By paulgillin | February 9, 2009 - 9:11 am - Posted in BusinessModel, Future of Journalism, Journalism, NewMedia, Solutions

A campaign for micropayments is beginning to gather steam in the news business, so now’s a good time to look at what journalists can learn from the recording industry.

Walter Isaacson’s lead piece in Time about How to Save Your Newspaper has got people talking. Isaacson argues eloquently that the iPod and the Kindle have paved the way for a business model based on “micropayments,” in which readers pay a few cents for content that’s easy to access, legal and convenient:

“We have a world in which phone companies have accustomed kids to paying up to 20 cents when they send a text message but it seems technologically and psychologically impossible to get people to pay 10 cents for a magazine, newspaper or newscast,” he writes. “The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment.”

Isaacson is dead right. The only salvation to newspapers’ current dilemma is to find a way to reverse that tide that has conditioned readers to believe that information should be free. Now is the time to start.

The End of Free

Can you really put the genie back in the bottle? Conventional wisdom is that once newspapers began giving away their stuff for free, the game was over. But history has shown that that isn’t the case.

itunes-logoA decade ago, Napster briefly tried to make music free. When the Recording Industry Association of America applied legal pressure to shut down Napster, the wisdom was that music-sharing would simply be driven underground in a maze of peer-to-peer networks like BitTorrent and BearShare. That happened, but only to a degree. Apple’s pay-by-the-drink model has flourished and even BearShare has shed its spyware-ridden past in favor of working with music publishers. Free file-sharing will always exist, but the music industry has successfully convinced fans that swapping copyrighted material is wrong.

The recording industry thought it killed Napster, but what really put the stake through its heart were bands like Metallica, who went directly to their fans with a passionate argument that pirating music was killing the golden goose.

Artists Drove Transformation

The evolving model in the recording industry harnesses the best of both worlds. New bands freely give away their music in hopes of generating a following that can be monetized in paid downloads and concert tickets. Successful indy bands like The Airborne Toxic Event enable their fans to stream songs on their websites but charge for the convenience of downloading. These bands are making money by earning the right to charge for their work.

The reason a legitimate paid model is evolving in the recording industry isn’t because recording companies are driving it. It’s because the bands are. The secret has been a grass-roots campaign by individual artists to convince their fans that music has value and that every 99-cent download is a vote for the band to continue its work.

So what’s the lesson for the news business? For starters, it’s that the solution doesn’t begin with newspaper companies but with individual journalists. Newspaper publishers won’t convince readers to pay for information because their motives are suspect. They’re too invested in the print model, just as the recording industry is too invested in CDs. This is the problem with campaigns like The Newspaper Project. It tries to convince people that newspapers have value, but people don’t care about newspapers; they care about information.

The only way a micropayment model can flourish is if individual journalists carry the flag. It’s up to reporters and the emerging breed of online news organizations like Talking Points Memo to convince their fans to fork over a few pennies to consume their stuff. Perhaps these organizations can steal a lesson from the music industry by giving away their content free on their website but charging for downloads to a Kindle. If readers perceive the value, they’ll pay.

Diversify Revenue

The second lesson is that journalists need to diversify their revenue models. Long Tail author Chris Anderson has proposed that in the future, people who make their living producing digital content will have to give away a version of their products for free and charge for something else: perhaps the convenience of a download, a speaking fee or even a printed version of the same information.

The key is to discard assumptions that news can only be delivered by large monopolistic organizations with legions of journalists whose salaries are funded by advertising. In the future, the brands of individual journalists will be just as important as those of the news organizations they work for. If some prominent columnists and editors can mount a campaign to convince readers that content deserves to be funded, a new model can emerge.

Prior to the dot-com collapse of 2001-2002, a lot of information was being given away for free. The bursting of the venture capital bubble forced the survivors to figure out sustainable business models. Most failed, but those who succeeded kicked off a new round of growth. The same can happen in the news industry. It will take a grass roots effort by those who deliver the news to change the minds of the reading public.

What do you think? Can micropayments save the news business? Post your comments here.

Comments

comments

This entry was posted on Monday, February 9th, 2009 at 9:11 am and is filed under BusinessModel, Future of Journalism, Journalism, NewMedia, Solutions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

16 Comments

  1. February 9, 2009 @ 9:25 am



    I don’t think the answer is *just* finding a payment method, though I do like micropayments. Like TimesSelect showed, to have a paid model for something you have to ensure someone can’t get it free elsewhere. So if newspapers try to monetize the everyday wire stuff, their sites will be ghosttowns. They also need to have unique, intersting content that appeals to their readers. That will get people to pay. The rest can just draw them in, continue to gather impressions for the advertisers. But if a TV station charges someone to watch a newscast and it’s all about waterskiing squirrels and promos for American Idol, they’re done for.

    Posted by F
  2. February 9, 2009 @ 10:24 am



    There were vast experiments with micropayments in 2001 in Slovak republic. Some banks created special micropayment accounts for customers and connected newspaper publishers, news agencies, weather forecast providers, traffic information providers to the system. Micropay was easy to use, just one click more for small payment authorization, but it never took off to commercial success, because of prevalence of free ad based content. There still will be someone who will provide content for free, unfortunatelly.
    If some model of payment for information should succed, it might be some sort of mobile phone payment (not SMS) – a new function on mobile phones.

    Posted by Stefan
  3. February 9, 2009 @ 10:32 am



    I thought sooner or later you newsies would figure out that you do not nor did you ever manufacture a product. I guess not.

    “News” is not a product, it is merely unshared information. Newspapers and television and radio are broadcast distribution systems. The value broadcast managed to temporarily earn for the past few decades was because it could control when and how information was shared – a monopoly. Once “news” is shared, it no longer has value, nor can it be controlled again.

    The web is a much superior system of information distribution as it combines durability with moving pictures and sound. It flows around and through conventional information distribution systems.

    As the web becomes more ubiquitous, advertising choices will increase and drive advertising costs down. As scarcity decreases, the ability of advertising to produce income for distributors will also decline.

    There is nothing anyone can do about any of this. It is technological progress that cannot be reversed.

    Posted by Walter Abbott
  4. February 9, 2009 @ 11:44 am



    […] online news organizations put the genie back into the bottle? Paul Gillin at NewsPaperDeathWatch think that if news organizations can think like record execs did … A decade ago, Napster briefly tried to make music free. When the Recording Industry Association of […]

  5. February 9, 2009 @ 11:51 am



    I’m not entirely convinced that if the news business makes it easy for people to pay that they will actually do so. We may be unpleasantly surprised to discover exactly what our product is worth to them.

    But, to follow this thread in the direction it’s going, iTunes succeeded because it was not associated with a particular publisher, but was a one-stop place to buy music. If I had to go to the Sony store and the Warner store and the indy store, I would never have bothered.

    Likewise, one-off efforts like the plan for the NYT that Steve Brill is promoting seem doomed to me, because they expect consumers to set up accounts for each media source. If, however, I could set up my credit card for micro-payments to a wide array of sources, I might be more likely to play along.

    Posted by Tim Windsor
  6. February 10, 2009 @ 8:31 am



    Micropayments may work for music downloads, but digital downloads are far from a perfect solution. CD sales continue to plummet with downloads not making up for it. CDs were great for the labels because they could bundle bad songs with popular ones. iTunes works because it’s a safe, easy-to-use one stop shop for music, movies and tv shows, and it’s branded with the iPod.

    However, the college crowd continues to share music, movies and tv shows by swapping iPods or streaming content online for free (though with short ads).

    I don’t think micropayments will work for the news. So many different sites have the same wire stories, which can also be accessed for free on Google News. I agree with F that they need original content. And if I had to pay a penny each time I clicked on a news link, I’d be ringing up a couple bucks a day.

    But I do think people will pay for the news. How about a BBC-style model where ISPs charge each subscriber a fee that gets distributed to different news organizations? (Not sure how blogs or Internet-only news sites would fit into this.)

    Posted by Steve
  7. February 10, 2009 @ 8:54 am



    Everyone sounds pessimistic about the idea. I agree it’s a long shot, but what alternatives are there? The ad-supported model is a thin business proposition and ad rates are only likely to go lower. If content is unique, valuable and only available from one source, would you pay for it, particularly if the cost is not an issue?

    I agree that people won’t pay for wire service copy. They’ll pay for something of clear value that they can’t find elsewhere. Maybe that’s coverage of local politics or in-depth coverage of their favorite football team. Maybe it’s the work of a particular reporter or columnist. I’m not sure Times Select was such a bad idea. The Times reportedly pulled the plug on the project because columnists complained that their audience was too small, but is a small, committed, financially involved audience any worse than a large audience that gets your stuff for free? The newsletter industry thrives on audiences of a few hundred or a few thousand. It may not be a lot of eyeballs, but it’s a living.

    Tim’s right: If micropayments are a title-by-title proposition the whole idea will fail. We’ll need an iTunes-like destination that brokers transactions, lets people fill up their accounts and does the whole thing in the background. I do think there’s a lesson in the recording industry experience, but we have to be willing to let go of the current model, stop thinking about big numbers and accept the fact that markets and audiences are atomizing. You can profitably monetize small audiences, but you first have to buy in to the proposition that small audiences are okay. I’m not sure many newspapers or journalists are ready to do that.

    Posted by paulgillin
  8. February 10, 2009 @ 2:19 pm



    […] How Micropayments Can Work (newspaperdeathwatch.com) […]

  9. February 10, 2009 @ 11:11 pm



    In comparing the music micro-payment system to journalism I only need one question answered: How many journos have a following as devoted or sizable as Mettalica? How many have a following that has kept up with them as long or rabidly as Bruce Springsteen’s or the Rolling Stones’ audiences? How many beat writers covering towns, transportation, education etc, etc can ever expect a fan-base equivalent to the local high school kids who play once-a-month at the VFW? Maybe micro-payments can work, but comparing news and journalists to music and musicians doesn’t fly on any level.

    BTW, record companies still aren’t happy with the iTunes type set-up because they used to be able to shop an entire album for $16 and now most fans are paying 99 cents for a single song (they don’t want the rest). http://www.commercialappeal.com/news/2009/jan/02/music-lovers-still-singing-single-song-chorus/

    Likewise, artists are wising up and realizing that with the internet they may not need a record company at all. My kids like Nevershoutnever, a one-man-band that has become a hit without a major label behind him. Guy is set to release his first full-length album with a big-name producer on iTunes. He has no record company, but is number 1 on the Billboard hot singles chart. Even established acts such as Nine Inch Nails are releasing their music for free in all sorts of formats (e.g. lossless separate instrumental tracks so you can recut song or album yourself). How do those analogies work for the news business?

    Perhaps the only comparison between newspapers and music should be that major labels are facing the same kind of failure as the print companies for much the same reasons: they can’t figure out the future and have invested years of time and millions of dollars trying to figure out how to hold onto the past.

    Posted by sizzlingjboy
  10. February 11, 2009 @ 6:04 am



    Paul,

    You are largely right on in the post above — it is individual journalists, and not large news organizations, who are most likely to make a success of the paid content model. These journalists are the ones who possess the unique expertise, reputation and ability to regularly create targeted, actionable content that people will pay for.

    My company, SubHub, provides a platform for easily managing and publishing paid subscription websites. Many of the people who come to us are journalists, authors, consultants and other experts who understand their niche and know how to create valuable, actionable content for their audiences. We have hundreds of sites in our network. So we know the subscription model works.

    Where you go off-track in your post above, and where the current conversation has gone off-track in my opinion, is the emphasis on micropayments. I personally don’t understand why this seems to be the talked-about model, when there is no widely-adopted micropayment platform even available (yes, I know some exist and could in theory become widespread, but they’re not right now). This is the old trap of having to come up with a technological solution first, when really what is needed is a business solution.

    Will newspapers come up with a micropayments technology themselves? Are they waiting for someone else to provide one? How long will it take? How long will consumer adoption take — if it happens at all?

    To get on with charging for content, create unique content that people are willing to pay for because they perceive it to be of value to them, and implement a subscription fee — something that’s doable today without major technology adoption headaches.

    Kind regards,
    Evan Rudowski

    Posted by Evan Rudowski
  11. February 11, 2009 @ 12:17 pm



    Nobody is running the numbers in micropayments, obviously. We already have micropayments: it’s called online advertising.

    I said this on Newsosaur yesterday: online ads already can produce a penny per page view … who on earth can possibly surmise that even smaller payments would do any good? Publishers can get the penny, but they need a dime to cover the cost of producing the content. Find that dime and your troubles are solved. Getting rid of offices and printing presses might cut it to a nickel, but you’ve still got to come up with five times the revenue generated by online ads. Good luck with that.

    Posted by tom mangan
  12. February 20, 2009 @ 11:12 am



    […] 09, 2009 – 9:11 am How Micropayments Can Work by Paul […]

  13. February 23, 2009 @ 10:18 pm



    […] know the idea of micropayments for digital content is nothing new, but most solutions require a surfer to sign-up for yet another service first, or surfers must […]

  14. March 4, 2009 @ 6:15 am



    In my opinion, the only reason the micropayment system works so well for itunes is that people trust them to not steal their credit card information. The fact that its just $.99 a song fuels their impulse driven purchasing, the thought that “maybe i shouldnt buy this online with a credit card” doesnt even cross their minds because the apple store is safe. For the micropayment system to work for other less “safe” sites the buyer has to trust that he isnt just dumping his credit card information online where anyone can grab it up. The solution for these websites is to use a company like OneTouch Online Purchasing where you can charge whatever you download to a trusted source like a cellphone service provider or an ISP. The buyer doesnt have to worry about phishing and fraud scams because he isnt putting any secure information online. Companies like OneTouch Online Purchasing is to digital content providers and customers as the apple app store is to its own customers, a trusted site where one can buy media online without having to worry about any consequences (other than the amount of their monthly bill)

    Posted by Alex
  15. April 6, 2009 @ 10:39 am



    Free file-sharing will always exist, but the music industry has successfully convinced fans that swapping copyrighted material is wrong.

    In my experience, this is not true, but in any case it is simply not relevant. The value added by the record companies (finding acts, distributing their music) has disappeared. Consumers may think swapping copyrighted material breaks laws, but they’re simply acting rationally by doing so. The overwhelming majority of music fans around the world have stopped buying music – that would be why the recording industry’s sales are tanking. iTunes has monetised the convenience of finding everything in one place, without viruses or spyware piggy-backing on the content.

    That would also be why people are flocking to free services like Spotify – because it’s figured out that people want convenience and quality (a la iTunes), and they’ll put up with some ads to get it.

    Posted by Trippenbach
  16. June 18, 2009 @ 12:14 am



    […] be pretty easily pick out how totally my brother has drunk the kool-aid of the bass-akwards mind fuck that the ‘old media’ folks try to sell […]