WSJ To Try Micropayments: What A Bad Idea

from the watch-this-fail dept

There are all sorts of bad ideas around trying to get people to pay for news, but perhaps the worst is the idea of micropayments. Micropayments are trotted out every other year or so as the "savior" to paid content by people with little understanding of economics. The problem is that micropayments never work in a competitive market. First, the "cost" is much bigger than the nominal sum, because of the mental transaction costs ("is this worth buying?") that add friction to the process. Second, and more importantly, it's a self-defeating move. In adding micropayments, you automatically decrease the value of the content. This may sound paradoxical, but what matter is why and how people value content. These days, many people value content for the ability to engage with it, comment on it and share it with others. Micropayments take away that ability, and thus decrease the value of the content. In some sense, adding a micropayment option gives people fewer reasons to pay! Micropayments have been tried over the years, and every time someone announces them the press goes all nuts about how they're the business model of the future for content. And then the projects go nowhere for a few years, whither and die. And the press never seems to notice.

So, it should probably come as little surprise that it's the press itself that's going to try such a plan. The Wall Street Journals' managing editor, Robert Thomson says that the WSJ is going to start offering a micropayment offering for individual articles. Of course, it sounds like it's not always micropyaments either:
"It's a payments system -- once we have your details we will be able to charge you according to what you read, in particular, a high price for specialist material."
A "high price," by definition, isn't a micropayment of course. And it's just as likely to fail miserably. Putting a paywall in the way of people, and they'll find the content elsewhere. Put a paywall in front of good content, and it just opens up the opportunity for other, smarter, publications, to provide the news for free and run away with all the advertising money.

Filed Under: micropayments, robert thomson, wall street journal
Companies: news corp.

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  1. identicon
    Anonymous Coward, 11 May 2009 @ 6:33am

    Need a mechanism

    I wish WSJ well. Whether this or that web content is worth the micropayments, I lament that there is no micropayments scheme in place.

    Sending a check by snail mail costs the sender almost a buck. Typing in credit cards is a hassle, puts my entire financial life at risk. Both have transaction large transaction costs on the other end.

    There's lots of stuff I wouldn't mind paying a couple of bucks for, but there's no convenient way to do it. I spend five bucks at Arby's and don't complain. Within 30 minutes it's no longer usable, and within 48 hours virtually the whole thing has become the property of my local wastewater treatment plant. Yet I don't complain that there's no refund process.

    There are a lot of other things I wouldn't mind paying a penny for, but no one is going to pay 100 pennies in transaction costs.

    It's not rational that everything on the internet is free, it's a consequence of the irrational internet bubble, which created unreasonable expectations. It should be cheap, however, really cheap, since the cost of making a copy is very close to (but not equal) zero. The path forward will make the transactions cost a small fraction of the sale cost. Then the price to the consumer can be so small that he can consume vast quantities, but the profits to the producer will be enough to keep them going without having to bring in third parties to keep the game going.

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