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
    pr, 11 May 2009 @ 7:54pm

    Re: Re: Re: Re: Need a mechanism

    The content itself does hold some value, yes, but that content can be obtained many places on the internet for free

    How does it get onto the internet for free? Does the news fairy provide it? Do government agencies and corporations write it up and hand it over? Actually, the answer to the latter question is, "yes", they do write up a lot of self-serving fluff. If you want to find out what's really going on somebody has to twist some arms. I would rather have that guy (and his editor) at least a little beholden to me, rather than being completely at the mercy of some advertiser.

    All this valuable content gets put on the internet for free due to an accident of history. During the internet bubble there was a fantastic tsunami of capital thrown at internet ventures, which subsidized the production of all sorts of things. To get attention amidst all the noise people gave away things that it didn't make sense to give away. Remember when NetZero really cost $0? That has created unreasonable expectations for free content. The actual reporting organizations are in a bind because they've been more or less forced to make their product available for free, even though they know it's ultimately going to kill them. That's going to stop someday. Here are some scenarios. 1) They become purely advertiser supported, (although internet advertising has thus far largely been a flop) and a) still somehow maintain some sort of editorial credibility or b) become ventriloquist dummies for PR flacks.

    2) Enough of them go out of business that the few who are left have enough market power to demand payment.

    3) We stop with our unreasonable expectations that we should get stuff for free and pay for what we want.

    (3) would leave us in the healthiest position, but I'm betting on 1b, then 2.

    As a friendly reminder: you don't MAKE the news, you just write about it.

    Actually, I do make the news, and I don't write about it. It appears that you have somehow erroneously concluded that I'm a shill for the news industry. I'm a mechanical engineer who makes things that actually are newsworthy. What's important here, however, is that I'm a customer of the news industry, one who hopes they can stay in business as some sort of healthy, independent voice. If they are going to do that, someone's wallet is going to have to get lighter. I think we're better off if the people who actually have an interest in getting the news reported (the readers) pay for it, rather than advertisers. The editor needs to be more afraid of us than them.

    Distribution in the modern age should be cheap; production is not free. Someone needs to pay the total cost of both. I'd prefer that the people are paying enough of the freight that the corporate flacks don't completely run the show.

    But getting back to my original point, a mechanism for making small payments would be a really good thing. I don't know for sure how it would work. Buying by the article sounds kind of ridiculous, but there's real power in big numbers.

    Big number * 0 = 0.
    Big number * small number = possibly something significant.

    The problem we've seen in internet paywalls is that the prices have always been preposterously high. Most have wanted at least as much for the internet subscription as the print one, which is nuts, given that the distribution cost is next to nothing. On the other hand, given current payment methods, five bucks isn't even worth messing with, either for the payer or the recipient. If there was a way that I could pay a penny, or a dime, it would create a world of new opportunities.

    On the other hand, maybe they don't even need that. Suppose the news industry bundled things, like 100 major newspapers for $30 a year, $500 for a corporate site license. Everyone would sign up. Maybe the ISPs would include it with the package. That would be recognizing the power of the internet while providing a way for somebody on the other end to get paid directly, rather than relying on largess from third parties.

    Whew! I should submit this as a dissertation. Maybe I can get another degree.

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