Murdoch's vision is just what Dow Jones needs

NEW YORK (Fortune) -- In the voluminous coverage of the bid by News Corp. for Dow Jones, the Internet is getting short shrift. Yes, we hear it duly reported that, for instance, two-thirds of cash flow next year at Dow Jones will be from electronic businesses, and that News Corp. (Charts, Fortune 500) chairman and CEO Rupert Murdoch may want to use The Wall Street Journal brand as a flagship portal for all his online business-news operations. But it's always the print paper that takes center stage. Joe Nocera in The New York Times called the paper, Dow Jones' "trophy property."

I think the trophy is the online business. Of course, Murdoch knows how to run papers as well as anybody. And he will take control of the Journal with gusto I'm sure (and I suspect, contrary to what many say, with respect for its editorial independence and traditions). But this is also the man, more than others in his generation who run big media companies, who has shown he understands how deeply the media world is changing as the Internet's grip grows stronger. And Murdoch's big-picture view is the key to his success and greatness.

I had the privilege of moderating a small dinner discussion two years ago about what broadband would mean. The group included ten luminaries of media, tech and telecom, including Murdoch. He said little, but unlike most of the others, was listening keenly to what each titan said. On his part there was no posturing, no bragging, just an effort to understand. In fact the dinner was organized largely for his benefit. At the time, he had not made any major moves onto the Internet. He was still in research mode, and it impressed me.

Subsequently he seems to have come to some pretty clear conclusions. He bought MySpace - before it was apparent that it is the pre-eminent online brand for socializing. But he didn't stop there - Murdoch's company also bought IGN, a major collection of news, review and community sites devoted to electronic games, movies and music.

Murdoch has realized that the future for entertainment and media is online, and he is taking large but methodical steps to get there. His interest in Dow Jones is of a piece with this strategy. The Wall Street Journal happens to be a newspaper, but it is also, like Fortune, one of the great brands in media that bespeaks business journalism. The idea he reportedly has of applying the brand to his incipient business news cable channel as well as a supercharged business-news Web site (which would include of course both print and video), makes perfect sense.

And it makes all the more sense if you see the media landscape as encompassing the entire world, as Murdoch does. Unlike so many of his landlocked American competitors, Murdoch doesn't just mouth words about globalization. He is launching MySpace China and he owns satellite video networks spanning the globe, among many other businesses scattered across the planet.

So if you want one brand to impress the businesspeople of the world, isn't the gold-standard Wall Street Journal the one you want? In cyberspace, media brands matter as much if not more than they do offline.

But I disagree with Murdoch on one key point. He said on the Fox News Channel (which of course he owns) that he likes business news online because "you can charge for it." And on the surface Dow Jones (Charts) has done well charging for its Web sites. As of its most recent quarter, it had over a million paid subscribers for its various online properties, mostly WSJ.com.

But I believe building an online business that way is making a pact with the devil. Information online is a world of links - a collective dialogue among numerous sources and speakers. When you close off a news site with a wall that is only crossed when a reader pays, you remove its content from that collective dialogue. Over the past few years, it has seemed to me that the relative weight and importance of the Journal's editorial content has diminished as other voices - both institutional and individual - have emerged online. WSJ.com has not been part of the freewheeling interactive conversation of the Web.

Furthermore, WSJ.com can't fully participate in the big money play online, advertising revenue, because it deliberately limits traffic to its site with its subscription model. It gives up a potentially very large monetizable audience by hiding behind a pay wall. Granted, people will pay for news that helps them make money. But while it's possible to envision a global Journal-branded news site of almost MySpace scale, it's a mistake to imagine that very many people will pay for it.

Of course, Murdoch's first challenge is persuading the Bancroft family, which controls Dow Jones, to sell him the company, at his generous offered price of $60 a share. It seems they are resisting. But unless a higher bidder emerges, they'd be crazy to turn him down.