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. Journalista - the news weblog of The Comics Journal » Blog Archive » Feb. 12, 2009: The opposite of a snob Says:

    […] Clay Shirky explains why micropayments won’t save publishers. […]

  2. dispatches from TJICistan » Blog Archive » micropayments Says:

    […] http://www.shirky.com/weblog/2009/02/why… […]

  3. More on micropayments | Nicholas White's Personal Weblog Says:

    […] out came the naysayers, including Clay Shirky.In an update of his longstanding opinion, Shirky says it won’t work. He might be right, but I have a couple problems with his post.”Meanwhile, back in the real world,” […]

  4. Archimedes’ Hot Tub » Blog Archive » Clay Shirky is smart, but that doesn’t make him right Says:

    […] Shirky has an interesting post, Why Small Payments Won’t Save Newspapers, on whether micropayments will save the newspaper industry, sparked by Walter Isaacson’s cover […]

  5. Why I dislike micropayments, don’t mind charity, but really have a better idea « Network(ed)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; […]

  6. What’s missing from the debate over paying for the news « Ink-Drained Kvetch Says:

    […] few journalist-centric views — and they are rare — are here and […]

  7. Breaking news: broken news « The Hannibal Blog Says:

    […] Clay Shirky (arguing against micro-payments, previously featured here) […]

  8. Tab-clearing linkdump! Says:

    […] Shirky rebuts the current Time cover story about how to save newspapers with […]

  9. A balela dos micropagamentos « Webmanário Says:

    […] É o que nos relembra, agora, Shirky. […]

  10. Do We Really Need to Save Newspapers? « Tape Noise Diary Says:

    […] Why Small Payments won’t save Publishers […]

  11. Small Touch Lamp Says:

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  12. Geeked » Clay Shirky on the recent resurgence of the micropayments fantasy Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky. business models, converstion, micropayments, MSM, publishing, web publishing […]

  13. Links for 11_Feb_09 « The Centre for Investigative Journalism News Blog Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky […]

  14. Why micro-transactions won’t work » Games Brief Says:

    […] latest post discusses the futility of micro-transactions for online publishers. His primary target is journalists hoping to sell their articles for anything from cents to dollars […]

  15. Economics Doesn’t Work In A World Of ‘If Only…’ | The-Informer Says:

    […] work, but it seems he’s still out there pitching the idea. Clay Shirky did an even better job dismantling the concept, but last night Isaacson appeared on the Daily Show with Jon Stewart to pitch the same ridiculous […]

  16. Hypercrit » Shirky says micropayments won’t work Says:

    […] of the critics out there don’t think they’ll work. One famous critic, Clay Shirky, has a particularly realistic argument against these micropayment […]

  17. Time » Blog Archive » Better Read Than Dead Says:

    […] Bloggers and old media guys alike  have derided the idea. People don’t want to pay for Web content online, they argue. They don’t want to be nickeled and dimed. Even Nick Carr, who gets it mostly right, and  understands that the situation is volatile and fluid, either doesn’t believe or doesn’t see that the salvation for the journalism business won’t come from the Web. (Or to phrase it as a positive: Thinks that newspapers and such still have a chance to find real revenue on the Web.) […]

  18. Economics Doesn’t Work In A World Of ‘If Only…’ Says:

    […] work, but it seems he’s still out there pitching the idea. Clay Shirky did an even better job dismantling the concept, but last night Isaacson appeared on the Daily Show with Jon Stewart to pitch the same ridiculous […]

  19. TPile » Blog Archive » Economics Doesn’t Work In A World Of ‘If Only…’ Says:

    […] work, but it seems he’s still out there pitching the idea. Clay Shirky did an even better job dismantling the concept, but last night Isaacson appeared on the Daily Show with Jon Stewart to pitch the same ridiculous […]

  20. Mikrobetalningar på tapeten, men fungerar de? « David Hylander Says:

    […] Clay Shirky skriver att mikrobetalningar bara fungerar i en monopolsituation, och definitivt inte i …. Vi använder innehåll på webben, genom att länka till det, dela det, kommentera det. En betalningsform som begränsar eller till och med förhindrar det användandet gör innehållet inte bara dyrare, utan dessutom fundamentalt sämre. […]

  21. Impressive Pixel » Micropayments and the Behavior of Readers Says:

    […] Clay Shirky on his blog: 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. […]

  22. Better Read Than Dead :: Nerd World - TIME.com Says:

    […] Bloggers and old media guys alike  have derided the idea. People don’t want to pay for Web content online, they argue. They don’t want to be nickeled and dimed. Even Nick Carr, who gets it mostly right, and  understands that the situation is volatile and fluid, either doesn’t believe or doesn’t see that the salvation for the journalism business won’t come from the Web. […]

  23. News Is A Medium. It Carries Our Conversation « Network(ed)News Says:

    […] Clay Shirky , Jeff Jarvis , aggregation , friend , innovation , news , twitter Too true, via Clay Shirky: We’re not just readers anymore, or listeners or viewers. We’re not customers and we’re […]

  24. Why Micropayments Won’t Work for the NYT | Genuine Forex Trading Says:

    […] there are lots of people trying to squash it: I’d particularly recommend Gabe Sherman and Clay Shirky. But in the case of Steve Brill’s "secret memo" on the subject, it’s worth […]

  25. Why Small Payments Won’t Save Publishers « MobBlog Says:

    […] interesting opinion article, about the absence of market justification for micropayment […]

  26. …My heart’s in Accra » links for 2009-02-10 Says:

    […] Why Small Payments Won%u2019t Save Publishers Clay Shirky Clay makes a convincing case that user behavior means that micropayments can't save journalism… readers will simply route around them and will prefer amateur content over paid, locked commercial content (tags: media economics journalism business publishing newspapers currency commerce shirky newmedia micropayments) […]

  27. Apogeonline » L’evoluzione del giornalismo Says:

    […] Il processo di informazione e di distribuzione non si esaurisce più nella linearità del processo giornalistico. Gli individui mediano le diverse fonti, le rielaborano, le rimettono in circolazione nei diversi network e nella blogosfera. È quanto Shirky chiama superdistribuzione. […]

  28. Paying for the news: A link-a-thon Says:

    […] – a more recent, and better, update from Shirky: http://www.shirky.com/weblog/2009/02/why-small-payments-wont-save-publishers/ […]

  29. links for 2009-02-10 | Yostivanich.com Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky Totally agree small payments are a dumb idea and should never be brought up. (tags: micropayment economics business journalism media) […]

  30. Morning Links: February 10, 2009 » Nieman Journalism Lab » Pushing to the Future of Journalism Says:

    […] Clay Shirky brings the smackdown on […]

  31. Shirky on micropayments | I’ve Said Too Much Says:

    […] Shirky on micropayments 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. via shirky.com […]

  32. Craig McGinty Says:

    Learn online advertising before using ‘nickel and dime’ tricks…

    THE wonder of the web can often offer you a glimpse of the future through someone’s online creativity, then again it can shoot you back about five years in a click. That’s where I travelled when I read a piece……

  33. Finance Geek » The problem with micropayments Says:

    […] Shirky has a great post this morning: Why Small Payments Won’t Save Publishers in which he argues eloquently that micropayments don’t work except in very specific […]

  34. The problem with micropayments | The Equity Kicker Says:

    […] Shirky has a great post this morning: Why Small Payments Won’t Save Publishers in which he argues eloquently that micropayments don’t work except in very specific […]

  35. Micropayments and News « Don Park’s Daily Habit Says:

    […] No Comments Is micropayment what the ailing news industry needs? Will it save New York Times? Like Clay Shirky, I have my doubts about micropayments, particularly from usability perspective. Micropayment UI can […]

  36. A Fresh Batch of Links « Nancy Scola Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky The thing that seems, to me, to be missing from this debate over the so-called iTunes-ization of the news is that journalism is fundamentally a different sorta thing than music, movies, whatever. It has a public service component that, I'm not ashamed to say, I believe is best addressed by people steeped in the practice making decisions about what busy, distracted people need to be reading. To put it another way, *demand* is not, IMHO, the way to determine what should be served up to the masses. Who's actually going to chose to "micropay" for content on the fighting in Congo? Call me elitist. Don't care. Besides, something I don't get about these micropayment models is at what point readers choose to chip in some coin for their preferred content. Do they get to read an excerpt, and then they decide whether it's worth their dollar? I'd rather reporters report rather than spending their hours slaving over the lede that's going to maximize how much immediate gratification they provide. […]

  37. Business & Finance Blogs » Blog Archive » Why Micropayments Won’t Work for the NYT Says:

    […] there are lots of people trying to squash it: I’d particularly recommend Gabe Sherman and Clay Shirky. But in the case of Steve Brill’s "secret memo" on the subject, it’s worth […]

  38. Clay Shirky on micropayments for online news - Invisible Inkling Says:

    […] here’s Clay Shirky: “The essential thing to understand about small payments is that users don’t like being […]

  39. Clay Shirky on micropayments | Michael Kimsal's weblog Says:

    […] read a piece from Clay Shirky on micropayments.  He makes a couple of good observations, but seems to fail on this […]

  40. links for 2009-02-09 | .:The worst kind of thief:. Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky E uma crítica de porque a solução para salvar o jornalismo não vai funcionar. (tags: newspapers newmedia journalism micropayments) […]

  41. still misunderstanding micropayments « ginsudo Says:

    […] quick recap:  Shirky says that publishers are grasping at straws if they think that micropayments will save their dying business models.  Matthew Gertner hopes […]

  42. 101 Culture Says:

    […] So will a single dominant model for funding editorial appear, for instance? Crowdsourcing and ‘micropayments’ cause much debate. […]

  43. Just Browsing » Can Apple Save the Publishing Industry? Says:

    […] according to Clay Shirky they won’t. In a post entitled “Why Small Payments Won’t Save Publishers“, he argues that publishers will not be able to save themselves by charging for their […]

  44. I refuse. « The Word Trade: An Evolution Says:

    […] latter problem, the less time we have to figure out real solutions to the former one. –”Why Small Payments Won’t Save Publishers” by Clay Shirky Possibly related posts: (automatically generated)Sex and the City movie and […]

  45. Pigsaw Blog » Blog Archive » Bookmarks for 9 Feb 2009 Says:

    […] Clay Shirky: Why Small Payments Won’t Save Publishers"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 […]" (media economics publishing micropayments ) […]

  46. News Is an Experiential Good; Or, Why it’s not like buying a pair of pants « Network(ed)News Says:

    […] economics of attention in a world of blooming, buzzing, atomized media. (UPDATE: It’s “superdistribution.”) So it would be awesome if a newspaper could get people to pay in order to add value to […]

  47. Dopp Juice » Blog Archive » I want to believe in micropayments. Says:

    […] the whole story of technological utopia when Clay Shirky — in his infinite clarity — shot it down this morning. “The essential thing to understand about small payments is that users don’t like being […]

  48. Steven Brill on how to save the New York Times | TeleRead: Bring the E-Books Home Says:

    […] gap between free and non-free, even when non-free is just a few pennies. (Clay Shirky has a great blog post about the recent spate of micropayment […]

  49. Publishers vs Reporters Says:

    […] Why Small Payments Won’t Save Publishers « Clay Shirky We should be talking about new models for employing reporters rather than resuscitating old models for employing publishers. […]

  50. California Citizen» Blog Archive » We’re Users, Not Consumers Says:

    […] longer can look at ourselves as consumers of information. We use information. He writes in “Why Small Payments Won’t Save Publishers,” We’re not just readers anymore, or listeners or viewers. We’re not customers and […]

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