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Fame, Fortune and Micropayments

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  • ...500 pages long with 3 zillion transactions. *Thats* why it'd fail ;)
  • micropayments suck (Score:2, Insightful)

    by nnnneedles (216864) on Saturday September 13, 2003 @06:24PM (#6953649)
    Everyone with half a brain realized this years ago, no matter how many hype articles there was in the media. Micropayments is great for companies, and a pain in the ass for consumers..

    e-cash? Shut up. We got credit cards, paypal and we dont want more accounts and stuff to keep track of.
  • Shirky is wrong. (Score:4, Insightful)

    by Anonymous Coward on Saturday September 13, 2003 @06:37PM (#6953712)
    phone calls, local and long distance, often are pay per unit of some sort. calling 411 too... yet, people can and do "calculate" that calls are worth making, and they pay for them.

    He's sunk his teeth into a clever sounding argument here, and he won't let go, but it doesn't make sense. It is potentially true that the web has brought the price of info down to nothing, but that doesn't mean it's because micropayments fail.

  • by rf0 (159958) <rghf@fsck.me.uk> on Saturday September 13, 2003 @06:40PM (#6953722) Homepage
    Expierence has shown that whenever people start trying to charge for content that people will find other sources which are free. We have become use to information being free and feel (wether rightly or wrongly) that it should be

    My $0.000002

    Rus
  • by noname3 (580108) on Saturday September 13, 2003 @06:46PM (#6953747)
    This guy is bang on in many points. Even a free registration is annoying, I stopped reading New York Times when they fixed the archive.nytimes.com hole. Fileplanet? I have to register to wait in line for 3 hours to download a patch? Micropayments are even more of a hassle. I liked the way the author described the way people evaluate purchase decisions, and he's right: I wouldn't pay for a newspaper that charged by the article, or word. Penny Arcade, RPGWW, Poisoned Minds, GU Comics and others tend to have a gift for any donation. They're the ones that clean up. I wonder how successful that method works for sites that aren't webcomics. LiveJournal and /. seem to be doing well.
  • by fm6 (162816) on Saturday September 13, 2003 @06:51PM (#6953773) Homepage Journal
    So because web content sucks, you shouldn't have to pay for it? Ever ask yourself why it sucks? Because the only way to pay for "free" content is to sell advertising, and there's only so much money to be made that way. If there were another way to pay for quality web content, you'd see a lot more of it.

    An observant person (don't seem to be a lot around here) will have noticed that one of the few pay-for-access web sites that actually have customers is the one owned by the Wall Street Journal. Not a coincidence that it caters to people who have deep pockets -- or like to pretend that they do. Clearly the bucks are there if you have something people want at a price they can afford.

    These "micropayments don't work" rants all fall down because they ignore a fairly conspicuous fact: micropayments not only work, but have been in use for a very long time. Do you have to buy a subscription to read a newspaper? No, you drop a quarter in the machine and you take one. (Or a buck for the WSJ.)

    But wait! That's different! You don't get to pick out individual articles and just pay for those. But that's a technical issue. It isn't practical to build a machine that would do that. The smallest unit that is practical is an entire newspaper.

    Somehow, nobody's managed to carry this idea over to the web. Perhaps this is technical and economic too: payment systems are too hard to implement, computers you can read in bed are still a marginal item, etc. But I suspect there's also a conflict with established interests. (Doesn't it bother anybody that not a single online newspaper has experimented with micropayments, even though they're all desperate for revenue?) Owners of "intellectual property" are very nervous about distributing it in electronic form. (Hence ebooks that cost more to buy than hard copy books.) And existing financial institutions can't be infatuated with payment systems that would compete with their lucrative credit card businesses.

  • by Anonymous Coward on Saturday September 13, 2003 @06:53PM (#6953778)
    You get points for candor, but yours are the words of a parasite. Forget micropayments and websites - focus instead on these poor "friends" of yours. "Prey" would be more accurate. Just what exactly do you do for them, give them all blowjobs?

    And please, you would never willingly "do without". If your "friends" became "suddenly unavailable" - an experience that I'm sure you're quite familiar with - you would immediately go looking for other "friends" to take their place in providing you as much as you can take.

    Honestly, whatever became of the idea of contributing? Of carrying your share of the load? Are there really so many people all the way down the producer-consumer axis - so far that you can't even see the relationship between the two?

  • by JayBlalock (635935) on Saturday September 13, 2003 @06:58PM (#6953803)
    Actually, they'd be a perfect example of why micropayment systems DON'T work. The reason the telephone charging system works is that people DON'T stop and think about it. You don't have to fish a quarter out of your pocket and plunk it into your home phone. You just pick up the phone and dial - which makes the charges invisible to the user, and most likely, almost totally ignored. (how many of you, honestly, actually think about what a call is costing, until you've been talking and suddenly say "oh crap, it's been two hours! This is gonna cost me a fortune!")

    If you DID actually have to make a conscious decision to place a financial transaction every time you used the phone, long distance calls would plummet. And THAT'S what this article is arguing. For a web-based micropayment system to work, it would have to follow the TelCo model - you hand the website in question your credit card, and then you don't hear a word about the cost of the services again except once a month in the mail. And this is, for reasons too obvious to bother typing out, NOT a good idea for internet-based systems. And that's why Internet micropayments don't really work.

  • Free Rider Problem (Score:5, Insightful)

    by David Hume (200499) on Saturday September 13, 2003 @07:06PM (#6953846) Homepage

    Free, or I'll do Without!

    Honestly, I can live without most things. Sure, I listen to music, and I watch DVDs, and I play video games, but only while they're free. (I mooch from my friends) Were these friends to suddenly become unavailable, I would do without.

    Same goes for web content. I enjoy slashdot, but I'd give it up in a second before I'd spend one red cent.


    If with respect to DVDs, CDs and video games everyone adopted your attitude, you would have to do without them because they would not be available.

    This is the classic free rider problem [stanford.edu] (see also Wikipedia [wikipedia.org]).

  • by Perianwyr Stormcrow (157913) on Saturday September 13, 2003 @07:15PM (#6953896) Homepage
    If I can buy pre-paid BitPass cards without a credit card, with a similar level of convenience, then we have a winner.

    Either that, or anything targeted at teenagers will never be able to charge.
  • by The Monster (227884) on Saturday September 13, 2003 @07:21PM (#6953916) Homepage
    500 pages long with 3 zillion transactions
    I think the model that will make the most sense is something analogous to prepaid cellular service. I don't use a cell phone enough to justify the typical flat monthly fee, but it's nice to have it for when I do want to use it. So, even though I'm not exactly their target demographic, I went with Virgin Mobile [virginmobile.com]
    Calls are 25 cents a minute for the first 10 minutes in any day, and 10 cents a minute for the rest of the day. There are other services that can be billed to my account as well. I have to 'top up' by adding a minimum of $20 to my account every 90 days, and I never use that much airtime, which is why I like the service. Even if I did use it more than that, it'd still be way less than the conventional accounts are.
    I don't see every phone call I make or take on my VISA statement - I just see that $20 charge to Virgin every few months. (You can go cashless by buying a $20 card at various retailers.) I can check out my Virgin transactions online for details, with no dead trees or postage stamps involved. If I could use my prepaid airtime account to do micropayments, I'd probably do it. Sir Richard - are you paying attention?
  • Cost of Marketing? (Score:1, Insightful)

    by sparkydevil (261897) on Saturday September 13, 2003 @07:51PM (#6954063)
    The fact that digital content can be distributed for no additional cost...

    Any content source, or wannbe journo, that thinks distribution is free is in denial (not a river in Egypt).

    The biggest cost of distribution is MARKETING. Ask Coca-cola. Up to now the business model for most news content, for example, has ridden on the huge growth of the net = lots of free publicity and free content to build the market and get people used tot he idea of using the net.

    Well,nopw that you are used to it, you can get used to paying for it too.

    Now the market is saturated, sites will start to charge, but to charge they have to MARKET their benefits because they are now trying to take market share from each other. The business model works that way, because their competitors are doing the same thing.

    I own an online news site and I believe that micropayments could work if they were applied globally and simultaneously, as in the case of Apple's i-tunes. The entire news industry is waiting for such a system.

    The market will return to the way it was before the net. You will pay for music, you will pay for news. Enjoy the free ride for now -- it won't last much longer.
  • by silverbax (452214) on Saturday September 13, 2003 @07:55PM (#6954077)
    The rule is simple, but so many people try to argue around paying ( or charging ) for anything.

    If you try to charge for something creatively generated...be it software, art, music or whatever, someone somewhere will pull out the Elsworth Toohey method of attack and claim your brainchild should be public domain.

    Conversely, too many people think they can charge astronomical prices for minimal or poor content. I like Scott McCloud's work, but 25 cents seems like a lot per comic strip. So, if 25 cents is too much, would people pay 5 cents? 10 cents?

    Mr. Shirky's arguments have the taint of someone who desperately wants to prove that you can't charge for anything that doesn't come with a big business label on it. Otherwise, give it away, it belongs to everyone.
    His arguments have some merit regarding micropayments and their effect of making consumers choose, but his general tact is that micropayments won't work because people are used to getting it for free ( and that distibution costs nothing to artists ) is making use of informal logic. If Jerry Seinfeld produced new 30 second episodes of Seinfeld and charged people $2 to view it, I'm not so sure people wouldn't flock to ante up. I'd probably pay to read Scott Kurtz'z PVP ( www.pvponline.com ). I've enjoyed reading it, usually every day. It's far superior to most of the comics in the daily newspaper, and I pay for those.

    The simple truth is, we all have limited funds, so yes, if someone charges for something, we will have to be discriminating with our dollars. But, if the person is producing
    something worth buying, then pay them. The artist is always getting 'free distribution' as Mr. Shirky seems to believe. Creating a comic is no different on concept than writing great software or producing great music. It takes more than time, it often takes actual education, materials, research, etc. If someone wants to give away their art for free, wonderful. But if someone wants to charge, it's understandable.
  • by Prof.Phreak (584152) on Saturday September 13, 2003 @07:56PM (#6954084) Homepage
    Can people find these same songs for free? Probably. But they're paying for how much more convenient the paid service is to them than the free version.

    How about people paying to not have to illegally download music? (or maybe they don't know how/where to look?)

    I'm sure nobody would be paying anything for music if it was legally available online from the artist's website (click a link and download, etc.)

    While music is hard to compare (you pay for the singer - so even if someone else sings a similar song, it's not the same). With most text based web-content, you can substitute things. I don't have to read NYTimes if I want to read about a particular story. I don't have to read slashdot for geeky news; there are always alternatives.

    Yes, some things are worth paying for, but a vast majority of users can live without a vast majority of the content - and can find free alternatives to the parts they really do want to read.
  • by michaeltoe (651785) on Saturday September 13, 2003 @08:01PM (#6954107) Journal
    The key point of Shirky's article was that publishers are removed from the scenario. There is no middleman, and an artist can publish his own work for whatever price he wants... compounded by the fact that it's usually easier to publish it for free and (as Shirky said) you'll get the competitive advantage in doing so. So while the example with Seinfeld makes sense for television, if anyone could produce similar material without landing a 'deal' with NBC, then no one would bother paying his ridiculous salary out of pocket. He would have never become famous.
  • by Anonymous Coward on Saturday September 13, 2003 @08:24PM (#6954200)
    I read the counterpoint, in which Scott McCloud dismisses the economic problem of transactional cost, and demonstrates his misunderstanding of the economic concept of substitutable good, in both cases because he misses the fundamental economic concept of marginal cost.

    This is most obvious when Mr. McCloud argues that art is not a commodity. Yes, but that doesn't change the fact that it's a substitutable good subject to the laws of marginal cost. This is one of the proven, observable facts of economics consistently misunderstood by those in the arts, usually using examples like his Hail to the Thief/Hootie and the Blowfish example.

    There are, economically speaking, vast numbers of people out there where the marginal value to them of "Product A" is greater than that of "Product B". However, they'll still go with "B" over "A" if the costs of A exceed the marginal value A has over B. It doesn't matter whether the question is Coke vs. Pepsi, NYT vs. Wall Street Journal, Linux vs. Windows, or Monet vs. Michaelangelo, people will pick their ideal world second choice over their ideal world preference if the marginal costs exceed their marginal value.

    Furthermore, this cost is not just in price. The decision whether to spend money or not always imposes a "cost", described as a "transactional cost", which Shirky pointed out. This cost in terms of micropayments may not be any higher than in supermarkets, as McCloud claims. It's still a marginal cost over the no-transaction-needed cost of free, and will convince people to leave for free content on its own, in addition to the marginal penalty of the actual charged price.

    The only question is if the quality of your work is consistently high enough that the sub-group willing to pay for it is big enough that the free competition doesn't stop you from having a successful buisness model. In this case micropayments could work, if there was no other payment alternative. But there is -- the subscription model, where you have only one transaction a time period, and unlimited access during that time.

    The result is that micropayments will only work as a buisness model in a tiny layer between free and subscription, and only if the payments and associated transaction costs of the micropayments combined have a user-percieved cost lower than a cheap subscription. Shirky clearly doesn't think that there's enough space there, and McCloud's arguments do nothing to address it.
  • by Robotech_Master (14247) on Saturday September 13, 2003 @08:34PM (#6954238) Homepage Journal
    The funny thing is, though, that they're also an example of how people don't like micropayment systems. To wit, the introduction of plans like MCI's Neighborhood, an integrated plan where $50-70 depending on what state you're in gets you unlimited local and domestic USA long distance, so you can call wherever you want for as long as you want and not have to worry about how much of a bill you might run up. People who might not even necessarily make enough LD calls to get their money's worth are signing up just so they have the peace of mind of knowing they're not on a ticking meter.

    I work customer service in an MCI call center (though my opinions and viewpoints do not reflect those of MCI), so I know whereof I speak.
  • Shirky's Folly (Score:4, Insightful)

    by Dan Crash (22904) on Saturday September 13, 2003 @11:18PM (#6954824) Journal
    By way of setting up a straw man, Shirky asks: "Would you pay 25 cents to view a VR panorama of the Matterhorn?" As if one's personal preference for Matterhorn photography had anything to do with the success or failure of micropayments.

    Make no mistake; like ALL business ventures, some people will fail with micropayments. Some will fail because they didn't know how to market their product, or because they set their prices too high or too low. But so what? That's endemic to capitalism, not just micropayments. Just because Crystal Pepsi failed doesn't mean capitalism itself is a failure. Engaging in these kind of arguments is a beginner's mistake, and most of Shirky's thoughts on micropayments surprisingly and unfortunately exhibit this same kind of sloppy thinking.

    His "mental transaction costs" argument, for example, is predicated on users being forced to engage in one or two cent transactions every time they want to view a page. But most micro advocates have abandoned this line of thought. The idea of charging a penny-per-page is history. What they want in the 21st century is the ability to sell their products -- songs and webcomics, mostly -- at a fair price. And micropayments enable them to do that. Shirky endlessly flogs the dead horse penny-a-page model, but conveniently ignores the 99-cents-a-song model that's made iTunes Music Store such a success.

    Scott McCloud himself writes that 1,354 readers bought Part One of "The Right Number" at 25 cents a pop. Considering that he was the very first BitPass seller ever, and that everyone who wanted to see his comic had to go through the effort of signing up for BitPass, that's remarkable, and worth talking about. It certainly flies in the face of Shirky's assertion that consumers on the internet are so lazy and indiscriminate in their tastes that they'll bolt to free content at the first opportunity. Scott's readers had to not only pay, but go through the effort of risking $3 signing up for a new, untested service. Scott's experience demonstrates that failure to get people to pay for your product has everything to do with your relationship to your audience and nothing to do with micropayments. But Shirky ignores it all the same.

    Finally, Shirky's views on micropayments completely fail to address the idea that micropayments can work with other forms of payment, such as subscriptions or bundling, instead of replacing them. Buying content ala carte may be the step that convinces you to subscribe to a site, for example. Micropayments aren't an either/or, they're an and. One more choice, not one less. And of course, micropayments can work exceptionally well alongside free content. Any public television pledge drive shows this principle in action; even small tchotchkes can induce many people to donate. Any thoughtful analysis of the future of micropayments ought to examine this phenomenon, but Shirky doesn't.

    In some ways, it's nice to see that Shirky hasn't changed his tune. At least he's willing to go down with the ship. But his analysis is -- by any standard -- unbelievably shallow. As the market for micropayment content increases, it will be interesting to see how he tries to spin reality.

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