The Great Debate on Micropayments and Paid Content, Part 2

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.

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.

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.

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.

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.

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.

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.