Economics Doesn't Work In A World Of 'If Only…'

from the back-here-in-the-real-world dept

We had already explained why Walter Isaacson’s “we’ll just use micropayments!” model for news wouldn’t work, but it seems he’s still out there pitching the idea. Clay Shirky did an even better job dismantling the concept, but last night Isaacson appeared on the Daily Show with Jon Stewart to pitch the same ridiculous idea:

Stewart called him on a couple points — noting that once something is free, you can’t reasonably flip a switch and start charging for it, and also noting that news is fleeting, while music is a product people hold onto. Isaacson didn’t have good answers to either points, other than a basic “if only…” Towards the end, Stewart pitched an equally bad idea (which Isaacson loved) which was that any aggregator would need to pay news publications for sending them traffic. It’s the “how dare you help build our readership” business model.

But the really frustrating thing is that Isaacson doesn’t seem to have a clue about basic economics (and, at times, news business models). For all his talk about the importance of getting good reporters “paid,” he seems to have missed out on the reason we want good reporters to get paid: because they actually do good work. That means doing research to understand the topic they’re talking about.

Isaacson didn’t do that himself.

Instead, his whole idea is based on the wishful thinking of “if only…” If only the newspapers hadn’t started by putting content online for free. Newsflash: they didn’t. A lot tried to charge and it failed. Miserably. If only we had a system whereby people could pay just a small amount per article. Newsflash: it’s been tried. People don’t like it and don’t use it. If you want to destroy your audience — the most valuable resource you have as a publication — it’s a great way to do so. If only journalists could get paid. Newsflash: they do. Journalism has always been paid for via advertising rather than direct subscription fees (which mostly just handled the cost of printing/delivery, if that). It’s particularly egregious early on in the interview, where Isaacson says:

“Who is going to send people to Baghdad if always, everything in journalism is free?”

Isaacson is certainly well-respected for his work in journalism for many, many years, but how can he make that claim with a straight face. Everything in journalism is not free. It’s never been free. The fact that you might allow people to read it for free, does not mean that “everything” is free. Google gives away “everything” it does for free, and is quite able to make a ton of money. Why? Because it sells the “attention” of its users. That’s what newspapers have always done. The difference now isn’t that they’re giving content away for free. It’s that they’re not used to competition and haven’t done a good job keeping their audience around.

But, the most ridiculous thing is that nowhere in the interview does Isaacson ever give a single reason why people would want to pay for a newspaper. Instead, he just focuses on why newspapers need money. That’s not how you run a business. That’s not how you come up with a business model in the face of tremendous competition. You don’t focus on “we need money.” You focus on giving someone an actual reason to pay. Isaacson doesn’t do that at all. He just focuses on the need for money, and falsely assumes that tollbooths solve that problem.

Filed Under: daily show, micropayments, newspapers, walter isaacson