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The micropayment debate continues

Is it possible to be fascinated by an issue and yet tired of it at the same time? If so, then micropayments for online news pretty much fits that bill for me. I know that it’s a crucial time for the newspaper business (which pays my salary), and I know that many thoughtful and intelligent people believe that micropayments are the answer to the industry’s woes — including former news executive Alan Mutter, who blogs at Reflections of a Newsosaur, and whose recent argument about paying for things I took on in this post. But there has been an awful lot of talk about the issue over the past few weeks and months, including some excellent pieces by Clay Shirky and others (I’ve collected a list of the major ones at my personal blog if you’re interested).

And still the debate continues. The Freakonomics blog at the New York Times is the latest to throw its rhetorical hat into this particular ring, which seems fitting given the authors’ focus on the conjunction of economics and society. Both Alan Mutter and Clay Shirky show up in this forum as well, making similar arguments — the former in favour of micropayments, which he says will overcome the “Original Sin” of giving content away for free online, adding that readers wouldn’t mind being nickel-and-dimed “if the content were sufficiently unique and compelling.”

Shirky, meanwhile, argues that:

Online, small payments only work when the collector of those payments has end-to-end control of delivery, generally by controlling the hardware or software the user has access to. (This is true of all metered billing, in fact.)

and adds:

The fantasy that small payments will save publishers as they move online is really a fantasy that monopoly pricing power can be re-established over we users. Invoking the magic word “micropayments” is thus grabbing the wrong end of the stick; if online publishers had that kind of pricing power, micropayments wouldn’t be necessary. And since they don’t have that pricing power, micropayments won’t provide it.

Sharing of content is the key to much of what users (or readers) do online, Shirky argues, and blocking content off destroys that relationship, and arguably makes the content less valuable rather than more. And without monopoly control or a giant cartel, there is simply no way to wall off all of the content — someone will inevitably provide something similar (i.e. close enough) for free and make it sharable. MIT information technology professor Marshall Van Alstyne concurs, saying that micropayments would be like “putting tollbooths on an open ocean.” He says that journalism can be supported by charging based on the platform (i.e., the Kindle), and charging for enhanced value of some kind (different versions, or more processed information, such as that offered by Bloomberg).

William Baker, an executive-in-residence at Columbia University who is looking at new business models, says that he sees journalism being supported by a mix of almost all the possible sources that people have mentioned: micropayments, donations or charitable foundations, advertising and subscriptions. Meanwhile in the comments, readers suggest some additional ideas: One recommends a process by which interested readers buy “shares” in a newspaper, which then funds the journalism and collects donations for it — with any surplus returned to the shareholders. Another suggests that advertisers could support the news directly by offering free subscriptions to readers in return for having them click on an ad (as Salon does).

Will any of these solutions make the difference in an industry whose old business model is being disrupted by a new medium, and may never be the same? Will someone try to put tollbooths on the ocean and actually make it work? Or will we still be having these arguments 10 years from now? I wish I knew.

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  • Terry Steichen

    We use the term “micropayments” as if there exists some widely accepted definition that all participants in the discussion share. That is not the case. For example, the oft-quoted Clay Shirky has a notion of what micropayments mean, and according to this notion, it doesn’t make sense.

    But there actually are ways to make micropayments that (a) do not involve building a common payment processing system, (b) do conduct even very small purchase transactions efficiently, and (c) that do overcome consumers’ natural anxiety about the small purchases accumulating to larger than expected totals. But they are, for the moment, irrelevant.

    The micropayment option, like the other payment options being discussed, assumes that what’s being offered (“the news”) is sufficiently valuable. They also assume that what’s being offered by a given publisher is sufficiently unique that enough consumers will be attracted to it (assuming it’s value and price are right).

    Unless and until the industry faces up to the challenge of creating new (or enhancing existing) products to achieve the above-mentioned goals of higher value and differentiation (while, of course, maintaining a news-centric focus and keeping the added costs minimal), it’s pretty much a waste of time to worry about how to get paid.

    IMHO, that’s the inconvenient but essential truth.

  • Tom Davidson

    Hear, hear, Terry.

    The “business model problem” is not our fundamental issue.

    The audience problem is.

    Which is not to say the business model issues aren’t vexing and complex. But first we have to retool our thinking to deliver useful, valued content and exploit digital technology to create conversations. Simply regurgitating existing print and broadcast content models won’t cut it, whether we charge for it, give it away and sell ads, or give it away and beg for alms.

  • Mathew Ingram

    I think you are quite right about that, Terry — and Tom. It’s not so much about the technology as what we are asking people to pay for.

  • MichaelJ

    Here, here, here,

    William Baker at the Times says “In America, most of the serious reporting is done by newspapers” takes that as true and goes on with an interesting business model.

    But the statement is just not true. No matter how many times it’s repeated.

    Still another inconvenient truth is that readers and people who want serious news is a niche market. People don’t and never have bought newspapers primarily for the news. It is headlines, gossip, weather, ball scores, the crossword, obits and the ads.

    Until the discussion starts with that reality, it’s just going to keep on going around in circles.

  • Terry Steichen

    The CJR article “Overload!” (Nov/Dec 2008) describes what appears to be a fairly extensive market survey (2007) sponsored by the Associated Press. The main focus was young-adult news consumption. They found that “many young consumers craved more in-depth news but were unable or unwilling to get it.” They also found that “[p]articipants in this study showed signs of news fatigue; that is, they appeared debilitated by information overload and unsatisfying news experiences .”

    My understanding of the study results is that these consumers (unsurprisingly) wanted some kind of screening to reduce what they perceived to be confusing and irrelevant clutter.

    But what was a bit more surprising was that they also wanted more depth in the stories that they chose to read. Now I’m paraphrasing (and maybe extrapolating a bit), but what the study seemed to suggest is that part of the clutter came when these consumers had to go to multiple sources to get the context they were apparently seeking.

    Bottom line: I think studies like this may provide some useful hints at directions for future news that might be perceived (by at least this market) as being more valuable and competitively differentiated than “ordinary” news. In more broad terms, the study seems to reinforce the oft-mentioned belief that news consumers want to be informed about not just what’s going on, but what it means. IOW, they want context.

    CJR Link:

  • Martin Langeveld

    Before all hell broke loose recently with regard to micropayments and other pay-for-content schemes, I tried to point a possible way for micropayments to work, on a two-way basis, here:

    But without even the two-way idea, think about this: far less than 10 percent of what’s on the Web is freely accessible now. The rest is behind paywalls or membership walls of some kind. Suppose news sites became gateways or conduits, selling access to their own archives and other paid databases, not at $3.95 for an article located via a directed search, but for 39 cents, or less, for an article suggested/recommended in the context of the user’s profile and content browsing history? Could overall revenue rise in that scenario, because volume would rise to compensate for lower price? What I’m saying is: rather than think of ways to charge, in any fashion, for content that’s currently free, news publishers should find ways to suggest and sell more content that already has a price tag (at much lower prices), as well as new kinds of content beyond the scope of free news. This could include entertainment content — YouTube is now accommodating paid videos, for example; news sites could help users find them and profit from the referral.

  • Mathew Ingram

    I think you might be onto something, Martin. People seem to be relatively well conditioned to paying for archived articles — why not make better use of them by tying them to everything else that we publish? Highlight them and do a better job of collecting older pieces and aggregating them, and maybe give people a few paragraphs and then charge tiny sums for the rest.

  • Terry Steichen

    Mathew, I do think the (or at least one) solution has to do with exploiting article archives. However, I think archives today generate only trivial revenue. As Martin observes, very few people are inclined to pay the exorbitant prices typically charged for them (usually several dollars each).

    The key to their use is, as you say, “tying them to everything else we publish” and “do[ing] a better job of collecting older pieces and aggregating them,..” If we can do that (tying them together, collecting and aggregating them) successfully (and economically), we might be able to unlock a lot of value tied up in those archives (for newspapers that have them).

  • MichaelJ

    I think you may be really onto something when you say “Suppose news sites became gateways or conduits, selling access to their own archives and other paid databases”

    These are long tail content that should be able to monetized. Not because of the particular words, but as evidence of the view at various points in history.

    An idea that I’ve been trying out in various places is for newspapers to harness that long tail and go after the textbook industry in K-12 education.

    Clearly textbooks are broken. But still attract a very significant revenue stream. One size fits all delivered every two years just doesn’t fit anyone. It puts into context why our students think history or economics or civics is boring. Presented in textbooks it IS boring.

    The opportunity is to harness emerging digital print technology to deliver stories based on the long tail of newspaper archives to make history,l science, politics, civics come alive. The revenue model is clear.

    It doesn’t require any new money. Just redirect an already large revenue stream that will be able to help financially pressured school districts to do alot more for the same money.

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  • Terry Steichen

    Michael, I don’t think it’s that easy or straightforward to better monetize the archives. There’s no evidence of any significant market for archive searching, even if you were to optimize (ie, sharply reduce) the pricing. Even for the small minority of consumers interested in retrieving old articles, it’s often just too much work (with lotsa different attempts) to figure out what kind of query will get the stuff they really want (if they even know what that is).

    The real value of archives, I believe, is not in rendering specific old stories. Rather it is in processing and organizing the archived material to create pre-packaged (and constantly updated) background material (augmented with an enriched set of static topic resources).

    Once you are able to do that, your next challenge is now to make consumers aware of that new material. Perhaps the most effective way to do that, for regular site visitors and in particular for ‘back door’ visitors (coming from search engines, rss feeds, blogs, and newsletters) is to insert links in today’s news articles that point to the relevant archive-derived background material. A non-trivial proportion of readers who are interested in a specific current news article will also be interested in some context for that article.

  • MichaelJ

    Points well taken. I don’t believe this is a consumer product, except as you describe “it is in processing and organizing the archived material to create pre-packaged (and constantly updated) background material (augmented with an enriched set of static topic resources).”

    I have to believe that a niche market could be identified for a collection of financial meltdown stories in a paperback book format. To be sold on the newspaper’s website.

    The much bigger opportunity is to use those stories to supplement or replace history textbooks in K-12.

    No doubt, unlocking the information is non trivial. But it is a well defined process and there a number of global companies that are very experienced in translating into XML databases.

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