an equivalent online subscription. I can't believe that newsstand sales are all that important any more and really cover their printing, distribution, and returns costs. Neither would bulk sales to hotels and other buyers; those are there to increase their rate base. So the idea that online could have crossed its breakeven point this significantly is rather incredible, and is certainly a sign of the times. It's easy to blame lower advertising revenues and hope that ad budgets will pick up, and whatever other excuses might come to mind. The B2B ad market has significantly changed, and it's not going back to the way it was. Ad dollars go where audiences go, and new media has had its corrosive effect; it's like a feather pillow case has been cut open and its stuffing dispersed in the wind, impossible to be fully retrieved and collected, never to be stuffed back the way it originally was. One concern I have is how much ad revenue can actually be generated on the Internet since print is based on ads delivered whether or not seen or read, and Internet ads are paid for when they are actually served to a viewer's screen or a viewer clicks on them. Advertisers are also enthralled with the idea of paying only for ads viewed, unlike print, where you have to rely on readership research (or coupon redemption or similar metrics ) to "guess" what effectiveness might have been. We may look back at this as a significant turning point in the publishing marketplace. The fixed cost, legacy infrastructures that support print production are under attack. Changing consumer preferences are forcing the administrative bureaucracies of managing print production and distribution to crumble. The pressure of ubiquitous direct and instantaneous access to news and information offered by new media, and a willing audience, will force a major publishing restructuring. The only question is when. --- Premium Access Members at WhatTheyThink.com can view more analysis in Dr. Joe Webb’s weekly column on Friday, appropriately called "Fridays with Dr. Joe".