Content economics, part 2: payments

By Felix Salmon
March 3, 2013
part 1 and this: I wanted to wait until Amanda Palmer's TED talk appeared online, because it's an important part of the other big aspect of content economics.

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

Apologies for the delay between part 1 and this: I wanted to wait until Amanda Palmer’s TED talk appeared online, because it’s an important part of the other big aspect of content economics. Part 1 was about the ability of publishers to sell readers to advertisers; part 2 is about the ability of publishers to persuade readers to pay the publisher directly.

There are basically three ways to go about this. You can put up a paywall; you can ask for donations; or you can sell non-digital things to your digital audience.

On its face, Palmer’s talk is about the second strategy, but in fact it’s about all three. (And yes, I’m the “financial blogger” referred to in the talk.) For instance, when it comes to online publishing, why are paywalls more common than tip jars, despite the fact that they’re much more difficult to implement? Palmer does a great job of walking us through the answer to that question: there’s something shameful, there’s a whiff of the panhandler, in asking strangers for money.

At the beginning of the talk, Palmer talks about her early career as a living statue, and the people who would drive by, shouting “get a job!” as she waited for people to drop money into her hat. The implication, of course, was that being a living statue is not a job (its surprisingly consistent revenue stream notwithstanding), and that a living statue’s income represents an entirely one-way transmission of value: spectators give money, and receive nothing in return. The rest of Palmer’s talk is an attempt to explain that the value goes both ways, and that there is (or should be) nothing shameful about creators asking for money. But the attitude she’s pushing against is deeply ingrained.

A couple of weeks ago, for instance, I asked Andrew Sullivan why he chose to put up a paywall rather than putting up a tip jar. His answer (at about 23:00) was unambiguous:

This is not a tip jar. And it is not a pledge drive. It is a subscription. And that makes it a different proposition. It’s telling people I’m not an amateur, and I’m not a charity. I’m doing work that I’m asking people to pay for. And it seems to me that at some point, we have to say that, in new media. Or else it is not going to continue to exist…

I had two pledge drives early on, in 2002 and 2003, which netted a certain amount of money. But this is a different model. This is trying to make it sustainable, long term: don’t give it money just because you like me. We are trying to create an actual site that is news and opinion that people value and pay for, and become associated with in the long run. We could have done a tip jar. We decided no. We wanted to be a business. And do it the right way.

The distinctions here are subtle ones: Sullivan still nags his readers, just as public radio does during its pledge drives, but in his mind those nags aren’t part of a pledge drive, because he’s a business, rather than an amateur, or a charity. And similarly, although he raised $500,000 from readers before his paywall even existed, those dollars weren’t donations, for much the same reason. There’s something shameful, on this view, about working for tips; there’s an unpleasant neediness about asking for charity. And it was those reasons, as much as any simply financial considerations, which resulted in Sullivan plumping for a paywall model.

Truth be told, Sullivan’s paywall is not much of a wall at all. 70% of his readers don’t click on the read-on links at all; they just stay on the home page, which is always free. And of the 30% who do click on read-on links, 91% are still within their allocation of seven free stories. Which means that overall, just 2.7% of his readers are reaching the point at which it gets a little bit harder to read what they want to read. And the actual number is lower even than that: many of his readers use RSS readers to consume his content, or else they disable cookies, or otherwise don’t get counted among the people visiting his website.

But as Sullivan would probably agree, the choice between a paywall or a tip jar is not as clear-cut as it sounds: realistically, it’s more of a spectrum. Some paywalls are forbiddingly high “Berliners“: if you don’t cough up, you have no access. Most, however, are porous to a greater or lesser extent. The Times and Sunday Times of London will give you the first 75 words or so of any story; the New York Times will allow you a certain number of free articles per month, plus all articles arrived at from external sites; the WSJ will let you in if you’re coming from Google, or from a link which has been emailed to you by a subscriber. At other sites, the wall is drawn around some content but not all: the New Yorker, for instance, puts only some of its magazine content online for free, while the Boston Globe hides all of its content behind a Berliner paywall but then allows a subset of that content onto for free.

None of these models is obviously better than any of the others. No paywall lasts untouched for long: all publishers are making decisions to put up or take down paywalls every day, and it can be hard to keep track of which publications have which model. (Right now, for instance, without looking, I genuinely can’t remember whether the Economist is paywalling any of its content or not.) Just in the past few days, we’ve seen one high paywall demolished, at Variety; there, the new proprietor, Jay Penske, called it the “end of an error“. Meanwhile, another paywall has been erected, at Fortune: for the time being, for now, most Fortune magazine content is now behind a wall, while online-only content is free.

In an editor’s letter which isn’t online, Fortune’s Andy Serwer says that “we consider Fortune’s content valuable enough that we have decided not to give it all away online”. The unfortunate implication is that the online-only content, including the excellent Term Sheet blog, is not valuable enough to be worth charging for. On the other hand, if you look at the pricing, you’ll see that the cost of a digital subscription — $19.99 per year — is exactly the same as the cost of a digital subscription plus home delivery of the magazine. And the unfortunate implication of that is that all the extra value one finds in a magazine — the art direction, the layouts, the ability to read it while waiting for your airplane to take off — is also worthless. (Contrast that with the NYT paywall, which doesn’t really charge for the content at all, but rather for the online ability to navigate from one story to another.)

The real reason why Fortune put up a paywall, of course, has nothing to do with how valuable Andy Serwer thinks the magazine’s content is. Instead, the paywall is just another way for the Time Inc brass to try to make money and keep the magazine’s rate base high, the idea being that people will be less likely to cancel their magazine subscriptions if they know that they won’t be able to read that content online for free.

Which brings up a fundamental rule of online subscriptions: there is zero correlation between value and price. There are lots of incredibly expensive stock-tipping newsletters which have a negative value: you’d be much better off if you didn’t subscribe to any of them at all. And of course there’s an almost infinite amount of wonderfully valuable content available online for free, starting with Wikipedia and moving on through the sites of organizations like Reuters, Bloomberg, the Guardian, and the BBC.

Or look what happened when Newsweek and Sullivan parted ways: both of them started subscription products, at almost identical prices. (Sullivan wants $20 per year; Newsweek wants $25.) That doesn’t mean the two products have almost-equal value; it just means that both Newsweek and Sullivan — just like Marco Arment, for that matter — came to the conclusion that the $20-a-year range was more or less the point on the supply-and-demand curve where they would maximize their income. They might be right about that; it’s hard to tell. Paywalls are put together in so many different ways, at so many different price points, that trying to work out their relative merits, in terms of income generated, is almost impossible.

But there’s another consideration, too: the more formidable the paywall, the more money you might generate in the short term, but the less likely it is that new readers are going to discover your content and want to subscribe to you in the future. Amazing offline resources like the Oxford English Dictionary and the Encylopedia Britannica are facing existential threats not only because their paywalls are too high for people to feel that they’re worth subscribing to, but also because their audiences are not being replaced at nearly the rate at which they’re dying off. The FT, for instance, has discovered that its current subscriber base is pretty price-insensitive, and has taken the opportunity to raise its subscription prices aggressively. That makes perfect sense if Pearson, the FT’s parent, is looking to maximize short term cashflows, especially if it’s going to sell off the FT sooner rather than later anyway. But if you’re trying to build a brand which will flourish over the long term, it’s important to make that brand as discoverable as possible.

And the lesson of very porous paywalls, like Sullivan’s, or even of pure tip jars, like Maria Popova’s, is that on the internet, people prefer carrots to sticks. That’s one of the lessons of Kickstarter, too. To put it in Palmer’s terms: if you want to give money, you’re likely to give more, and to give more happily, than if you feel that you’re being forced to spend money. If you look at the $611,000 that Sullivan has raised to date, essentially none of it has come from people who feel forced to cough up $20 per year in order to be able to read his website. To a first approximation, all of that money has come from supporters: people who want Sullivan, and the Dish, to continue.

Palmer concludes her talk by saying that “people have been obsessed with the wrong question: how do we make people pay for music. What if we started asking: how do we let people pay for music?” The same question can and should be asked about other forms of online content, too. Tomorrow Magazine raised $45,452 — more than three times its goal — from 1,779 people, none of whom felt in the slightest bit grudging about the money they were spending. A mere 296 people clubbed together to raise $24,624 for Baltimore Brew. 99% Invisible, a radio show, raised $170,477 from 5,661 people. And that’s just a few of the Kickstarter journalism projects which were funded in 2012. There are lots of other models, too, like membership of Longreads, or, which helps to fund all manner of interesting and amazing journalism. What all of these projects have in common is that they’re free online even as they’re asking for money: they’re not going to punish anybody for not supporting them by throwing up a paywall and saying “well, in that case, we won’t give you access”.

As Palmer says, this kind of model involves something quite rare in the journalism community: the ability to trust that people will support you, even if they don’t have to do so. And the stronger the relationship you have with your readers, the more you’ll be able to trust them. This is why Palmer’s Kickstarter campaign was so successful: not because she had a lot of fans (that, in itself, doesn’t work), but because the connection she has with her fans was so strong. As Paul Smalera says, “digital media needs to reconnect to readers”:

For all of the hype around interactivity, big media is still primarily a one-way street. And the rise of programmatic ad-buying will only reinforce that trend. Most old media revenue officers aren’t going to care about connecting to their online audience, beyond understanding their aggregate profile and average value to an ad network. Yet cultivating those reader relationships on an editorial level can unlock all sorts of value, understanding, and yes, even revenue.

Twitter is great at this: readers are quite right when they feel that they know the people they follow on Twitter, in a way they never do just by reading polished content. But there’s more to connecting with your audience than Twitter. Indeed, the best way of all to do it is to venture out into the real world.

Events are one obvious way of doing that, and can be significant profit drivers in their own right. Atlantic Media is fantastic at monetizing its brand by putting on conferences, as are other franchises: the tech world is a particularly good place for such things, as All Things D or Wired or TechCrunch will attest. The NYT has its Dealbook conference, the New Yorker has its festival, and of course the business press has branched out into things like the Economist’s gatherings or the WSJ’s whole suite of events.

Big formal expensive events like these aren’t easy to put on, of course — they require large dedicated staffs, and a huge amount of effort. But non-sponsored events like Radiolab Live are a bit cheaper and easier, and anyone can cobble together a Meetup, or even just tell his readers to meet him at the Oyster Bar for an impromptu celebration.

And events are just one tiny part of the non-digital world which digital creators can put their brand on and sell. The whole Kickstarter phenomenon, for instance, is based on the idea that if you give enough money, you’ll get stuff in return. Palmer was offering glossy books and LPs and CDs and even (if you ponied up $10,000) promised to come and paint your picture and have dinner with you. Tomorrow offered a phone message from a porn star. 99% Invisible offered books and shirts and all manner of other stuff. Kickstarter is no tip jar: make no mistake, it has a very large element of e-commerce to it as well. Meanwhile, Monocle has seven stores around the world, plus an elaborate e-commerce site, and Mental Floss magazine makes a good third of its revenue from selling things.

Think of this as the flipside of content marketing: if brands can bypass publishers and create their own content in order to sell the stuff they produce, then publishers can bypass advertisers and sell their own stuff — be it a $40 chemistry cocktail set or a £415 cashmere scarf — to their readers directly.

The bigger lesson here is that when it comes to persuading your readers to pay you money, it actually helps to be small. There’s an exception for finance, of course, and also for the NYT, which is unique in many ways. But the lesson of Palmer’s talk is that while 25,000 supporters aren’t nearly enough to support a band on a record label, they’re more than enough to support a band on Kickstarter — or, for that matter, to keep an iPad magazine going strong. What’s more, while consumers can be very loyal to brands and to publications, in many ways it’s easier to become loyal to an individual, especially when she has an idiosyncratic and unique voice.

If you want to read The Dish, you can’t get there by going to or to or anything like that: you get there by going to The person is the site, and when that happens, the readership becomes much more willing to hand over money. Do I want to give Fortune $20 a year so that I can read its magazine articles online? No, I do not — especially when we live in a social world, where if I find a story I love, the first thing I want to do is be able to share it. On the other hand, I’m much more willing to spend $20 a year to support Andrew Sullivan, even if I rarely visit his site, precisely because I don’t particularly have to do so, and can read any of his stuff whether I pay him or not.

We’re not talking about micropayments here: those have never taken off, and I doubt they will, at this point. For a long time, people thought that the sheer size of the internet would enable enormous numbers of people to pay negligible sums of money, which would add up to substantial amounts in aggregate. The problem with that was that it’s just too hard to spend money online: the effort involved just isn’t worth it, for sums of a dollar or less.

Instead, the sheer size of the internet enabled the opposite to happen: it enabled smallish numbers of people to pay modest amounts of money, which can add up to just as much in total.

So if you’re a huge publicly-listed corporation, by all means create an elaborate paywall in the hopes that people will decide that they need your content and will just have to pay for it. Every so often, that can work, as it has at the FT and the NYT. But frankly I don’t think those examples are particularly replicable: they’re both sui generis in many ways. Instead, it seems to me, the most promising aspect of content payments is at the other end of the spectrum. Build up a relationship with your readers, in large part by giving your content away for free; ask for money with pride and shamelessness; and place no cap on how much you let your readers spend. Give them the opportunity, and you might be very surprised at what they’re willing to buy.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

OK Felix, I agree!

How much you want?

Posted by Twinkbait | Report as abusive

First: what is with that woman’s eyebrows???

Two: The elephant in the room is that just as blue collar workers found their wages collapsing due to globilization, writers no longer have the moat of big, expensive printing presses.
I would be very curious to compare the subscription price of the Washington Post, minus newsprint costs, and comprare net profit per Post employee against Sullivan’s 20$ per year. I would say Sullivan’s true value as an individual writer would be along the lines of 1$ a year (not because I don’t like him but using the metric of how much does it cost me to read a writer for a year in the post?) – the Post gives me dozens upon dozens of writers daily and many more over the course of a year. If we look at Sullivan as an aggregator, well, how is he more valuable than…you? And what are you charging? (free, as far as I can tell….)

The truth of the matter is that there is a zillion good articles published every day. And they are very, very inexpensive. The only problem is that I can’t read all of them :(

Posted by fresnodan | Report as abusive

Unless your job is to write news or have a business that needs the information and you can right off the price of news or information related to you work on your income taxes, why buy any of it? Unless you can get a business write off, gossip and information isn’t worth much. I also find that the useful information seems to be what everyone accepts as the “story” and not what you think you know.

The only reason I ever bought books and magazines in the pre-digital age was because there was no substitute. I even fancied I was keeping a private library of works of “art” that I save, keep tended and protected and intend to leave to someone when I die. But it will probably all end up at the local library book sale. The resale value on used books is pretty low unless they are very rare books. Furniture has almost no resale value, because the cost of keeping the shop and the sales staff is what the next owner is really paying for. I only keep any of it because it would cost too much to replace things I bought decades ago at a tiny fraction of what they cost today. And I can’t really insure most of it for replacement value. The insurance companies lie about that. They say you need large dollar amount coverage for contents, but when I canceled a few years ago, the agent told me they would not have paid replacement value. I told them I didn’t think the contents were worth even $5,000, but I couldn’t get less than a minimum of $30,000 coverage for contents because they said I must insure for replacement value.

News isn’t vital to most people’s lives. Their jobs probably provide most of the necessary information built in. Even if you have a lot of information at your fingertips or from online sources, the job defines what you can do with any of it, for the most part. A lot of us may not actually believe the buzz anyway. It is always a matter of someone else’s take on the issues.

The only sites I ever actually spend any money on are sites like ebay that sell tangible products. Otherwise I look at the Internet as the extension of the free TV and radio I knew when I was a kid. I hardly buy anything in stores anymore. It’s probably better for the environment to stay home, not drive to stores to shop, and have only UPS or USPS make the deliveries. If I could get groceries that way – and that used to be a service from some small mom and pop grocery stores – I would do that too. But there was a delivery charge.

Actually – why keep much of anything today or even live a lavish lifestyle? This economy is so stuffed with stuff it’s cheaper and easier to buy at garage sales, Goodwill, Salvation Army etc. and not pay the overhead costs for main street shopping. People drop dead or move all the time and there is so much good stuff costing a few dollars. In fact: everything one buys at retail stores tends to loose value the moment it leaves the store.

From my perspective, a low-income senior, the digital age is killing the economy. I could almost live in a single room, have the internet for interaction with the outside world (I live in the sticks) keep only a few tangible artifacts or treasured possessions and do almost everything for as little as possible. My father lives part of his year visiting my sister in a small RV. He does not consider that he is poor or living a miserable lifestyle. In fact, having too many things only means a burden and exposure to taxation, fees and maintenance costs. My sister pays big money for everything and has a large income she spends to preserve the image of an executive. But it isn’t actually necessary for her job. But with that line, I probably killed the economy.

I could almost live like an ancient Roman. Unless he was very wealthy – the average person didn’t seem to own much of anything. And they got their daily baths for small change too.

I think this is how they lived. They would wake up with the sun, eat some bread, perhaps, do their work in the morning until the sun got too hot for comfort and strength, go to the baths to clean up and have something to eat. After a nap through the hottest part of the day, they would then do their socializing and entertainment in the cool evening and have the biggest meals of the day, and go to bed in a small cubicle, with hardly any furniture. The next morning they would repeat the cycle. People spent money on tangible things like houses and furniture that they expected to last generations, to preserve their social status. Otherwise they lived on small personal expenditures, except for their rent. They got the news from their social life.

It sounds so rational and even elegant to me now, although I wouldn’t miss the slavery. But roman slavery was not as often like the old southern kind of slavery. It was a matter of legal definitions and citizenship rights.

One other thing – the writer Alexis de Tocqueville was the son of an aristocratic French family and he said they would only buy the best quality of artifacts and do without until they could afford to have the best quality. That furniture and bric-a-brac was expected to be well built, to be carefully preserved and to last forever and they paid in cash. That is not how the modern consumer economy works. De Tocgueville’s class philosophy is almost the kiss of death to a consumer society. But their stuff is what we see in great country houses and museums. Everything else from those times tended to be worn out and discarded. Historic times also produced cheap goods that we just don’t see now.

The modern world can’t quite afford the waste stream it creates anymore. Industrial scale consumption makes so much garbage it’s expensive to get rid of it now. So I burn anything I can in my woodstove and minimize trips to the dump. Plastic, however, is a pollutant and doesn’t decay if not exposed to sunlight and the regional incinerator has to burn it anyway.

In some ways our whole consumer society is some kind of stupidity.

Posted by paintcan | Report as abusive

Enjoyed reading your comment paintcan. Less is more! Thank you.

Posted by logicus | Report as abusive

@Felix – The Economist is akin to FT where you’re given a certain number of reads per month if you’re a non-subscriber now. I want to say 8 but am not 100% certain.

Posted by GregHao | Report as abusive

Felix, what is the bases for your claim, “The problem with [micropayments] was that it’s just too hard to spend money online: the effort involved just isn’t worth it, for sums of a dollar or less”?

It sounds like Clay Shirky’s pseudo-theory of “mental effort.”

The facts are, however, the micropayments are a multibillion dollar industry, forecast to nearly triple by 2015 ( ry/making-money-from-micropayments-repor t-from-vrl)

Online publishers’ use of the on-demand micro and small payments is also growing. One of the reasons for that is micropayments can add revenue and increase readership, not limit it, especially among the younger populations (so called “digital natives”) accustomed to iTunes, in-game, and other one-time purchase transactions.

See our study here: And stop repeating the nonsensical “theory of mental effort.”

Posted by Golebiewski | Report as abusive

Well, maybe now we understand why Mr. Bezos, the country’s expert on low-friction purchases, has backward-integrated into “journalistic media properties & production.”

Posted by WaltFrench | Report as abusive

Reporters tried to interview the Ying Ying, but all immersed in the new joy in the hope to keep some personal space, did not accept interview

If you’ve had a job for a long time, than you meet the minimum criteria that will get you the money that you need fast.

In truth, My partner and i decided not to anticipate something such as ipad device by Apple. . -= Aminul Islamic Sajib’s previous website… Yahoo and google Pr Current: AISajib. com is actually PR3! =-.

Posted by traduceri daneza romana | Report as abusive

Merely, amazing what we do the following. It truly is desirable to check you communicate from the cardiovascular as well as your clarity for this substantial articles is usually very easily looked. Amazing publish and will count on your own future revise.

I will be able to determine whether your nice solenoid is certainly faulty. You think this can be a good indication?All the creator device is certainly: Onan Microlite 1000 model4KY FA26100J S/N: F990 934964You did a person tremendously project involving trying to explain to us all kinds of things you should know relating to this freezer or fridge. Could not now have expected a lot more.