Friday, September 18, 2009

Dancing Barefoot and Paying for Online News

One issue that comes up with the question of whether people would pay for online news is the nature of micropayments. So what is a micropayment?

I have a recent example of one. While buying pot plants at Bunnings, with 4 year old in tow playing in the children's play area, I heard Patti Smith's "Dancing Barefoot" on the in-store music system. An unusually engaging song to hear at Bunnings, and I was thinking what a great song it is. Upon getting back from Bunnings, I went onto Apple iTunes, paid my $A1.69, and got the song downloaded.

So micropayments may be for impulse buying. I'm exposed to it, I like it, and I buy it. Can this work for online news? I think there are several problems with the anlaogy.

I could compare it to the last really compelling news article I accessed. It was Paul Krugman's diagnosis, in The New York Times on September 8, of why economists failed to anticipate the global fianncial crisis of 2008, and how their ideas helped contribute to it. This is a comprehensive and compellign piece by the most recent Nobel Prize winning economist on what he believes was wrong with dominant thinking in his field over the 1990s and 2000s, written in a way that both makes its non-specialist reader able to understand the issues, whithout overly simplifying or misrepresenting the views of those whose analyses differ from his own neo-Keynesian position. In my view, the model of how an academic specialist can write an op-ed piece, and an excellent case study in why they should do so.

Buy would I pay for it?

At present, I don't because I can get it for free. Unless I feel a moral obligation to pay for journalism in order to keep journalists in work, I take advantage of free access. Even if I felt morally obliged to "return the gift" of news with money, it is not clear that I would give money to the New York Times which, even if a high-quality paper, is also a capitalist enterprise that I would expect to survive through means other than my charity. Even if a case was made that people should pay for good journalism, I would prefer that it was done through general tax revenues that I contirbute to rather than one-off donations. And with taxpayer-funded public broadcasting, that already happens.

But I could afford to make a micropayment if that was the only way that I could get the article. And this is what the "paywall" question for the future of online news, most forcefully raised by Rupert Murdoch in recent months, revolves around.

It is at this point that other dilemmas emerge. One is how I found the Krugman piece in the first place. I found it because someone put a link to it up on Facebook. After I read it, and profiled it, others did the same. This is, of course, the phenomenon of network effects, and the risk for proprietors of the paywall environment is that they lose them altogether. While some may those to subscribe to NYT to continue to get Paul Krugman op-eds, they will be a fraction of those who get such information serendipidously via the 300 million Facebook users or via network aggregators.

I don't know who Patti Smith's record label is. The point is that I don't have to, as its not a condition for getting access to the song, and Apple iTunes has simplified the task for middle-income earners prepared to pay for the convenience of going to a single site [If I was on a student income, I would devote time to shopping around the Web for a free copy of this, copyright be damned.] This is not the way the news business has worked, with its brands, mastheads, trusted sources and so on. In the past, this didn't matter, as the source and content were bundled in a single package. Now they are increasingly disaggregated.

Which raises the last point. If I were to pay for articles by Paul Krugman, what do I need the New York Times for? Why don't I just pay Krugman directly? In the recent past, the answer would have been that big media have distributional clout and the capacity to reach large audiences that a sole trader can never acquire, and that a Princeton University economics professor with plenty of other calls on his time would be foolish to also seek to be an Internet entrepreneur. There may still be something in that, but the self-evidence of the proposition is diminishing quickly.

Finally, as Joshua Gans notes, one source of resistance to the idea of paying for online content is that people are already paying for online access. Be it a broadband plan, a mobile phone plan or whatever, people are paying for access top the medium, and payment for the content on top of that may be seen as a payment too many. With the scope for myriad news providers to emerge in the online space if the incumbent media players vacate it and move behind content paywalls, the risks of losing audience share, and what interests advertisers, are substantial. They are not the same risks Patti Smith has to face.

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