Micropaying Rupert

Journalism academic Terry Flew blogs about a recent paper by a UK colleague:

Recently published on Open Democracy has been an influential paper by Angela Phillips on “The Future of Journalism“. The paper was presented at the Media, Power and Revolution: Making the 21st Century, held in London and hosted by the Goldsmiths Leverhulme Media Trust.

There are certainly valid points that Phillips makes. The point that the much talked about “crisis of journalism” is actually a crisis of traditional news business models, at a time which in other respects is an exciting one for journalism, is well made. Similarly, the limits to the Huffington Post-type business model, where more and more content is aggregated, and drawn from as many non-paid sources as possible, are timely and important.

The question remains of, as Phillips puts it:

Journalism, done well, is an expensive business and it has to be paid for. The question is not whether it should be paid for but how.

The problem is that Phillips’ answer enters into the realms of conspiracy theory. …

Maybe the real reason why we cannot have a simple payments system, that doesn’t require complex and off-putting log-ins, is because that would prevent the big players from getting their hands on all that private data. It is in the interests of big players to keep small players out of the game and they are doing it by telling us that information wants to be free.

Flew observes that there are no technological barriers to media organisations implementing anonymous micro-payment systems allowing casual readers to access and download individual articles for (say) a few cents.  I can’t help wondering why someone hasn’t tried it.  Or have they?  Do Troppo readers know of any examples?  Examining my own reactions, there’s no way in the world I’m going to pay a few dollars a week to Rupert Murdoch for an online subscription to The Australian, but I would certainly click to access individual articles that interested me at (say) 5-10 cents a pop.  My gut feeling is that I’d probably spend on average $1-1.50 per week by such a system, which is less than Rupert charges for a subscription but $1-1.50 more than he receives from me now.

In more rarefied fields casual access “micropayments” seem to be getting more common.  For example, I noticed only a few days ago that the Alternative Law Journal offers a casual individual article purchase option.  However at $8.80 per article they’re not really “micropayments” except perhaps from the standpoint of a highly paid QC.  I can’t help wondering how carefully the Alternative Law Journal has actually thought through this initiative.  The main consumers of journal articles are academics and university students.  Neither group is likely to pay for casual access because we can get it for free anyway through our university’s subscription to the journal or by inter-library loan.  For the small number of casual browsers who come across an article and decide they’d like to read it, a price of $8.80 will almost certainly serve as a complete deterrent. It doesn’t make any obvious sense given that the marginal cost of allowing articles to be downloaded is zero and the extra revenue is money they otherwise simply won’t receive. Fifty cents or a dollar, or two dollars at most would surely be much more sensible.

As for News and Fairfax,  I have no idea why they don’t try a casual download micropayments option.  Anyone want to venture an explanation?

About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.
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15 Responses to Micropaying Rupert

  1. Tony Healy says:

    For large publishers, the fear is that micropayments would become metering systems, discouraging readers from accessing articles other than the ones they see as really useful. Over time this would reduce site traffic, and thus the already fragile advertising revenue and the publication’s authority.

    As well, for micropayments to work, the publlisher has to aggregate the payment transactions for each consumer, in order to avoid the small but significant transaction costs imposed by financial institutions. That means the consumer has to be enlisted into a subscription arrangement anyway, in which case micropayments represent much the same marketing cost, but lower revenue per subscriber.

  2. Antonio's says:

    I think one of the problems has always been that the distance from free to even registration, let alone micropayment, is actually quite large.

    Apple managed to get micropayments to work with their app store, but people had to have an apple account anyway if they wanted to have their iPhone working properly.

    I doubt I’d bother with registering for any newspaper to read their stories, though. Having said that, I do subscribe to Crikey.

  3. Donna Stephens says:

    I was shocked recently when I went to go into the Herald Sun (which was recently free) to see that you have to pay for it! Living overseas I rely on my Australian news online. It makes me angry that I have to subscribe to the Australian but what choose do I have? I would not want to pay per article with aco preference of being able to access the complete newspaper. Mr Murdoch you are a very greedy man and unfortunately I am going to make you richer by subscribing!

  4. conrad says:

    “That means the consumer has to be enlisted into a subscription arrangement anyway, in which case micropayments represent much the same marketing cost, but lower revenue per subscriber”

    What about i-tunes and buying apps ? These are pretty much micro-payment sites and work just fine without subscriptions.

  5. conrad says:

    Oops, just noticed Antonio said that too.

  6. I’d echo what Tony said – transaction processing costs are always the major concern of micropayment systems and that this is normally addressed by “buying” a certain amount of a virtual currency for use on sites.

    The original micropayments which sprung up during the dot com boom were currencies like Flooz, Beenz, CyberCash, Bitpass, Peppercoin and DigiCash which aimed for broad adoption on all sites. However, critical mass was never reached and people ended up with a currency they couldn’t usefully spend.

    Today, a more successful brand of micropayments targets a specific ecosystem. The best known are iTunes and game networks – XBox, PS, Wii, Kongregate – all of which use “credits” that can be spent on multimedia, games, or other perks.

    So the problem for newspapers is that you would have to be a regular consumer to make the micropayments worthwhile; in which case, of course, just buying a subscription would seem to be a better bet.

    Online journals, on the other hand, could really benefit if they just got their act together. If I could buy “article credits” they worked on any of the major journals, then I would probably do it since I often want to buy articles but the rate severely puts me off. But I’m not holding my breath on that one!

  7. (As Antonio/Conrad note, iTunes doesn’t have a minimum spend and doesn’t use credits – but it’s still a payment aggregator since it only charges you daily instead of per transaction. And the average value of a customer can be expected to be much higher with lots of return business. This takes most of the micropayment sting out of the process.)

  8. Jacques Chester says:

    Good old micropayments. There’s been many variations tried, so far none have stuck.

    In a fit of blind optimism I will this year be working on my own startup in this very field, based on my honours project research. Stay tuned.

  9. aidan says:

    Donna, why do you need to pay for the Herald=Sun? Fairfax is still accessible
    free as are the ABC and SBS.

  10. Ray says:

    I agree Donna! How dare Rupert Murdoch attempt to charge money for the consumption of a service he is funding! Greed in the extreme! And how about those bastards at Holden? I mean, I know it costs them a lot of money to design and build cars, but I want one for free, goddammit!

  11. Donna Stephens says:

    Thanks Ray for your insightful reply. An online service that has always been free compared to the purchase of a car.. good comparison!

  12. Ray says:

    sigh …

  13. Andrae Muys says:

    Ray, your comment betrays a gross ignorance or indifference to over three hundred years of debate and discussion on the issues surrounding digital media. Donna’s offhand dismissal of you, while couched in simplistic and naive terms, was still more than you deserved.

    On the subject of micropayments, Tony’s comment is the key insight gained from the various failed attempts at such systems in the 80’s and 90’s. Adding even a 0.001c charge to the process of “following a link”, fundamentally changes the social relation from ‘conversation’ to ‘transaction’. This change destroys most of the social surplus previously enjoyed by the reader, which ironically in turn regularly reduces the value of the article to such an extent that the article is no longer marketable.

    The problem is that this shift from $0 to $any is a discontinuity on the demand curve.

    In otherwords, assume I value of a non-micropayment article at $2.
    The change in the social relationship and the friction imposed both on me, and my social circle by a micropayment of $1, reduces the value I place on the article to $0.10.
    As a result, while it may well appear to the article publisher can charge me up to $2 for the article, in fact once they start charging anything at all, the most they can charge me is $0.10.

    This then runs up against the transaction cost issues mentioned by other commenters. Even extremely small transaction charges per transaction are amplified by the extremely small values of teach transaction; routinely swamping them. The problem here is that the once you take transaction costs into account, it is not hard for the residual value in the transaction to be less than the subscription or advertising revenue displaced by charging using micropayments in the first place.

    All this is to say that you are dealing with an extremely non-linear system, with strong hysteresis (see Donna’s original comment). It isn’t really surprising that no one has managed to make it work in the past; and I for one won’t be surprised if no one ever manages to make it work sustainably in the future.

  14. Ray says:

    300 years of debate about digital media? Really? Curious …

    IMO paywalls aren’t designed to encourage you to spend money on subscribing or buying individual articles via the web. They are designed to encourage you to just buy the paper with your morning coffee – where the bulk of advertising revenues still lie.

    If you want it, you pay for it. If you don’t, it will eventually just go away. That goes for news websites and newspapers in general.

  15. Andrae Muys says:

    Debates regarding the moral, economic, political, and social issues surrounding non-rivalrous, non-excludable, low marginal-cost public goods? The dawn of the enlightenment would be the latest you could date their commencement. Indeed, the Statue of Anne was 302 years old on the 5th April this year. Jefferson’s famous letter to Issac McPherson has its 200th birthday on Aug 13 next year. When it comes to exclusively digital media, some of the debates surrounding the piano roll are over 100 years old[1].

    As to the rest of your comment, the topic is not “should we pay for news reporting”, it is the feasibility and desirability of micropayments.

    A few links from the last time we went around this particular merry-go-round:

    http://www.shirky.com/weblog/2009/02/why-small-payments-wont-save-publishers/

    http://techcrunch.com/2009/05/18/there-we-go-again-no-micropayments-wont-save-journalism/

    http://abstractfactory.blogspot.com.au/2009/02/c-shirky-vs-w-isaacson-on-small.html

    Personally I feel that between the massive qualitative speedbump between $0 and $some, and being on the wrong end of a steep hysteresis, micropayments are a will-o’-the-wisp.

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