Newspapers Again Thinking About Micropayments

from the won't-work dept

There’s been a lot of hand-wringing in the paper journalism world lately about business models, so it’s no surprise that bad ideas for business models are springing up again. Specifically, some are beginning to wonder if micropayments could work. As Clay Shirky notes in the article, any time people bring up micropayments as a solution, it’s a hail mary pass — a last ditch effort by someone who has no other ideas. Now, every time we bring up micropayments, we get some pushback, but no micropayment system has ever been shown to consistently work on a large scale — especially when it comes to news. People will. undoubtedly point to iTunes or even the iPhone app store as micropayment examples to the contrary, but both of those pale when compared to free music and free apps in terms of volume — and considering the business models we’ve seen adopted that don’t rely on those sorts of payment structures it’s difficult to believe that such systems will really be dominant over the long haul. They work in the short term, mainly due to the convenience factor — but they’re a stop gap — not a true strategy to deal with digital economics. Micropayments add in an element of unnecessary friction — which represents an economic inefficiency. They may work for some time, but eventually someone comes up with better business models that get rid of that inefficiency.

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Comments on “Newspapers Again Thinking About Micropayments”

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History of Advertising (user link) says:

It's either that or a slow death

The traditional business model is dying because there are so many online options.

Surely traditional media will completely change in the upcoming decades if it is to survive.

It is just too difficult to get and hold original content.

Even WSJ and NYTimes had to make compromises to get additional valuable traffic from Digg and Google News.

While WSJ often gets exclusive leaks first – this can not be the solution for continued survival in the next decade.

Micropayments may be the answer for must have exclusives – but during the next decade, online marketing, behavioral targeting and relevant Advertising will be the transitision all must master to compete

Anonymous Coward says:

Re: Thanks, but no thanks

Based upon past history with repect to the security of personal information online, I’ll pass – thank you very much.

LOL, seriously? Get a decent credit card and you’ll be more than protected from any online fraud.

Besides, shopping online has numerous benefits which far outweigh the negligible chance you’ll be scammed.

Crimson says:

“People will. undoubtedly point to iTunes or even the iPhone app store as micropayment examples to the contrary, but both of those pale when compared to free music and free apps in terms of volume — and considering the business models we’ve seen adopted that don’t rely on those sorts of payment structures it’s difficult to believe that such systems will really be dominant over the long haul.”

How many billions has Apple made from those applications? At some point you’ll realize that businesses care more about dollars and cents more than “volume”. It’s why Valve doesn’t give away copies of “Half Life” and adds DRM restrictions to all of their games.

Christopher Parsons (user link) says:

Micropayments as one of many elements

I think that something like micropayments might work, but only if newspapers let you download/access something ‘more’ than is in the article itself. I’m not suggesting that items should be intentionally left out of news articles for the sole purposes of selling ‘extras’ – instead, the ‘extra’ that people could download would be a bit broader and contain elements that the reporter cut out to meet their word limitations. This would let journalists write more content than space normally permits, and give them and their newspapers financial incentives to actually write this for the paper(s). Not all people would be interested in the extra content, but those that were could click a button and download/view the extra.

While it’s true that people can go to other sources for free versions of news, what needs to happen is that newspapers, and other traditional content owners, make their consumption environments simple and user-friendly. iTunes is, in part, so successful because it pulls everything together in one location and makes buying so easy – their success indicates that individuals are willing to pay for convenience. Newpapers need to get this if they’re going to implement some kind of micropayment scheme to supplement (not replace!) their current revenue streams.

Dan Taylor (user link) says:

Not for news

As a producer of microtransaction technologies, we see a lot of different ways to apply the technology. I’m still struggling with this one though. One of the reasons microtransactions work is that there is a value to the purchase that can no be achieved anywhere else. Within games, virtual worlds, and social games, microtransactions are available to provide the player with a service that s/he could not obtain anywhere else. As the anonymous comment above states – this information could readily be found elsewhere. This idea looks nice (or does it?) on paper, but in practicality? Not so much.

Frosty840 says:

It’s pretty much gotten to the point where the only people who’d actually pay for access to original news content are the bloggers who are currently the main online… “news dissemination vector” is a phrase that springs to mind…

If the newspapers were to switch to, well, any kind of up-front payment model at all, really, then it would be the bloggers who read the stories and who spread on the information, and the masses who would read the blogs for free.

One might try charging bloggers through the nose for access to the original content (counterproductive on its face, but bear with me), but that cost would simply be passed on to the first level of blog-readers, who would, themselves, most likely be a second tier of bloggers, who would produce the free content. Eventually they might end up needing to chare their readers, and then we’d move on to a third level of blogs and a bizarre game of internet-based chinese whispers…

Not really sure where you’d go from there on, apart from to fourth-tier free blogs, but I guess that’s why I’m not in the “new and innovative revenue streams” business.

Crosbie Fitch (profile) says:

Re: Payment vs Charging

The term ‘micropayment’ is misapplied to what everyone is actually thinking of, i.e. microcharging.

It is a demonstrable folly for online publishers to attempt to charge people for what they already have (published works). Far better to enable people to pay for what they would like (more good works to be published).

That’s why I’m working on – a way for readers of blogs to pay the blogger a penny for each post they publish.

Micropayments can work when the payer and payee are HAPPY to make what should be a voluntary exchange.

The only way micropayments wouldn’t work is if they were compulsory, i.e. microcharges – “You’ll pay a penny whether you want to or not!”.

Crosbie Fitch (profile) says:

Re: Re: Re: Payment vs Charging

“One pee to you”? Yep, that’s how I read it too.

Perhaps ‘one pee = one penny’ is familiar only to long term residents of the UK?

Anyway, it’s a short URL, and a site primarily for testing/demonstration/prototyping purposes – at the moment anyway.

There are no constraints of copyright or patent, and the source code is freely available, so you could reproduce a similar site at a domain of your choosing, e.g.

Marcelo (user link) says:

The problem isn't micropayments, it's in the nature of bits

Newspapers aren’t dying because of how they get paid, but because people no longer find value in paying for information that they can obtain somewhere else. In a way, the web is a very efficient P2P network exchange for information, and it undermines distributors of information just in the same way that P2P networks undermine music distributors.

gene_cavanaugh (user link) says:


I basically agree, Michael, but once again, you are “pegging” on an extreme position.
Micropayments are generally a bad idea, but we still buy newspapers at a newstand (one paper rather than a subscription), which is a form of “micropayment” compared to a full subscription.
So, you are basically right, but your position is too extreme.

the_dukeman (profile) says:

what is the suggestion

I’m curious what might be a good way for the newspaper companies to become profitable. What do you guys think? My guess is for them to adapt to providing what the consumers want. That is quite a task considering the varied ways in which customers consume the news. While online content seems to rule for many, the print versions are very popular as well.

IMHO the biggest reason the print newspapers are selling much less these days is not that they have been replaced by online versions, but that the price has risen too much. I’m convinced that if your local rag sold for 25 cents daily instead of a dollar, circulation would quadruple at least. I know I would start buying it again at that price. If you could order only your favorite sections and only the specific days you wanted, subscriptions could be much more cost effective. I would subscribe even though I’d still be checking my online news sites several times daily.

Any newspapers out there willing to take on that challenge?

COS Annoyance says:

For Example, In Colorado Springs...

Something stupid starting here, note the humorous date. This change will eliminate over 50% of the useful content of this paper (it’s a Republican rag).

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Andrew D. Todd (user link) says:

Newspapermen are Admen.

Newspapermen are admen. It’s that simple. Magazine and newspaper readers have never paid even the full cost of printing and distribution. In the case of newspapers, the paper has traditionally been priced so cheaply as to be competitive with paper towel and similar products. When one speaks of paper-training a puppy, one does not mean teaching him to read. The editorial staff have always lived on the advertising revenue. This means that, economically speaking, they are admen, and when they get into financial difficulties, the difficulties grow out of their position as admen. I have noted that when a magazine is due for collapse, its advertisements “go dull”– they run out of things to say. Instead of actually saying something about the product, the advertiser fills up space with pictures of pretty girls. The real explanation for the newspaper’s decline is to be found in its relationship to the kinds of businesses which advertise in newspapers.

The Internet did not just come out of nowhere. It was preceded by a “paper internet,” that is, people doing internet-type-things by paper means, with limited use of computers. Most importantly, newspapers were losing circulation to magazines. Magazines were of course sent through the mails at a substantial discount over newsstand prices. Magazine publishers used computers to to print address labels in presorted order so as to be eligible for various volume postage discounts. The Post Office was itself computerizing, going from 5-digit ZIP codes to 9-digit ZIP codes, and offering correspondingly deeper discounts to those able to take advantage of them. There were some national daily postal newspapers (the highly regarded Christian Science Monitor comes to mind; it was the archetypal “highbrow” newspaper). Furthermore, magazine publishers conducted an elaborate traffic in mailing lists. A magazine would often have a “customer service card.” The reader could detach this card, stamp it a couple of times with his rubber address stamp, and go through the magazine circling reply numbers corresponding to those printed in the various advertisements and articles. Having done this, he dropped the card in the mailbox, and in due course, various brochures, pamphlets, and catalogs would arrive. The system was not as fast as clicking links, but it was just about as effortless. In advertising, there were various “shopper” publications, focused around various kinds of purchases. If one was in the market for a particular purchase, one bought the appropriate “shopper,” and dived into the advertisements. More recently, “shoppers” have become free, left in boxes at convenient locations. Similarly, there is Direct Mail Advertising, which can be geographically targeted in a precise way, and there are local “advertising newspapers,” distributed for free by mail. The electronic internet is only the final straw.

Similarly, in the related field of merchandising, one can talk about a continuum from discount stores and mail-order vendors to Amazon. The better mail-order vendors were using computers to get their order-processing time down, and the discount stores were adopting barcodes. Grocery stores were getting bigger, and carrying a wider range of incidental goods. Over the whole period, all kinds of consumer goods manufacturing was being outsourced, and then offshored, first to Alabama, then to Mexico, and finally, to China. Department stores were often being remodeled as shopping malls. The merchandise was no longer at the center of the customer experience. The name of the game was not to bring people in for merchandise sales, but to get them in the habit of coming in every day for lunch and window-shopping. These kinds of changes affected newspapers indirectly by injuring the kinds of firms which were likely to use newspaper advertising. Looking at a 1995 issue of a big city newspaper (Philadelphia Inquirer) which I happened to have hung onto for some reason, I note that the prime advertisements were placed by traditional department stores (eg. Macys), offering temporary discounts on upscale clothing, housewares, electronics, etc. In the end, the discount store triumphed. More than that, the mentality of the discount store triumphed, that is the assumption that nearly all merchandise is presumed to have been bought at a discount store, or else, by mail order. Discount stores spend very little on advertising. Their basic method is to make things cheap enough that the shopper buys on impulse. Mail-order retailers spend their money obtaining or building mailing lists. These firms will continue to look for ways to move more of their production offshore, employing the smallest feasible number of high-wage Americans, and to lower their prices accordingly. The end result will probably be somewhere between vending machines and mail orders processed in China.

The advertiser does not really need to be plugged into the daily news. Shop floors simply are not stocked with merchandise at that speed. It is convenient for the advertiser to run his promotional offers on a weekly or monthly basis, and put together a conveniently big advertising package to get the best postal rates. Add to this, the fact that a newspaper audience, being undifferentiated, is not very profitable to advertise to. A direct-mail postcard linking to a local news/shopping website will probably produce surprisingly good results, at a one-time cost of twenty or thirty cents per household. That is enough to get it into the bookmark files of, say, ten percent of household, and they can propagate the URL to their friends. The money released by merchandise discounting has been going into services, and services, being people-based, are extremely local. Even so standardized an operation as McDonald’s varies substantially, according to the kind and quality of people McDonald’s is able to recruit as counter help in any given locality. The local shopping newspapers serve such businesses better than a city newspaper could. A neighborhood restaurant does not benefit much from advertising to people who are too far away to drop in conveniently.

The basic economic problem of newspapers is that they have stayed the same while the rest of the world moved on. In the case of big city newspapers, there is a further complication. The newspaper naturally reports on its city, and such identity as the city possesses is usually focused around the slum at the center of the city. The business of a big-city mayor is first and foremost to deal with poverty. Suburbia is about rejecting the city, and the rejection is becoming more complete over time, with the rise of what Joel Garreau called “edge city,” the exurban city of the ring road, yet another precursor of the internet. The Philadelphia Inquirer is a great newspaper, and its greatness consists very largely in telling tragic stories about the slums. When you juxtapose the local headlines with the advertisements, the effect is that of a grimly comic “Tale of Two Cities… it was the best of times and it was the worst of times…” One can see that an advertiser would not want to pay for being portrayed as a kind of buffoon if there were any alternative. With Direct Mail, there is an alternative. The newspaper cannot put the clock back. It cannot restore a lost monopoly. Nor can it restore department stores with high markups. If the city’s principal industry has become poverty, the newspaper cannot change that in any simple way.

What you may be able to do is to set up a neighborhood operation of some kind, centered around the local mini-mall or shopping street. Your starting point is what businesses are actually there, on the ground. Talk with the proprietors, get a sense of what their problems are, and proceed from there. Maybe a local website, maybe organize a street fair, maybe hire kids to leave gift baskets on people’s doorsteps. It all depends. Of course, if something really newsworthy happens on your beat, you can write about it. A lot of nominally local newspapers have office-chair-itis, meaning that the editor and publisher want to sit in their offices and be executives. This means that if you are willing to spend a lot more time going door-to-door, preferably on foot, than they are, you may be able to undercut them.

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