Opinion

Felix Salmon

One problem with newspaper micropayments

By Felix Salmon
September 11, 2009

As a blogger, Barry Ritholtz ought to be super-alert to one obvious consequence his proposal that newspapers charge micropayments for their content: that content will simply migrate to free blogs. One way of building a large following on a blog (I’m thinking Mark Thoma or Yves Smith, here) is to marry analytical added value with long quotes from newspapers which obviate the need to click through to the actual article. If all those articles disappear behind firewalls, I can guarantee you that thousands of new blogs will spring up featuring extremely extensive quoting from MSM sources which have now walled themselves off from the blogosphere.

Yes, the newspapers in question could try to send cease-and-desist letters to any blogger behaving in such a manner, but those letters are expensive, and time-consuming, and they don’t always work, and most importantly they only serve to antagonize bloggers and turn a relationship which is good right now into something more akin to the relationship between the music industry and teenagers.

And even if newspapers manage to solve the blog problem, they won’t solve the equally-inevitable email problem, where people will just start emailing articles to each other, or posting them on their Facebook page, or that kind of thing. Newspaper websites at the moment are unrivalled as the first best source of any given newspaper’s content. That won’t continue if they start putting up firewalls.

We’re entering a share-and-remix culture, where the idea behind micropayments — that a small sum must be paid just to read something, and republishing or remixing are pretty much barred entirely — is increasingly untenable. Newspapers have always made money not by selling content but by building a strong relationship with a large number of readers, and then monetizing that relationship — mainly by charging advertisers large amounts of money for the privilege of inserting themselves into it. If readers become resentful of their newspapers, because they have to pay for every article they read and because they can’t easily pass that article on to others, then that’s a great way of destroying a valuable relationship.

My view is that the internet has been magnificent at vastly increasing the number of readers that newspapers have, and at strengthening the relationship that print subscribers have with the newspaper brand. By rights, those relationships, in aggregate, should now be more valuable, not less valuable. But because of problems with the ad market — including the tyranny of the CPM and the fact that advertisers in general are not big fans of buying online inventory — newspapers profits have gone down even as their readership has skyrocketed.

The trick to succeeding in the internet era is to take what’s good about the present situation and monetize it. Ritholtz, by contrast, would take the one good thing which newspapers have going for them, and kill it.

Comments
11 comments so far | RSS Comments RSS

I’ve thought for a while that the answer to the advertising pie getting smaller for newspapers is for some of them to exit the market – i.e. go bust – leaving proportionally more for the survivors. However, the non-economic motivations behind newspaper ownership mean this isn’t happening as quickly as it might in other industries. My guess is that it will happen eventually.

I wonder what smaller number of newspapers is required for the current advertising pie to be sufficient for profitability? I’m sure it’s a calculation that would be quite straightforward once you have the total advertising number and the average variable and overhead costs of a newspaper. My guess is that there’s room for two or three seven-day a week broadsheet newspapers in the UK (i.e. with no Sunday special editions). The weak ones that would exit? All the Sunday editions, of course, plus the Independent and probably one of The Times, The Telegraph and the Guardian. But it’s difficult to see any of the owners of these latter titles throwing the towel in, unless their backs were really against the wall, financially.

 

Okay, so you’re saying two things:
1) It’s impossible to effectively implement a micropayment system because there’s no real way to keep bloggers and others on the Internet from redistributing newspaper content.
2) Newspapers can make money on the Internet by building a relationship with readers and selling that relationship.

But aren’t these two things contradictory? If a newspaper website’s relationship with its readers comes from the content it distributes, and it’s impossible for the newspaper to hold a monopoly on the distribution of the content it produces on the Internet, the newspaper can’t monetize the relationship effectively because anyone else can duplicate it in whole or in part. I’d argue that that’s a facet of what’s actually happening on the internet–newspapers lose ad revenue to blogs and other aggregators that republish their content. They also lose control of ad inventory related to their content, which makes it hard for them to improve their pricing models.

Part of this problem is a free-rider problem. In one way or another, newspapers should be paid for the content they generate. If they can’t exercise any control over that content on the internet, they can’t effectively demand to be paid for it in any way. Their ability to enforce micropayments won’t be perfect, but it’ll be better than nothing.

Posted by SC | Report as abusive
 

Actually, I was thinking the other day as I flipped through my dead-tree WSJ that between you and Barry, I get “more” thought-provoking value, more consistently from your blogs than the Diary of the American Dream (I own a small web business). And the chaff to wade through: the one-note editorial pages (guest columnist: Sarah Palin!), the sports page that does zero for serious sports fans, and the Consumption Class stuff that reads like a 2007 time capsule.

And as you allude to above, what are the chances that I’ll completely miss a Must Read with the fair use excerpts?

So when Rupert sends me the renewal notice in January: thanks, but no thanks.

Posted by Brian | Report as abusive
 

If I have to pay a newspsper with a separate transaction, even if it’s as little as a tenth of a eurocent, for EVERY SINGLE ARTICLE I READ, it will slow down the reading and researching process enormously. The whole point about the Internet is that links take the user to their destination immediately. The press barons are threatening to violate the founding Internet principle that everything is connected. Also, if an article I have paid for turns out to be rubbish I will be annoyed. If I have to pay, can it please be per issue, as with a print journal, and NOT per article!! Anyway, I am sure that, like many, I will simply gravitate to those sites that remain free and stick to the basic principles that KNOWLEDGE IS TO BE SHARED and that THE INTERNET EXISTS FOR THE COLLECTIVE ADVANCEMENT OF HUMANITY.

 

How about an Dying-Newspaper-Wheel-of-Fortune-Increme ntal-Tiered-Pricing model?
Z’s and X’s and whatnot are free to everyone, the ‘good’ consonants and a few vowels are provided for the regular subscribers and a full set of vowels are only available those who opt for a ‘premium’ subscription.

W_lcom_ to your TH_ N_W YORK TIM_S hom_pag_, Shnaps!

anybody want to buy a vowel?

Posted by Shnaps | Report as abusive
 

What value have you provided Reuters? This isn’t a dig, I honestly want to know what the value you’ve provided to them is. Not internally estimated or good will. How much has Reuters’ revenue increased due to your blog?

Posted by zach | Report as abusive
 

Reuters pays you a salary, right? They have money to pay you because they are paid for their information. If they gave it away free for the goodness of all humankind, you would be in your mother’s basement.

Don’t you write about finance?

Posted by Willis Darpopia | Report as abusive
 

UThe current newspaper business model is clearly broken, and its a given that many papers today won’t survive. The assumption is WSJ, NYT, WaPo are the survivors. Even that is not a sure thing.

What are the alternatives? Annual payments only seem to work with specialized journals and financial papers (think WSJ). The Times Select experiment was a bust.

That leaves micro-payments per article, or something else entirely —

Its pretty clear that the current situation is heading to a massive downsizing of journalism — and that doesn’t serve democracy very well…

 

Pick what you like to pay for.
I wanted to pay a blog for its good content, but there wasn’t a good way.

“Thought-provoking value” as Brian put it, is worth something to the users. Right now, there is no outlet to express that value beside a “Great article!” comment.

I believe there is unrealized goodwill that readers want to pay for good content. Just not forced to. I’ve considering a system where a button like those ‘share this’ links, can let users tip the website easily. So I created one after months of seeing nothing online.

 

At FutureOfCapitalism.com I have a hybrid model where the content is free but you get more extra stuff (access to the editor, private events, a futureofcapitalism.com bow tie) if you pay. We’ll see how it works.

 

Scott Karp nails the issue.

http://seekingalpha.com/article/161945-m emo-to-newspapers-content-doesnt-matter- without-the-package?source=article_sb_pi cks

Memo to Newspapers: Content Doesn’t Matter Without the Package

“An individual content item on the web, without a package, has marginal value approaching zero — and attempting to charge for an individual item of content is unlikely to change that. What you CAN charge for is the package.”

Posted by Daniel Hess | Report as abusive
 

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