Archive for the ‘micropayment’ Category

How charging for online news is different from selling digital music

Friday, July 3rd, 2009

I’ve alluded before to the notion that news publishers would love to do what the music industry has done — moving from a free-use, copying Napster era to a low-enough priced, big enough revenue iTunes model.

There are a lot of similarities between digital music and digital news media. They are both infinitely copyable. They take resources to produce but with online distribution the marginal cost of an extra copy is close to zero.

In Napster days, with no alternative, people would share music similar to the way people copy, blog, and share news today.

There are differences, however. People consume news differently than music. It would not be strange for someone to listen to a track several times and enjoy it, perhaps even more than when they first heard it. They might go back and listen to an old favourite or discover music recorded and released decades ago.

News is much different and has rapidly decaying value. It needs currency. Old news reports have residual value, but they are more a historical record and don’t offer the same excitement or enjoyment of hearing it the first time.

News is also more easily replicable than music. To be up on the latest, it’s enough for someone to forward me an e-mail or read me the beginning of a story. Some people want the details, but for many, cursory, current reports that don’t violate copyright may be enough.

If I hear the first ten seconds of a song, or someone tries to hum it for me, it is not the same. I want to hear the full and actual track.

Also, a song from one band may have a similar sound to a song from another, but they will still be very different. But two news reports from different outlets may be much the same.

To move to an iTunes-like model for news, you need some kind of micropayment system. Micropayments sound great. People would pay to read each news story, like they do to get a song.

Because of the differences in consumption, owning the right to read a particular story isn’t as valuable as owning the rights to a song, so a news provider must charge less than a music distributor.

Because of replicability, it is harder to control copying and distribution.

These differences point towards a different model.

First because of differences in consumption it would be better to have a subscription or even a declining balance model (somewhat like micropayments or the using of minutes in a mobile communications plan). Consumers wouldn’t have to decide to purchase individual stories each time they read the news.

Because of the replicability of news, publishers should not try to capture much or any value for commodity news — that is reports of things happening, stuff you get at the beginning of a TV news cast. Those stories may be a vital part of your package, but news organizations need to invest in and sell unique content. Strong local news, investigative reports, and provocative analysis that makes people think are all more differentiated, as are songs from different bands.

The music industry still has many vestigal structures and business models, but in many ways it is way ahead of the news business. We, in the news, should listen to the music, but also know how it is different.

Posted in micropayment, state of news | 2 Comments »

NFC payments could help pave the way for micropayments

Tuesday, May 26th, 2009

I recently encountered the term NFC payments. I was familiar with the concept, though not the term. “Near field communications” refers to the technology that allows a mobile device to communicate with, for example, a vending machine to perform payment and make a purchase.

The mobile device has a link to an account and a wireless connection with the vendor. The device is the middle-man in the transaction.

It is interesting to me because it shows the growing ease of transactions. Because mobile devices are quickly becoming a common means of digesting content, like news stories, they unify consumption and payment in one place.

It may not take that form, but it is not hard to see how the smart-phone/handheld-computer could become the link between the account and the pay-per-view content, and thence the link between news publishers and much-needed revenue.

One of the challenges of any micropayment for news scheme is creating  a system that is widely adopted. A generalized payment device for transactions of all kinds eliminates that barrier. Its development could also drive down transaction costs.

Once there is a way to pay for news, you can bet publishers will jump at the chance to charge for it. Right now we are the era of Napster for news and some day soon we will enter the era of iTunes for news.

Posted in micropayment | 1 Comment »

My first lesson in media economics

Thursday, May 14th, 2009

When I visited University of Texas earlier this year, I found out that one of the foremost media economics texts is Canadian. It seems there is, or perhaps was, quite a concentration of media economists at the University of Alberta, resulting in this book.

It took a while before it even occurred to me to look for the book in Warsaw’s libraries. But then I found it, easily, in the reading room at the school of journalism — a brand new, crisp copy.

I’m speaking with one of the authors, Stuart McFadyen, this afternoon (or this morning, Alberta time).

More on that later; in the meantime, here are some interesting points from Media Economics: Applying Economics to New and Traditional Media.

  • “Cultural objectives are considered important  by most governments in broadcasting, film, book publishing, magazine publishing, and music recording. However, most private companies operating in such industries are commercial operations whose main motivation is profits. Typically they are not too impressed if the government, or a regulatory agency, tells them they should be pursuing cultural goals (at the expense of profits).” (page 176)
  • In a perfectly competitive industry the companies would be unable to comply since that would result in negative economic profits and force the company to exit from the industry.
  • Monopolies, though, are more amenable to such pressure. The reduction of economic profits can be seen as a small price, especially if the monopoly’s position depends on regulatory rules. For example if a regulator requires the organization to meet cultural goals in exchange for being a monopoly.
  • Profit can still be a secondary goal in companies that operate as for-profit: eg. as a filmmaker Atom Egoyan’s primary aim is cultural expression, and public funding allows him to pursue those goals separate from aiming for profit. BUT it’s impossible to pursue non-profit goals at the expense of profit in a state of perfect competition.
  • “Economic profits are necessary if firms are to be persuaded, or required, by a regulatory agency to further cultural goals at the expense of profits. Similarly, the opportunity to earn economic profits in the long run permits other goals to be pursued willingly.” (page 208)
  • “If a television program is thought to have external benefits, a subsidy is appropriate. However, the level of subsidy should not exceed the level of external benefits.” That can be hard to measure, which is why governments often set standards instead, similar to pollution caps. (page 294)
  • “For public goods, such as national defense, firefighting, lighthouses and basic research, it is the role of government to determine the optimal level of output and to finance the service from taxation (or, alternatively, for broadcasting, a television or radio license fee).” That involves a cost-benefit analysis, but benefits are hard to measure, so sometimes a government department can provide the service itself, eg the BBC. (page 297)

Posted in Uncategorized, micropayment | 1 Comment »

Crowdfunding comes to Canada

Tuesday, April 21st, 2009

Crowdfunding can work in Canada, at least on a small scale. That seems to be the message out of the Tyee, a web-only publication in British Columbia, which decided to appeal to readers for cash to help cover the ongoing election in BC.

Tyee editor David Beers told readers early this month that if they raised $5,000, the Tyee would hire an extra reporter for each day of the campaign. Within two weeks, they’d raised almost $20,000.

This wasn’t your standard PBS membership drive, either. The Tyee invited donors to earmark their money toward coverage of a particular election issue — a spot.us-style move that lets funders dictate what news they ultimately end up reading. (In this case, the biggest chunk of money — $8,000 — went unearmarked.)

While this might one day be a viable way of funding news, the Tyee experiment might not work everywhere, as commenters on the site indirectly point out. Many see the Tyee as something of a protest publication; it might ironically be harder for, say, the Vancouver Sun to launch a successful crowdfunding project.

Posted in micropayment | 2 Comments »

Isaacson advocates reader micropayments for news in Time

Wednesday, February 18th, 2009

“Newspapers and magazines traditionally have had three revenue sources: newsstand sales, subscriptions and advertising. The new business model relies only on the last of these. That makes for a wobbly stool even when the one leg is strong,” writes Walter Isaacson in the Thurs 5 Feb issue of Time Magazine.

Isaacson leads the Aspen Institute and formerly headed CNN and was managing editor at Time.

He writes the covers story on the issue that is in the worries if not on the minds of newspeople these days, how can news reporting work in the future.

His solution for where the money will come from is different from those who suggest foundations or government funding and prepaying crowdfunding. He does acknowledge those ideas though.

“That’s fine. We need a variety of competing strategies,” he writes.

His answer is to maintain a relationship and responsibility to the reader through micropayments.

Time cover Walter Isaacson How to Save Your Newspaper

Time cover Walter Isaacson How to Save Your Newspaper

Under a micropayment system, a newspaper might decide to charge a nickel for an article or a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough.

The system could be used for all forms of media: [...] This would not only offer a lifeline to traditional media outlets but also nourish citizen journalists and bloggers. They have vastly enriched our realms of information and ideas, but most can’t make much money at it. As a result, they tend to do it for the ego kick or as a civic contribution. A micropayment system would allow regular folks, the types who have to worry about feeding their families, to supplement their income by doing citizen journalism that is of value to their community.
— How to Save Your Newspaper Time 5 Feb 2009

He also tells a story about how as a boy in Louisiana his friend took bags of ice from the gas station arguing that it should be free. “We didn’t reflect much on who would make the ice if it were free[...].” It is interesting that he feels he has to use this story of ice to illustrate the point.

It takes resources to produce and has value, so the readers, the beneficiaries of the news, should be given the opportunity to pay for it.

Posted in micropayment | 1 Comment »

Nuts and bolts of crowdfunding

Wednesday, January 7th, 2009

I know very little about crowdfunding. But recently, I discovered Spot Us, a site that’s actually doing journalism under an alternative funding model.

The idea is that users post story ideas, reporters sign up to write those stories and suggest how much it would cost them to do so, and then readers donate until they’ve fully funded the writing of a story, at which point the reporter goes out and does the work. It strikes me as particularly piecemeal, but I’m really compelled by the way it inherently involves readers in story selection.

Cohn discusses his successes and failures at idealab.

Posted in micropayment | No Comments »