Micro Economics
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Micro Economics
Why Steve Jobs and micropayments won't save the media.
Posted Monday, February 9, 2009 - 12:44am
But despite pervasive piracy, the real reason why Jobs won't embrace an iNews service is that Apple actually cares very little about content. Jobs doesn't want to save newspapers. He wants to sell more iPods.
Right now, Apple doesn't make money on iTunes, but it loves the service because it has helped the company sell nearly 200 million iPods and some 13 million iPhones to date. Apple would be interested in developing an iNews service only if it would move more iPods (or a new tablet version, rumored to be in the works). Given the newspaper industry's track record of convincing readers to pay up, it's doubtful newspapers would be attractive enough to lure in new Apple customers. (By most estimates Amazon has sold only 500,000 Kindles since its launch, hardly a number to brag about.) The sad fact is that journalism and books, while culturally invaluable, don't have the consumer demand that music and videos do. "The only places nickel and dimes work—ring tones, music and in-game currency—is when there's an end-to-end monopoly," notes Clay Shirky, an adjunct professor of new media at NYU and an early micropayment critic.
But the monopoly newspapers once commanded has been obliterated by the Internet. How would a newspaper that adopted a micropayment system compete with outlets that remained free? If the Times went behind a micropayment pay-wall, couldn't the Washington Post undercut them and attract a lot of readers seeking free, quality news?
iTunes worked so well as a closed system because by the time Apple launched it in 2001, the industry had successfully shut down most online sources of free music (at least the legal ones). Today, if you want a song and want to follow the law, you need to purchase it. In contrast, there are scores of sources of free news online.
The reason why smart media people like Carr and Isaacson want a killer device for newspapers is that they hope that hardware might finally restore the monopoly power newspapers held over information for so long. Offering readers a gadget with the sex appeal of an iPod could once again make consumers see the unique value in the newspaper "experience" that can't be replicated elsewhere. Build it and they will come, the thinking goes.
Unfortunately, with the Internet, newspaper Web sites, no matter how sophisticated, are forced to compete with every other source of news. The fundamental question, then, comes down to why consumers would pay hundreds of dollars upfront and then a subscription fee or micropayment on top of that to access newspapers' content when so much news is still available for free. To replicate the old print model in which newspapers retained pricing power and content remained scarce, all major news organizations would have to adopt the micropayment model en masse. And that would spark cries of collusion. It's not the lack of a cool device that's killing the newspaper industry—it's that competition and consumer tastes have undermined their competitive position. No device or download service will change that.
Comments
Micropayments for News
You raise some interesting points about the proposed micropayment business model for online news: that its market may not be as huge as the market for music and that pricing may be difficult. But I think in looking at the problems you have conflated the question of whether this could work with the question of whether Steve Jobs would be interested in facilitating such a system(a question which I don't think anyone poses seriously). You also ask "How would a newspaper that adopted a micropayment system compete with outlets that remained free?" Which begs the question how does an organization create content for which it charges nothing over a sustained period of time? The answer in the past has been to gather a large audience and sell it to advertisers(which paid for most of the last century's journalism rather than subscription fees). This model seems not to work in the fragmented environment of the internet. So how does anyone provide journalism which I think we can assume must at some point be paid for by the provider either in time or money. I think micropayments can be an answer here. It benefits anyone (not just large media empires) who provides news in which someone is interested which in turn allows consumers to choose, from among a wide range, what they want to pay for if the technology truly permits quick one click payments. Any critique or comment on this is much appreciated.
Food for thought...
We're not limiting the discussion to NYT or WPO I hope... Take a look at the paper in Little Rock. They've put up a pay wall and actually made it work. This is a practice that I've advocated for some years now, but I've been told repeatedly there's "no way" it will work. Gosh, maybe if some of my bosses along the way had listened to what I was suggesting we'd all still be employed.
Micro Economics: paying for it
Interesting proposal and most likely the only direction to take this. How to set the rates? Probably between .05 and .50 cents per article, debited from an online, PayPal-esque account. Also, charitable tax receipts are in order. If a person paid for articles from the LAT or NYT or almost any other major US daily, they would qualify for a charitable tax receipt, issued by the Democratic Party.
paying for NYTimes.com
Agreed that a per-article charge, however small, is a nonstarter. I do think, though, that a paywall of some sort is the way to go for the Times. They should do a hybrid approach, put some (perhaps even most) of the current stuff up for free, and charge for deeper, more complete access. If they drop half their traffic that's fine; they aren't monetizing it anyway. The remaining traffic will be much more valuable because it will be matched to subscriber roles, rather than IP addresses, allowing them to charge higher CPMs. Only a few newspapers have the leverage to do this, and NYT is one of them. This would force sites that link, like Yahoo News and Huffpo to do deals with the Times if they want that link to work the next day. The Times should probably re-evaluate all their portal deals, syndication and linking arrangements to see that they are getting value out of them. If that means locking Google's crawlers out of NYT, well, something to consider.