A Good Suggestion For Funding Journalism… And A Great Explanation For Why Micropayments Don't Work
from the fantastic dept
With a bunch of old school journalism industry guys suddenly rehashing the old and tired debate over micropayments for news, the folks over at Freakonomics put together a little “quorom” where they asked four different people, with varying viewpoints, about the whole “micropayments for news” issue. Two of them, William Baker and Alan Mutter, support micropayments. I find their arguments not particularly compelling, as they both seem to focus on why newspapers need money, not why anyone would want to pay. On the other side of the coin is Clay Shirky and Marshall W. Van Alstyne, a professor at BU. Shirky, not surprisingly, does an excellent job rehashing his reasons for why micropayments don’t work, but I have to say that Van Alstyne’s reasoning is even better (and quite eloquent):
Micropayments won’t solve newspapers’ pay-or-perish problem, at least not under current proposals. There are many reasons why micro-scalping readers won’t work, but let me start with two: the unique properties of information goods, and inefficiency.
News is not like an iTunes song; it’s perishable. Today’s front page is tomorrow’s fish wrap, and we don’t need to replay it. If anything, a reader benefits more from a second source than repetition from the first. Facts are delivered; songs and movies are created. Facts also can’t be owned, so when the Internet places geographically dispersed media in direct competition, the price of facts falls to marginal cost. In digital markets, that’s zero.
Micropayments introduce friction into an otherwise frictionless world. This means that no matter how efficient they become, it is more efficient to bundle. If a person makes one or two transactions with a news source, it’s more efficient to aggregate lots of them and bill a single advertiser once. If a person makes frequent transactions, it’s more efficient to aggregate those and bill that person once as a subscription. Any increase in micropayment efficiency improves bundling efficiency at least as much, because the gains accrue over more transactions.
Putting micropayments on news is like putting tollbooths on an open ocean. Internet users, awash in a sea of information, will avoid new barriers by navigating around them. And frankly, the interests of a free society are rarely served by building barriers between the people and their news.
And, unlike the actual newspaper guys, Van Alstyne actually then makes suggestions for ways that newspapers can both add value and give someone (if not the consumer) a reason to buy. He has three suggestions, and you can click through to read them all, but I found the last one the most interesting:
Invert the whole business. Use the friction of micropayments to solve a consumer problem and stem the flood of information from advertisers vying for their attention. Advertisers can bid for limited units of people’s time. This increases ad revenues and helps match particular ads to particular people. Vendors will bid low to rent New York apartments to sports fans checking scores for the Oakland A’s, but bid high to offer next week’s tickets. Publishers need to give up on the idea of profiting from distribution and focus on the idea of matching people to content.
The trick is not to add new types of costs, but to add new types of value.
What a surprise. It looks like the folks outside the industry understand how to make the industry work better than those inside of it.