Why Small Payments Won’t Save Publishers

With continued turmoil in the advertising market, people who work at newspapers and magazines are wondering if micropayments will save them, with recent speculation in this direction by David Sarno of the LA Times, David Carr of the NY Times, and Walter Isaacson in Time magazine. Unfortunately for the optimists, micropayments — small payments made by readers for individual articles or other pieces of a la carte content — won’t work for online journalism.

To understand why not, there are two key pieces of background.

First, the label micropayments no longer makes any sense. Some of the early proposals for small payment systems did indeed imagine digital bookkeeping and billing for amounts as small as a thousandth of a cent; this was what made such payments “micro”. Current proposals, however, imagine pricing digital content in the range of a dime to a dollar. These aren’t micro-anything, they are just ordinary but small payments, no magic anywhere.

The essential thing to understand about small payments is that users don’t like being nickel-and-dimed. We have the phrase ‘nickel-and-dimed’ because this dislike is both general and strong. The result is that small payment systems don’t survive contact with online markets, because we express our hatred of small payments by switching to alternatives, whether supported by subscription or subsidy.

The other key piece of background isn’t about small payments themselves, but about the conversation. Such systems solve no problem the user has, and offer no service we want. As a result, conversations about small payments take place entirely among content providers, never involving us, the people who will ostensibly be funding these transactions. The conversation about small payments is also not a normal part of the conversation among publishers. Instead, the word ‘micropayment’ is a trope for desperation, entering the vernacular of a given media market only after threats to older models become visibly dire (as with the failed attempts to adopt small payments for webzines in the late ’90s, or for solo content like web comics and blogs earlier in this decade.)

The invocation of micropayments involves a displaced fantasy that the publishers of digital content can re-assert control over we unruly users in a media environment with low barriers to entry for competition. News that this has been tried many times in the past and has not worked is unwelcome precisely because if small payment systems won’t save existing publishers in their current form, there might not be a way to save existing publishers in their current form (an outcome generally regarded as unthinkable by existing publishers.)

Faith in salvation from small payments all but requires the adherent to ignore the past, whether existing critiques (e.g. Szabo 1996; Shirky 2000, 2003; Odlyzko 2003) or previous failures. Isaacson’s recent Time magazine cover story on micropayments, How to Save Your Newspaper, a classic of the form, recapitulates the argument put forward by Scott McCloud in his 2003 Misunderstanding Micropayments. That McCloud advanced the same argument that Isaacson does, and that the small payment system McCloud was proselytizing for failed exactly as predicted, seems not to have troubled Isaacson much, even though he offers no argument different from McCloud’s.

Another strategy among the faithful is to extrapolate from systems that do rely on small payments: iTunes, ringtone sales, or sales of digital goods in environments such as Cyworld. (This is the idea explored by David Carr in Let’s Invent an iTunes for News.) The lesson of iTunes et al (indeed, the only real lesson of small payment systems generally) is that if you want something that doesn’t survive contact with the market, you can’t let it have contact with the market.

Cyworld, a wildly popular online forum in Korea, is able to collect small payments for digital items, denominated in a currency called Dotori (“acorn”), because once a user is in Cyworld, SK Telecom, the corporate parent, controls all the distribution options. A Cyworld user who wants a certain kind of digital decoration for their online presence has to buy it through Cyworld if they want it; the monopoly within the environment is enough to prevent competition for pricing of digital goods. Similarly, mobile phone carriers go to great lengths to prevent the ringtone distribution network from becoming general-purpose, lest freely circulating mp3s drive the price to zero. In these cases, control over the users’ environment is essential to preventing competition from destroying the payment model.

Apple’s ITMS (iTunes Music Store) is perhaps the most interesting example. People are not paying for music on ITMS because we have decided that fee-per-track is the model we prefer, but because there is no market in which commercial alternatives can be explored. Everything from Napster to online radio has been crippled or killed by fiat; small payments survive in the absence of a market for other legal options. What’s interesting about ITMS, though, it that it contains other content that illustrates the dilemma of the journalists most sharply: podcasts. Apple has the machinery in place to charge for podcasts. Why don’t they?

Because they can’t afford to. Were they to start charging, their users would start looking around for other sources, as podcasts are offered free elsewhere. Losing user attention would be anathema to a company that wants as tight a relationship between ITMS and the iPod as it can get; the potential revenues are not worth the erosion of audience.

Without the RIAA et al, Apple is unable to corner the market on podcasts, and thus unable to charge. Unless Apple could get the world’s unruly podcasters to behave as a cartel, and convince all new entrants to forgo the resulting vacuum of attention, podcasts will continue to circulate without individual payments. With every single tool in place to have a functioning small payment sytem, even Apple can’t defy the users if there is any way for us to express our preferences.

Which brings us to us.

Because small payment systems are always discussed in conversations by and for publishers, readers are assigned no independent role. In every micropayments fantasy, there is a sentence or section asserting that what the publishers want will be just fine with us, and, critically, that we will be possessed of no desires of our own that would interfere with that fantasy.

Meanwhile, back in the real world, the media business is being turned upside down by our new freedoms and our new roles. We’re not just readers anymore, or listeners or viewers. We’re not customers and we’re certainly not consumers. We’re users. We don’t consume content, we use it, and mostly what we use it for is to support our conversations with one another, because we’re media outlets now too. When I am talking about some event that just happened, whether it’s an earthquake or a basketball game, whether the conversation is in email or Facebook or Twitter, I want to link to what I’m talking about, and I want my friends to be able to read it easily, and to share it with their friends.

This is superdistribution — content moving from friend to friend through the social network, far from the original source of the story. Superdistribution, despite its unweildy name, matters to users. It matters a lot. It matters so much, in fact, that we will routinely prefer a shareable amateur source to a professional source that requires us to keep the content a secret on pain of lawsuit. (Wikipedia’s historical advantage over Britannica in one sentence.)

Nickel-and-dimeing us for access to content made less useful by those very restrictions simply isn’t appealing. Newspapers can’t entice us into small payment systems, because we care too much about our conversation with one another, and they can’t force us into such systems, because Off the Bus and Pro Publica and Gawker and Global Voices and Ohmynews and Spot.us and Smoking Gun all understand that not only is a news cartel unworkable, but that if one existed, their competitive advantage would be in attacking it rather than defending it.

The threat from micropayments isn’t that they will come to pass. The threat is that talking about them will waste our time, and now is not the time to be wasting time. The internet really is a revolution for the media ecology, and the changes it is forcing on existing models are large. What matters at newspapers and magazines isn’t publishing, it’s reporting. We should be talking about new models for employing reporters rather than resuscitating old models for employing publishers; the more time we waste fantasizing about magic solutions for the latter problem, the less time we have to figure out real solutions to the former one.

121 Responses to “Why Small Payments Won’t Save Publishers”

  1. Rupert Murdoch vs. The Sandman. | Mass Comments | Blogs | Loyola University New Orleans Says:

    [...] Others don’t. [...]

  2. Sket på nettet den 01.10.09 Says:

    [...] Why Small Payments Won’t Save Publishers « Clay Shirky — 4:55pm via [...]

  3. Bland dig i debatten på politiken.dk Says:

    [...] Internettet har lige rundet det skarpe hjørne, 40, og blev i den anledning fejret med boller, lagkage og fødselsdagsopsang i The Economist, hvor der lød et lidt trist hurra: ”En midtvejskrise truer Internettet”. Det er ikke overraskende, at en et konservativt medie som The Economist går til Internettet med samme begejstring, som vi andre går til opvasken. Den samme dystopiske tilgang fornemmer man også af og til hos chefredaktører fra etablerede medier, som ser Internettet som en ting, man skal forsvare sig imod og beskytte sit indhold imod. Den evige debat om, hvorvidt medier som fx New York Times og L.A. Times skal tage mikrobetaling for deres indhold, er et godt eksempel på en reaktiv tilgang til Internettet, som Internet-eksperten Clay Shirky også har sagt ved flere lejligheder. [...]

  4. This week in media musings: Advocacy journalism’s (bogus) failings and more paywall options | Mark Coddington Says:

    [...] this year’s manifesto on the subject from Time’s Walter Isaacson, and here’s a refutation from new media guru Clay Shirky. In light of the Google micropayments news, journalism prof Mindy [...]

  5. Why I want to pay for news | Sealed Abstract Says:

    [...] of all, I’m in the minority.  Lots of smart people don’t like paying for news.  A new story about why paying for news is bad shows up in my RSS reader every [...]

  6. MISCmedia » Blog Archive » SAVING THE P-I, PART TEN OR ELEVEN (I lost count) Says:

    [...] Mark Potts, Alan Mutter, Steve Outing, Philip Meyer, Jane Stevens, Dan Vigil, Jeff Jarvis, Clay Shirky, my pal Paul Andrews, and ex-Microsoftie Michael [...]

  7. The Future of News: In quotes | idio Says:

    [...] it up in his own delicious way, Clay Shirky says: The word ‘micropayment’ is a trope for desperation, entering the vernacular of a given [...]

  8. Why ITV’s micropayment plan is unlikely to make the Grade | DAILYMAIL Says:

    [...] cite Apple’s iTunes Music Store as proof that micropayments can work on the net. But, as Shirky argued earlier this year, the fee-per-track model works because this is a rare example where no alternative exists. [...]

  9. Why ITV’s micropayment plan is unlikely to make the Grade | Journalism.co.uk Editors' Blog Says:

    [...] cite Apple’s iTunes Music Store as proof that micropayments can work on the net. But, as Shirky argued earlier this year, the fee-per-track model works because this is a rare example where no alternative exists. [...]

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  11. In Depth: How nanopayments finally came of age | TeCZonE Says:

    [...] a response to the Time article, blogger Clay Shirky suggests nanopayments can only succeed when a provider has a monopoly on a particular type of content and a [...]

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    [...] a response to the Time article, blogger Clay Shirky suggests nanopayments can only succeed when a provider has a monopoly on a particular type of content and a [...]

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    [...] näistä sovelluksista kaatuvat turhanpäiväiseen kolikoiden pyörittämiseen, jota Clay Shirky kuvaa termillä “nickel and dimed”. Tälläisessa toiminnassa on se vika, että valuutan ylläpitäjä haluaa vain ja ainostaan [...]

  15. Micropayments? Steve Brill is not optimistic. » Nieman Journalism Lab Says:

    [...] see the arguments in favor by Scott McCloud and, more recently, David Carr as well as the ultimate micropayment takedown by Clay Shirky. Steve Outing also generated a lot of buzz in February with his piece on a [...]

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    [...] nyhedsindhold. Indholdet er for generisk og ganske enkelt ikke værd at betale for. Og folk, der primært bruger nyheder som et objekt at samtale med andre om, skal nok få deres nyheder gratis stadigvæk. Konkurrencen er simpelthen for velfungerende på [...]

  17. Why micropayments won’t corrupt journalism | Dave Lee / jBlog Says:

    [...] Clay Shirky says: The threat from micropayments isn’t that they will come to pass. The threat is that talking about them will waste our time, and now is not the time to be wasting time. The internet really is a revolution for the media ecology, and the changes it is forcing on existing models are large. What matters at newspapers and magazines isn’t publishing, it’s reporting. We should be talking about new models for employing reporters rather than resuscitating old models for employing publishers; the more time we waste fantasizing about magic solutions for the latter problem, the less time we have to figure out real solutions to the former one. [...]

  18. The New York Times Is Preparing For The Future » Design, Digital Media » Russell Heimlich Says:

    [...] I think this is the first step to the New York Times setting up a pay wall like the Wall Street Journal. Unlike the Wall Street Journal, The New York Times looks to be pushing a monthly fee over a micro-payment business model which will ultimately fail. [...]

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    [...] {Shirky | Continue reading} [...]

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  21. Why I dislike micropayments, don’t mind charity, but really have a better idea « Networked News Says:

    [...] emphasize that readers are active and don’t simply passively consume the news. Users want to re-purpose the news, get more out of it. We also don’t want to forget that creators aren’t just writers; [...]

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