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    The Great Debate on Micropayments and Paid Content, Part 2

    by Mark Glaser
    September 18, 2009

    In Part 1 of the great micropayments debate, David Carr tried valiantly to defend the idea of charging for heavy-hitting journalism online, while Mike Masnick disagreed vehemently, saying micropayments would seal the doom of newspaper companies. Can the two debaters be brought together to find some common ground? Read on for Part 2.

    Major Media Without Walls

    Mike Masnick: We absolutely agree that doing nothing is a death sentence. Great. Where we disagree, entirely, is on what to do. You claim they’re looking at customer-pays options for survival, but that only works if customers will pay. And, to date, there’s no evidence that they can get enough customers to pay to survive. I’m not saying to keep the status quo. I’m saying that putting up pay solutions that aren’t based on scarce value won’t last.

    The problem is in thinking that the content alone is a reason to buy. History has shown that it's just not a very compelling reason on its own to buy, and not very sustainable." - Mike Masnick

    You say there are “fewer and fewer players” to compete with and I think you’re defining the market incorrectly. All I see is more players popping up each and every day. Sure, some of the legacy newspapers who took on too much debt and were unable to adapt are having problems. But, that’s the business cycle. I think you may be too narrowly defining the group of publications and that you’re looking at “newspapers.” The problem is that the person looking for news doesn’t care whether it’s from a newspaper, a TV station, a radio station, an online-only publication or some guy down the block. If it provides what they want, they’re going to be happy with it. And, yes, there are a ton of those willing and waiting to step in should “newspapers” take themselves out of the market.

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    NPR, now run by a former NYTsian, has said that it won’t charge. In fact, it has beefed up its website, added more community features and is looking to leverage the fact that it has real feet on the ground in local communities all over the country. CNN is looking to expand its own online reporting, and has shown no sign of going behind a pay wall. Reuters has been beefing up its reporting, as well as its attempts to better connect with a community of readers. And then there are the startups. Many fail, but that’s how the startup process works. Some are starting to break through and do really interesting reporting.

    As for the market, you are again limiting yourself to “newspaper advertising.” Yes, that’s been a bad market lately, but not because of problems with advertising. It’s [because of] the problems with newspapers. They’ve failed to build real community, so the community they used to “sell” to advertisers has gone elsewhere. Why aren’t newspapers investing in real community tools? (And that means more than adding comments or tacking on a copycat social network.) It’s about recognizing how people interact with news these days. They want to participate. They’re not passive readers any more. They want to share the news. They want to comment on the news. They want to contribute to the news. They want to participate. A pay wall makes that almost impossible. It takes away from what people want to do, rather than enabling it.

    So what should news organizations be doing? They should be enabling people to interact and participate in the news. They should be enabling their community and providing real value to the community. Not to toot our own horn, but we put together a system that pays our community to interact with companies that want their insight. We’re not looking at our community as a cash register, but as an asset. And, yes, we do charge for some things — but never for content. The model we structured was on providing scarce value…that helps enable the community, rather than limit them.

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    Finally, on the ability to sell the paid eyeballs — yes, such people may be “more valuable,” but it’s a much smaller group, and newspapers will run into trouble if you squeeze them dry. People hate paying for something and then having to pay again with ads. Yes, they’ll put up with it if there are no alternatives. But there are an increasing, not decreasing, number of alternatives.

    I think that we agree that newspapers need to change. We just disagree on the right path for change. Putting up a pay wall or micropayments hastens the decline in my book. There are serious alternatives. They may not be as easy, but they’re much more likely to be effective. To create a painfully strained analogy (sorry, sorry), your argument is that they’re going over the cliff already, so why not try this. I just think that it’s not a parachute you’re opening, it’s an anvil. I’m looking at ways that they should be deploying jetpacks to take them higher, rather than just looking to avoid crashing into the ground.

    David Carr: Between all the talk of jetpacks, anvils and parachutes, I’d like to drop one more metaphor. The end of days. What newspapers have going is not sustainable and whether it is Steven Brill or Rupert Murdoch or the mad geniuses we have at the Times that crack the code on new, meaningful veins of revenue, I think something remarkable is at stake. And we can’t wait for the web fairies to drop down and turn free into a business. Freemium, maybe, but you can’t full-stop take paying digital consumers out of the equation. I think we should be clear about the fact that the current business model is not working and if we want to preserve newsgathering capacity, some things have to change. I agree that we are in agreement about that.

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    Can media deploy jetpacks to take them higher?

    But many folks, including you, want to take any charging for content off the table. Really? Does that mean the FT’s metered model has no value, or that Rupert Murdoch’s announcement that the Wall Street Journal will charge small money for a Blackberry app is a bad idea?

    Certain content is far more expensive to produce and has a broader civic value. The community that you speak of is very powerful and can do amazing things, but it can’t produce Walter Pincus’ deconstruction of a new four-year national security plan in the Washington Post, or easily replicate David Leonhardt’s relentless coverage of the meltdown and the aftermath at my shop. To refuse to innovate around the traditional business models that have sustained that kind of reporting is inviting a future of lesser ambitions and reduced accountability.

    And although I am the MSM dad in the basement at the digital party in this argument, I just wanted to say how much I enjoyed kicking the ball back and forth. A pleasure to be talking about the future instead of moaning about the past.

    Finding Some Agreement

    Mike Masnick: I’m quite enjoying this as well…

    Yes, we absolutely agree that the current model is unsustainable, but I think you’re building up a strawman and projecting it on me. I don’t want to take charging for content off the table. If you want to do it, go do it. I’ve said it before: go for it. My point, however, is that it’s a bad idea and it will not do what you think it will do. It will not save newspapers. It won’t even help them. It will hurt them. It will hasten their demise. Telling you something is a bad idea doesn’t mean I’m taking it off the table or somehow trying to shut you down. It just means that I think it’s a terrible idea, and there’s an awful lot of economic history that supports that idea.

    I think where we run into trouble is you seem to think that there are three options:

    1. Continue down the current path
    2. Charge users
    3. Wait for the web fairies (or perhaps that’s in combination with number one)

    We agree that number one makes no sense. We disagree on whether or not number two makes sense. And, most importantly, we totally disagree on number three. There are things that can be done today: It’s called adding more value to your community, bringing in more users and providing them more direct value. But that’s not what’s being suggested. What we’re hearing is that you’ll just toss up a pay wall and the people will magically start paying. But they won’t. At least not enough of them to matter, and certainly not enough to cover the loss in ad revenue.

    We agree that today’s model isn’t sustainable. Done and done. But I fail to see how putting up a tollbooth and denying readers what they want is any better. I see it as significantly worse. You’re shrinking your market and taking away value at the same time. I can’t fathom how that is any better.

    i-64de352cf10bddf28eb3af987a373664-techdirt cwf.jpg

    The other point you make, which is not what I said, is that I’m taking paying consumers out of the equation. I’m not. But I am saying they won’t pay for content in significant enough numbers to make it worthwhile. They may pay for other things. We just ran an experiment and got our readers to give us quite a nice chunk of money — but it wasn’t from selling our content. It was selling scarce goods — things that can’t be “copied” online, but that were made valuable thanks to our content. Those are things that can’t be copied, and for which there is no real competition. Things that don’t block what the consumer wants to do, but enables something else that they couldn’t get or do elsewhere.

    As for the FT and the WSJ model, I think both are long-term mistakes, and will eventually be looked upon as such. But, first, both are unique situations, where they’re providing direct economic value to many readers who are willing to pay for it, because to them, having that information sooner can be directly translated into money. I think it highly unlikely most others will do well following their model.

    That said, I believe that the fact that both lock up their content provides an excellent opportunity for newer players in the space to step in and offer similar content for free, and monetize it elsewhere. There are players who are beginning to enter that market who will cause both the WSJ and the FT a lot of trouble in the future.

    Finally, I never said that “the community” would do all of the reporting. I was quite clear in stating that, while there is a role for participatory journalism in helping with the process, I am very much talking about professional journalists. I recognize that others in the space may talk of the community replacing journalists. I am not one of those people.

    i-1f8fc9ce5b88e6acd5071f65479a036b-WalterPincus.jpg
    Who will pay Walter Pincus?

    But here’s the thing, if you put up a pay wall, and very few people pay and it kills off whatever ad revenue you had left, then who’s going to pay Walter Pincus? That’s my question all along. You keep saying that the reporters need to get paid, and we agree. But putting up a pay wall doesn’t do that. It does the opposite.

    Mediator: This has been a great discussion. One thing I’d like to point out is that you both bring up valid points on each side of the argument, but you both also fall into the trap of making each other into caricatures. David says Mike is depending on “web fairies” for a new business model and says Mike is opposed to pay content; and Mike is saying David wants pay walls around all content.

    Isn’t it possible that our future content distribution models online will be as they’ve always been from the start: some paid content, some free content? Why does everything have to be all-pay or free? A hybrid business model seems like the real future for onilne content, including revenues from ads, from running online community sites, from running business directories, from doing web marketing for small businesses, plus specialized paid content or access to top-tier information (whether that’s WSJ.com or ESPN Insider or The Packer Insider that’s been sold for years by the Milwaukee Journal Sentinel newspaper).

    Can you guys break out of the old paradigm in this debate and find a center that includes free and paid content (and maybe even micropayments)?

    Mike Masnick: Fair point — though I really did not mean to imply that David supported putting pay walls around all content. I think he was quite clear of that at the beginning, and my apologies if I suggested that in my responses.

    Now, in an attempt to find that middle ground, I will note a few things. I actually very much like the idea that the New York Times was apparently considering recently of offering value-added tiers that focused on scarce access, rather than content.

    So, I think some of the debate comes down to a bit of semantics, but I think they’re important. I’m not opposed to giving people a reason to buy things — in fact, that’s become something of a mantra on Techdirt. We highlight case study after case study of those embracing the digital era, while still giving people a reason to buy. The problem is in thinking that the content alone is a reason to buy. History has shown that it’s just not a very compelling reason on its own to buy, and not very sustainable. That’s because all it does is open up an opportunity for others to come in and provide similar content for free.

    But there are things that the content itself makes much more valuable — scarce things, such as access, events, convenience, tangible goods — that can be offered. But to do that right, you want to make sure that the content itself works to make those things more valuable, and I believe you do that by freeing up the content itself, providing tools to build out the community, and then connecting that community to those scarce goods. That provided them with real reasons to pay. I thought the early New York Times proposal needed some work around the edges, but was a big step in the right direction.

    But any proposal that focuses on blocking what users want to do, and making the content itself less valuable seems like a non-starter to me. Perhaps it works for a little while, but it only invites significant competition.

    So, it’s not that I think people won’t pay for stuff. It’s just that I think they won’t pay (at least enough to matter) for content. And I think focusing on getting people to pay for content actually makes all those other business models more difficult.

    David Carr: I love tiers of service, especially because it preserves a free product that is SEO-ed on the web and always allows a point of entry for new or casual readers. And sorry about the web fairies crack, which I didn’t mean to aim at you, Mike. What I was trying to get at is while there is what one of my bosses Jon Landman has referred to as a spiritual or religious belief on the part of journalists that people are just dying to give us lots of yummy money for our work, they are not. There is also a kind of magical realism that infects always-free folks that suggests if we just continue to build audience, a business model will find us. It’s a little like the nascent dot-com that is always going to go into the black “next year.” Next year never comes.

    I think much of what divides us is words rather than values, as Mark points out. Journalism is going to have a blended, hybrid future where the consumer assembles the content they need and then decides what is worth their hard-earned lucre, regardless of platform. My only hope is that the informational market they shop at is a robust and thriving one.

    *****

    Thus ends the Great Debate on Micropayments and Paid Content. If Masnick and Carr can agree that paid tiers might have a future, that some paid content can work (if scarce and unique enough) but other content should remain free, then maybe dogs and cats can lie down together, and the world will live as one. Or not. How do you see the future of content online? What content do you pay for, and what content would you not pay for? Share your thoughts in the comments below.

    Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.

    Tagged: micropayments new york times newspapers paid content techdirt
    • The future revenue mechanism for intellectual work will revolve around the exchange of that work for money. I am the only person on the planet actually exploring this. Everyone else is either trying to figure out how to charge for copies (including levies and taxtion) or how to sell something peripheral.

      The market for copies has ended. The market for intellectual work resumes.

      Art for money, money for art.

    • chris muller

      Thanks for a very interesting debate. As I consider myself about as Joe Average as you can imagine, I can only describe my own practices and habits. I commute to work by train (like a lot of people in London). I sit at a desk all day staring at a computer screen, eat my lunch at my desk and look at a couple of my favorite web sites including BBC and Techdirt. On my way home in the evening I always buy a copy of the Evening Standard and read it on the train going home.

      My point is this: As a computer user of more than 20 years, I like the convenience of the net for demand-driven search. For riding the train (and other reasons) I like the user interface and tactile feel of newsprint, but also like the fact that I will always see something unexpected, that I didn’t search for. Newspapers present “all the news that fits” including things I may have never thought to search for, and this randomness of content has an appeal that even Google can’t give me. Google doesn’t have a “show me something interesting that I am not thinking about” button. However, once I have decided on a topic, it makes me glad I live in the 21st century.

      So, I for one, will continue to use both online and printed content far as long as both are available.

    • I am starting to see that skills once revered and rather scarce (like great writing and photography, and even to some extent computer programming) are becoming commonplace. In the debate about content, I realize that technology has moved us along a path that truly puts more and more players on the field. (Extra interesting given the moaning early on that the Internet would make all our kids illiterate.)

      Certainly the increased abundance of skill in creating content is almost as much a factor in the current meltdown as the decrease (elimination?) in cost of digital distribution.

    • mermaldad

      I was a little disappointed that neither contributor suggested any concrete examples of scarcities that media outlets could sell. These are the heart of the tiers that they agreed on. So come on, commenters. What scarcities might you pay for? What things might you not pay for, but might influence you to come back to a particular site for news?

      Chris Muller mentioned being presented with something interesting that he wasn’t actually looking for. Chris, have a look at http://www.stumbleupon.com/ . If there was something like this specifically for news…

    • @mermaldad I might pay to have someone like Maureen Dowd, Thomas Friedman, or even David Carr respond personally to my e-mails. What’s valuable is not the column but the knowledge and experience of the columnists. And their time is scarce (and worth charging for!)

    • mermaldad,
      I agree that it would be great to look at what type of tiered, specialized content has sold well on sites. Sounds like an idea for a future post here. Maybe: “Your Guide to Tiered Paid Content”? If people want to supply some ideas here in comments, I’ll round them up in a future post.

    • Stop talking in terms of ‘content’.

      The notion of a copy as a receptacle for ‘content’ (an infinitely reproducible yet valuable comestible, ‘protected’ from theft by copyright) is anachronistic and fundamentally flawed thinking.

      Instead, think in terms of intellectual work (labour) and its delivery or communication (there is no copy) to the public.

      Those who are interested in the work being done (the audience interested in receiving that work) are naturally and logically those who will pay for it to be done. You all clearly recognise this, but you still then slip into thinking of it in business terms of producing and consuming ‘content’.

      The work is not content. This comment is not content. The work is mental effort, can be identified when fixed in a physical medium, and can be communicated. That’s all there is to it. Pay for the work, not the copies. The work is what takes the effort. A child can produce the copies for nothing, so start paying the authors for their work, and stop paying publishers for copies, and legislation that enables them to prosecute children for producing copies.

    • Crzen

      Its time to stop soft-stepping the issue and tell it the way it is because they just arent getting it. No matter how much you keep telling people they should pay you for what you do, they don’t want to and wont, period! Please, put up your paywalls and everything already, get it over with, go out of business, and maybe then you will figure it out. The old saying “lead, follow or get out of the way” speaks volumes here. To be brutally honest, no,the FT’s metered model has no value and Rupert Murdoch’s paywall will fail. Stop whining about it, get over yourself and move on. We already have and we don’t care! You’re just not that important any-more, Sorry.

    • Kristina Setzekorn

      I am interested in implications for the academic publishing model. Academics write research articles solely for the professional reputation gained by having them published. These reputations allow them to gain and keep employment at universities (enhanced reputations enable them to demand higher salaries when they move to new positions). Publishers earn $ through subscriptions (mostly academic library and individual researcher). This model is anachronisitc, in my opinion.

      If academics are providing the content for free to publishers, why not just provide it for free to everyone? This way, they would not have to pay for their own subscriptions, and university libraries could reallocate $ previously spent on journal subscriptions. If content were free, the articles would have wider readership and academic authors’ influence would be greater and reputation more enhanced.

    • Kristina Setzekorn

      Let’s also consider academic text book content. Here again, professor-authors make very little, while college students pay exhorbitant prices. These texts rapidly (and artificially) obsolesce, sometimes with new editions coming out twice a year (killing the market for used texts).

      Professors require but do not purchase the books, so they don’t consider the price. Students who purchase have little choice in purchasing required texts, so the supply/demand mechanism does not apply. This causes price inflation.

      Perhaps online texts could be published by the authors or their universities. Publishers would be disintermediated, or at least have their power checked enough to slow textbook price inflation?

    • Everybody seems to be stuck on content as the only valuable service to be provided by news organizations… What I am willing to pay for (and I would imagine that many of you would too) is a “clipping” service that would parse the millions of articles and generate a personalized news feed of reputable sources (if that is my preference)… all for a fee.

      It’s the parsing that I would pay for in a much larger number than the micropayments for authors or media sources…

      PS What ever happened to Millicent?

    • Kyle Kivett

      While I disagree with his statement that he is the “only person on the planet currently working on” the issue, Crosbie Fitch makes some excellent points. The true value of content is the work done by the producer of that content, not the dissemination of the content. I think the big news organizations are doomed, because we no longer need clearinghouses of information – we can do that work ourselves in a few minutes. To the gentleman who enjoys the randomness of the newspaper, I commend his disciplined use of the internet if he considers the newspaper more random. Links from social media sites have me spending far too much of my free time wandering about the interwebs…

      I think the ubiquity of information on the internet will eventually cause the cream to rise to the top. These creators of the best content will be paid for their work because it is worth paying for, much like musicians still make a living in spite of mp3 file sharing. True, revenue has been lost, but the spontaneity (specialness) of live performance still draws crowds, and artists have had to raise their standards to fight the “madding crowds” of potential competition.

      The same primary hindrance plagues the news industry and the music industry – a 20th century distribution model. The internet is a distribution SOLUTION, not a problem, but most old-school newspapers & record companies are focused on the concrete distribution end instead of the abstract creative end, and will suffer for their myopia.

      Creativity will triumph – a new profitable business model will emerge that pays the creator instead of the distributor and we will all look at each other and say, “Why didn’t I think of that?”

    • Kyle Kivett, you wisely foresee that “a new profitable business model will emerge that pays the creator instead of the distributor”, but I think the more intriguing question is not “Why didn’t I think of that?” (because like you, I did, so that’s not what we will say when we look at each other), but instead “Why is everyone else refusing to think of that?”

      Answering the question of how to make money when information wants to be free is a doddle in comparison to answering the question of “Why do people insist on the need to pay publishers for copies that kids can make and share for nothing, instead of the need to pay talented artists for their intellectual work?”

      The best answer I have to that conundrum is “Because that’s the way we’ve done it for the last three centuries and it is taboo to challenge our tradition, too terrifying to consider the possibility that our tradition may be wrong, that the youngsters we are prosecuting for sharing music aren’t actually criminals deserving of million dollar fines.”

      Please tell me of anyone (apart from myself) that is working on a way to enable an artist’s audience to pay the artist for their work (instead of their publisher for copies of it), and consequently a way that artists can be remunerated without persecuting their audience for sharing or building upon their work.

    • Consider a mass-sponsorship model for some (not all) news stories. For example, instead of trying to charge end users 25 cents or so for an article, motivate sponsors to buy in bulk, say 100 prepaid downloads for $25. Let any sponsor add a personal message (about almost anything), to go to each of the 100 people who use one of that sponsor’s prepaid copies. And let sponsors spread their prepaid downloads through social networks as they wish, easily sharable by ordinary email or other means

      End users can then download the content free and registration-free — paying the newspaper (or the band, artist, etc.) from the sponsorship, by the act of free downloading itself — as long as a sponsored copy is available. If none are, then end users will be motivated to help find sponsors — or maybe become sponsors.

      So the key question is, will there be enough sponsors? There are reasons for optimism:

      1. You don’t need many of them. In the above example, only 1% of readers need to be sponsors;

      2. Anyone on Earth who can pay online can sponsor any article distributed this way, in any amount, for any reason, any time one is in the mood. It’s just another e-commerce purchase — except that sponsors can optionally add a personal message, and note a password if they may want to change their message later. And like many other e-commerce purchases, sponsors can pay using various languages and currencies.

      3. Sponsors will get recognition, and have many other incentives. They can: reach a unique, content-targeted audience with their personal message; create a shareable gift worth money; distinguish their email from the run-of-the-mill messages with ordinary links that include no monetary privilege; promote articles they like for any reason; support a cause by rewarding the reporter, and/or with their personal message; and be recognized for their support in front of the social networks they choose.

      Also, sponsors can play the hero, scoring reputation for themselves and their cause by instantly making free copies available around the world, when they were not available before.

      And if all this isn’t enough to get sponsors, the newspaper, reporter, or artist, etc. can lower the per-download price. E.g. at 10 cents instead of 25 cents, the same $25 sponsorship will now reach 250 free users, not 100. Here is a powerful tool (even beyond supply and demand) for using price to keep sponsors and free end users in balance.

      I’m designing software for this mass sponsorship of online content, as a public, open-source project that anyone can use.

    • John, I think you’re on the right track.

      It sounds like you are proposing that people pay for the production of work (sponsorship), instead of an authorised copy of a published work.

      Of course, the work is delivered to the sponsors in the form of a copy, but it’s the production and delivery of the work they’re paying for, not the production and delivery of a copy. A kid can produce and deliver me a copy, but they can’t produce and deliver me the work.

      Others are describing this as mass patronage or micropatronage (given each patron among a massive audience contributes a relatively tiny amount of patronage).

      I’m pleased to find another who’s working in this area. :)

      The sites documenting my current work are http://contingencymarket.com and http://1p2u.com

      Instead of worrying about a portable account ID, I figure I might as well rely upon the publisher’s URL, at least for the time being.

      You seem to be going straight for a more distributed approach than an interim centralised solution as I am. I suspect RepliCounts are a better match for Doc Searl’s EmanciPay project than my system.

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