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
    Grae, 12 May 2009 @ 10:37am

    The Real Value of any Given Thing

    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.
    This is so true, and it's hilariously bad how many people have such a hard time understanding this.

    There's a fairly basic way to express this:
    {real value} = {perceived value¹} - ({perceived difficulty to obtain²} + {perceived cost³})

    ¹All the benefits someone believes they would get from a given product. This may or may not include the actual product itself: for example, some may place more value on the community around a given product.

    ²E.g.: setting up and using a torrent client may be simple to some and insurmountable to others. The same can be said of navigating complicated DRM schemes. Anything that forces the consumer to think about why they should consume your product more than is absolutely necessary.

    ³Everyone values their time and money differently, a price set by the vendor that is reasonable for one is unreasonable for another. The potential to be under legal cross hairs is also a cost factor that people consider with varying degrees of importance.

    The important thing to take away is that, as a creator (or rights holder), the value you believe your content to have is meaningless. The real value != perceived value alone. Making it more difficult to obtain your content (physical or digital) and/or raising the price will decrease the real value of your content.

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