About Me

  • I'm CEO of Newspeg.com, a social news-sharing platform. I've spent 20 years at the intersection of traditional and digital journalism. I've helped to invent ways to read and interact with the news and advertising on computer screens and iPads, and before that, I wrote news stories on typewriters and six-ply paper. I co-founded WashingtonPost.com and hyperlocal pioneers Backfence.com and GrowthSpur; served as editor of Philly.com; taught media entrepreneurship at the University of Maryland; and have done product-development and strategy consulting for all sorts of media and Internet companies. You can read more about me here.

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February 07, 2009

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Patrick Thornton

No one has yet to explain to me how micropayments would be financially viable. Even if users were all for it, it would be difficult to get around the transaction costs. Apple has had trouble making money off of selling songs for 99 cents because of credit card transaction fees. Selling an article for 5 cents (and this would be overpriced for a lot of content) would make it very difficult.

A popular approach to reducing transaction costs is to sell gift cards, points (ala XBOX Live and Wii or other methods of getting users to buy in bulk up front. But the question is, who would really want to spend $20-50 up front to have a card charged up so they could buy news ala carte?

And then comes the pesky problem of requiring people to manage an account and sign in all the time. Beyond that, the real question is, if all news is beyond a pay wall, how will people know they want to read it? How will people discover new news sources?

It's not like a printed product. I can browse through it at Borders or at the newsstand. Heck, I can read as many stories as I want for free before I decide to purchase. Even if today's users are willing to pay, I fear that all news organizations would succeed in doing is ensuring that they don't have any users tomorrow.

Instead of charging for content, news organizations should look into charging for access, technology and services. Keep the content free, but find new ways to charge. Even if 90+ percent of users don't want to pay for anything, news organizations could still run up margins on those 5-10 percenters who are willing to pay for premium products.

I am a member of ESPN Insider. It's not for everyone, but it's a product that appeals to me because of the added features and services it gives me.

Robert Onyx

Let's look at this from a totally different angle.
Suppose the real value here is the eyeballs not the news or other content. Is it so far fetched to think that the cost of gathering news or providing entertainment is the cost to secure the eyeballs. These eyeballs become the real product that can then be sold to the advertisers. So forget charging for access and thus restricting the number of eyeballs available for sale. Rather start to look at this situation as a bottom up excersize. Construct a business model on how much can we spend to create an envionment that will attract the most eyeballs that can be sold. Sold that is at a price that can support the cost of securing them.
Forget the current infrastructure and look at the situation from the point of view of the guys that were trying to make a buck and support themselves with the first newspaers, when that technology was brand new.
This is not an exersize in journalism but in business. If you want your own platform to show your journalistic skills start a web page from home.
Things are fundamentally different today and the eyeballs are the true product of value. The charge is to find a way to get them at a cost that can be supported.
Let's get real dude.

Howard Owens

I have another great idea, ok?

See, we put these barcodes in all of our ads and at the bottom of the stories.

And then readers could scan those codes into their computers and they could be shown new ads!

Of course, they would need something to scan with, so we would have to give them that device.

They might not want that device, so we should need to make it look like a cute animal, like maybe a frog or a puppy or a gold fish, or, I don't know, maybe a cat.

It's sure to be a big hit. People would read the paper more because they would have so much fun scanning all of those bar codes into their computer.

Vin Crosbie

Contra Shirky, a microtransaction system (provided in this specific case that the amounts the publishers want to charge are truly micro, such as no more a penny per Web page) would be viable and would work.

However, any such system would have to be relatively Open Source and secure (at least as much as the current Mastercard/VISA/JBC system). No such microtransaction system exists, though it will sometime later this century (MC/V/JBC and competitors realize that they eventually need such systems and are designing such systems)

Moreover, there would need to be a parallel and relatively Open Source rights/rate indexing system. Such a system exists (http://www.doi.org/) but has been overlooked by periodical publishers.

Whatever. The point Mark was making wasn't about microtransactions but about "print veterans naively jumping into online strategy debates that have been going on for years." Particulary a print veteran who a decade ago mismanaged Time's online strategy.

Patrick Thornton

@Vin,

I get the point Mark is making, and I think it's valid. We don't need print veterans jumping into online debates that have been over for years. People have tried to charge for content, and it has failed. Micropayments in particular aren't a great option.

My point is, even if we could get people to pay for content (which, many news orgs have demonstrated users won't do), is that it is difficult to make money off of micropayments. Yes, there are ways to work with micropayments, but it's not an easy strategy. I just wish all the print veterans who are jumping onto the micropayments bandwagon understood the business aspects of what they are proposing.

Micropayments are ultimately a very 1990s argument. We've been there and done that.

I would really like the discussion to move to ways to create products, services and tools that people would be willing to pay for, rather than trying to get people to pay for content we know they don't value enough to pay for. I'm not convinced users aren't will to pay for anything, but I am convinced that most users are not willing to pay for what we currently produce.

To me, that means we have to think of new products.

tgdavidson

Hear, hear, Mark.

I'm reminded of quality-of-life debates in Florida as a young reporter: Newcomers are ruining the state! So we must impose financial penalties on people who come here!

Said proposals usually being made by people with fewer than five years' residency, of course.

The point: The online world is populated by thousands of smart people who started their careers in print newsrooms. The traditionalists (or newcomers to online thinking) look at us like some strange, alien species - and yet we are them. (More than once, I've not-so-gently smacked down someone who says "but you online people don't understand print!" with a question: Which of my 2,500 bylines befuddled me about the print world?)

To rip off Uncle Ernie: Ask not who's tolling the bell. It's rung by thee (or people who look just like thee).

(@Howard: You almost owed me a keyboard, and definitely triggered something approaching a bad flashback.)

Vin Crosbie

Patrick, we agree that the main point of Mark's posting was Isaacson was bloviating about a subject he failed to research or even realize wasn't new. Moreover, you put it more concisely than I ever could when you wrote: "I would really like the discussion to move to ways to create products, services and tools that people would be willing to pay for, rather than trying to get people to pay for content we know they don't value enough to pay for. I'm not convinced users aren't will to pay for anything, but I am convinced that most users are not willing to pay for what we currently produce."

However, a lot of the reactions against Isaacson's twaddle throw the baby out with the bathwater. Because a lot of people I respect (including you) are reading this, I want to rescue a few bits of the baby before we move on. So, forgive me for picking on some minor things you mentioned, but I think those do represent the conventional but slightly errant thinking of the online news industry about the viability of microtransactions:

"People have tried to charge for content,and it has failed. Micropayments in particular aren't a great option."

"even if we could get people to pay for content (which, many news orgs have demonstrated users won't do)"

"Micropayments are ultimately a very 1990s argument. We've been there and done that."

I can list hundreds of examples of today's mainstream technologies and services that were initially dismissed because their early implementations and early versions were primitive or badly done. The automobile is a great example. Or Edison's thousands of failed attempts to make a light bulb. Bob Newhart has a hilarous skit about what if the Wright Brothers phoned a product marketing agency ('What, you sit outside on the wings?!'). I tell my students how nobody thought the the first commercial personal computers (the Altair, which anybody could use if they could solder it together and then write their own software for it) and the first mobile phones (the size and weight of a brick) had any future market. Let's not prejudge the future viability of something by its earliest versions. Who'd have bet on early humans' survival?

Second, I'd mentioned earlier that no truly functional (i.e., Open Source, secure, scalable, etc.) microtransaction system exists in the U.S. So when the early, proprietary, faulty, and non-scalable microtransaction systems that some online newspapers tried to use during the past dozen years failed, those failures led many people to assume mistakenly that all future microtransaction systems will thereby fail. They neglected to examine why those early systems failed. Similarly, we all laugh at pictures of the early, non-Wrights Brothers contraptions that ditzy inventors 110 years ago thought might fly. Those contraptions' failures led many people back then to dismiss the Wright Brother's claims that powered flight was possible.

Third -- and what I love about Shirky's totally academic 'proving' that microtransaction systems must fail -- is how many of my graduate students from foreign countries are amazed that we in America have never adopted the very successful microtransaction system they use in their countries. It's called their mobile phones. From Finland to the South Africa to the Far East, millions of people use their mobile phones daily to pay parking meters, buy from vending machines, and make other types of micropayments without cash. Many even purchase daily or weekly access to newspaper and magazine Web sites (a column I wrote earlier this decade gives examples: http://www.clickz.com/1550451). Shirky claims that millions of people won't use microtransaction systems due to the 'mental transaction costs' involved, but he must not travel abroad very much.

Of course, those foreign systems are successful in countries that each have but one mobile phone carrier, a different situation than here in the U.S. Yet if there were an mobile phone/SMS mechanism for microtransaction that interoperated among the U.S. mobile carriers, something that is quite feasible, it would then be the type of fully functional (secure, scalable, etc.) microtransaction system I mentioned. I know for a fact that the Mastercard/Visa consortium is scared of the U.S. mobile carriers getting there first, and is motivating that consortium's work on rolling out a microtransaction system during the next decade.

Fourth, you're quite correct not to be convinced that people won't pay for access to online newspapers. Newspaper industry researcher Mike Donatello earlier this decade polled consumers and found that -- despite so many pundits' belief to the contrary -- most people would be willing to pay to access newspaper Web sites. The problem is that what they are willing to pay (no more than $1/mo., although the median response was closer to 50 cents per month) and what the publishers want to charge ($5/mo. to $15/mo. range, particulary because the ABC wanted them to charge at least 1/4 print rates for any online usage to count in circ. figures) were so far apart that there was effectively no functioning market. [http://www.econtentmag.com/Articles/Editorial/Feature/What-Consumers-Tell-Us-About-Paying-for-News-Online-858.htm ]

So, let's keep an open mind about the potential of microtransactions systems. Isaacson and other sophists we can dismiss.

David Hakala, Denver, CO

Sixteen years ago, my two year-old son solved this how-to-get-them-to-pay problem. Tony tried to forestall lights-out by hitting me with "a GREAT idea" I just had to hear as I tucked him in:

"Let's make magazines, put them in our backpacks, and go all over the world and sell them to people."

"Good idea, but what if they don't want to buy our magazines?"

"Then we'll just GIVE THEM AWAY and people will like them so much they'll pay us!"

True story: my boss at Boardwatch Magazine heard this tale and offered Tony a vice presidency.

It works for Randy Cassingham of ThisIsTrue.com, the first person I know to earn his full living (and a very comfortable one) off a subscription email newsletter. Randy's been getting paid for what he gives away free since 1994.

jeff mignon

Paid model for newspaper sites? We have ran some numbers on a spreadsheet here:
http://mediacafe.blogspot.com/2009/02/newspaper-charging-or-not-for-online.html

You can download the excel file and play with the numbers. And send us your feedback.

Allan

Newspapers must either:

1) Stop charging for their print editions and continue to offer their online editions for free. This would result in an increase in newsrack, corner market, and home delivery of the print edition, thus increasing readership and ad dollars especially after the economy improves. The alts do it and make money.

2) Start charging for their online editions and continue to charge for their print editions. Online newspaper site visits are increasing, so the audience is there and growing. There would be a drop off in audience with paid online subscriptions, but at least there would be revenue whereas now the ad dollars are not sufficient to sustain giving away online access.

It is not a sustainable model to charge for the print edition while giving away the online edition. It is economic suicide, as we are seeing now.

Charles Barthold

The other problem with the Time piece is its underlying premise -- "How To Save Your Newspaper". Instead it should be "Why Your Newspaper Should be Saved". Then there would be a valid discussion of what benefits a newspaper does and could offer which would lead to a discussion about what to charge for.

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