Micropayments: new business model or old?

Nick | 24 Feb 2009, 17:10

US think tank The Aspen Institute secured the front cover of Time magazine recently, thanks to a presentation from its CEO, Walter Isaacson, entitled “A Bold, Old Idea for Saving Journalism.“

In the speech, Isaacson wrestled with the issue that is central to the future of the publishing industry - should you give your content away for free or hide it behind a firewall and charge for it?

Although he argues that the aggregators, search engines and ISPs have profited disproporionately from selling advertising and charging the consumer for access to publishers’ content, Jeff Jarvis counters:

“As for Google: its detractors have the value proposition exactly backwards. Google shouldn’t be paying newspapers - newspapers should be grateful Google doesn’t charge them for the value it shares in links and audience. Google is their free newsstand.“

The same argument could be made for Drudge or Digg.  The validity of Jarvis’ argument is surely demonstrated by the emphasis that publishers place on optimising their content for search engines, providing their writers with lists of key words most likely to drive traffic.

Isaacson believes that the answer is not to be found in carving up the advertising pie a different way, but in identifying a practical system for charging consumers via micro-payments:

“If I ran the New York Times, Wall Street Journal, or Los Angeles Times, I would take the lead by creating my own digital coin purse or micropayment E-Z Pass and try to get other content creators to use it as well. Or I would work with a company such as Amazon, Pay Pal, Google, Apple, or Microsoft to partner in creating one. I would at the same time also start accepting the best of the existing micropayment systems. Just as stores take multiple credit cards, sites should accept multiple micropayment systems.“

And his comments will have chimed with many in the industry, as Jemima Kiss writes for the Guardian:

“When advertising slumps, subscription schemes such as those offered by the Wall Street Journal Online and the Financial Times begin to look newly attractive. Although based largely on expense account fees for business-critical information, the Journal’s success is being studied by colleagues at its News Corp siblings, the Times and Sunday Times. Although they remain tight-lipped on plans, they are at least discussing the option of subscription for a global audience of nearly 23 million unique users a month.“

Studies like this one suggest that the consumer will always seek out “blockbuster” creative content with high-production values, unique creative input and significant profile. In these cases, content owners can continue to charge for content, so long as they can protect their IP and develop effective distribution channels that meet consumer need. 

The trouble for newspapers is that unlike music labels and film studios, even the conglomerates no longer have any kind of monopoly on good writing, thanks the proliferation of high-qualty blogs and other forms of self-publishing.

What newspapers have is a stable of good content procucers, high-end content management systems (in some cases) and brands that guarantee a community of readers. As soon as micro-payments are introduced, the newspaper’s Google ranking drops, the readers defect and the value of the brand is diminished. Meanwhile individuals like Perez Hilton or Stephen Fry have become media brands that dwarf the profile of many newspapers that have failed to carry their readers with them online.

Even if micro-payments could be made practical for print content, where would you draw the line?

Today, every organisation is a media brand. Why would a consumer pay 2 cents to read the Time article about Isaacson’s ideas, when they can read them on the Aspen Institute website for free?