Micropayments Won’t Save Newspapers

Time Magazine, among other things, advocates “micropayments” as a solution for the struggling newspaper industry:

The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment. We need something like digital coins or an E-ZPass digital wallet — a one-click system with a really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a penny, nickel, dime or whatever the creator chooses to charge.

Gawker/ValleyWag offers an astute criticism of the approach (thanks Malcolm Lewis for pointing out):

The problem with micropayments is not technology. It’s that consumers are fundamentally uninterested in paying per article. Isaacson dismisses the problem of “mental transaction costs,” but it’s quite real. It’s almost impossible to determine the value of an article before you read it. And the amounts we’re talking about — 3 cents? 5 cents? 10 cents? — aren’t worth the time it takes to decide how much one is willing to pay.

People might be willing to pay for a “day pass” or individual edition (same thing online effectively) but I agree they’re not going to pay for bits of content (an article here, a video there). Online magazine Salon has done a version of the day pass approach for a long time; I’m not sure how effective it is. But Salon is still in business. :)

At this zenith of financial crisis what newspapers really need to do is get together and say to online readers, “We know you’ve been getting all this great free content for a decade at least, but we newspaper publishers are all going to fail if we continue down this path. We now need you to pay something for that great content” (a subscription, a membership, a rescue fee; call it what you like).

That kind of behavior, however, is legally prohibited as anti-trust activity. It wouldn’t be price fixing because publishers might charge different amounts. But this effort to change the culture of online news/content only works if everyone does in it concert and people don’t have free “workarounds.” For all these reasons it’s not something we’re likely to see.

NYTimes.com, the newspaper site with the most online traffic (18M monthly uniques according to Nielsen) could ask users to pay $19.99 a year, say, for access to the site. (You have to deal with the free rider problem somehow.) But if 18 million people paid just $19.99 per year that would represent $358 million dollars. Total 2008 revenues for the company were just under $3 billion (circulation was $900M).

How much would you be willing to pay for your favorite news site? The problem is we’ve all gotten used to visiting tons of sites or collecting tons of feeds for free. Probably can’t put the genie back in the bottle in this case. And there are going to be those who would argue what I’m hypothetically suggesting is totally misguided.

The “culture” of free, celebrated by Chris Anderson (now carefully qualified in a recent WSJ article), is the problem for newspapers — as the Time magazine article points out in its discussion of the history of online news. Anderson’s answer in an ad recession is a “freemium” model, which Salon has tried for news for a long time with mixed results I think.

I really have no idea what to recommend at this point. But I think I’m going to resubscribe to the Sunday print edition of the NY Times both for my nine year old daughter and as an act of patriotism.

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Related: Newspapers and magazines in near free fall (based on Q4 ad numbers, reported in MediaPost).

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11 Responses to “Micropayments Won’t Save Newspapers”

  1. Dan Vigil Says:

    I like the $19.99 a year model but I think this should be built in to the cost of other communications services. For example, the Verizon device mentioned in your previous post. Newspapers can make a deal with Verizon and offer to deliver news to the device, this would be included in the service fee. Or perhaps they can make a deal with local cable companies and deliver daily news content to the TV as part of a cable subscription.

  2. earlpearl Says:

    Kudo’s to you, Greg. Your daughter is fortunate.

  3. Greg Sterling Says:

    Interesting. Whatever the model I think that newspapers need to come together and find a way to charge for what they’re doing.

  4. mectruy Says:

    A new hope to be a :) maybe.

  5. 212Degrees Says:

    I think many would “pay” for a news site. IF ……maybe it was wrapped in convienience. Like my NYTimes iPhone app. If they told me it was $xx/mo to keep it, I may just pay that. I’d be paying more for the convenience of the APP and instant gratification to check the news anytime, in a great format. The way the local newspapers have discounted subscription packages for the past 10 years (Denver Post, buy sundays for .50 and get weekly for free), even getting $6/mo for the APP (news) would get them at par with what they were getting.

  6. Greg Sterling Says:

    Regardless of the precise form, which is of course important, they need to do something to get consumers to pay for the electronic version of their content.

  7. Tons More on Newspapers « Screenwerk Says:

    [...] David Carr at the NY Times voices a desire for traditional publishers to come together and tell everyone that they’re now going to charge for content. This is something I discussed as an unlikely scenario in an earlier post. [...]

  8. Ajay Says:

    Micropayments (mp) are clearly the answer, the only problem has been that they haven’t been implemented right. Normally, I ignore posts that put forth the dumb arguments against mp that you put forth, but you actually bring up some numbers and realize that journalism has to be paid for somehow, so I’ll address them here. Regarding a culture of free or consumers not being willing to pay, that’s clearly nonsense. Every time you leave a lightbulb or central heating on for a couple hours that costs you 1-50 cents. Do you agonize all day long about those charges? No, you use as much as you want and then look at the bill at the end of the month. If the bill is too high and you can’t afford it, you try to cut back the next month, wearing a sweater or being careful to turn off the lights when you leave a room. That’s exactly what will happen with mp: you’ll read whatever you want to read and at the end of the month you’ll look over the bill and realize you spent too many dollars drooling over gadgets at engadget, maybe you won’t refresh that bookmark this month as much as last month. 1-10 cent prices are too low to think about individually, just like the same charges in your house. However, unlike your house and the public utilities, you can shop around online: if you find that gizmodo has the same posts but generally charges less, you’ll just switch over to that site eventually. As for the paid model needing to be ubiquitous to succeed against free, another nonsense argument. The paid sites will thrive while the free sites will go out of business, just as they are today. The stupidity of this argument is mind-boggling as the only reason we’re even talking about paid is because free/ads clearly doesn’t work. Yet the free crowd keeps asserting that paid will not succeed against free, precisely while free is going out of business. As for your revenue numbers, I think that the reporting that a paper like the Times does can be cut down to $1 bil/year in costs, once you get rid of printing costs, ditch various useless bureaucrats, and get reporters’ salaries in line with reality. For 20 mil users, that comes out to $50/year, a price that most of those readers would be willing to pay. They won’t have to pay it up front, as they will pay with micropayments, and they won’t pay it to the Times, as most current newspapers won’t survive, but they will pay money to journalists to do their job. I’m working on a mp frontend for a payments startup so I obviously believe it can be done.

  9. Greg Sterling Says:

    iTunes music and iPhone apps give people hope re micropayments. And in Norway I believe people are doing lots of micropsyments for content. There are two broad issues: user experience and “culture.”

    The former can be addressed. But the latter is a problem from my point of view. There’s also the question of whether you could generate enough revenue with mp. As one of several revenue streams, selectively used, it could make a potentially meaningful contribution to newspaper revenues over time. But it’s not the solution in and of itself.

  10. Ajay Says:

    I maintain that it is the solution in and of itself and it will be so successful that it will kill off every other model, including advertising. As noted previously, “free” culture is nonsense, customers will adapt to whatever is offered. If two roadside apple carts setup shop and one is selling at a low price and the other is giving them away for free, of course the customers flock to the free. However, once the free cart goes out of business, as it inevitably will, they will have no choice but to pay for their apples: the same is true with online content. As for generating enough revenue, let’s assume that the cost of writing an article for the New York Times is $3000. If 100k people read that article, the micropayment fee can be set to 3 cents, not much. I see no rationale for your argument that mp will not be the sole and final solution.

  11. Google Offering Micropayments System To Newspapers « Screenwerk Says:

    [...] correctly asserts, however, that micropayments are not likely to be widely popular: While providing an option for micropayments will be important, we do not believe it will be the [...]

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