Fame, Fortune and Micropayments 177
adharma writes "Clay Shirky is at it again. Addressed previously, his new article discussess the failures of Micropayments and the joys of free content."
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Fame, Fortune and Micropayments
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New York... when civilization falls apart, remember, we were way ahead of you. - David Letterman
Sure I'd love to have my bank statements... (Score:5, Insightful)
micropayments suck (Score:2, Insightful)
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)
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.
Micropayments will fail because.. (Score:5, Insightful)
My $0.000002
Rus
Donations vs Micropayments (Score:2, Insightful)
Getting what you pay for (Score:4, Insightful)
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.
Behold! The Tragedy of the Commons! (Score:2, Insightful)
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?
Re:Shirky is wrong. (Score:5, Insightful)
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)
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]).
The forgotten segment (Score:5, Insightful)
Either that, or anything targeted at teenagers will never be able to charge.
Micropayments and prepaid cellular (Score:3, Insightful)
Cost of Marketing? (Score:1, Insightful)
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.
If it's worth it, pay for it. (Score:2, Insightful)
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.
Re:People pay for quality. (Score:3, Insightful)
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.
Re:If it's worth it, pay for it. (Score:2, Insightful)
A Counter-Counterpoint. (Score:1, Insightful)
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.
Re:Shirky is wrong. (Score:3, Insightful)
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)
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.