The Challenges of Online News Micropayments and Subscriptions

The impetus toward subscriptions for access and micropayments for single use of online news is growing because online advertising alone cannot sustain the news organizations necessary to provide high quality and broad coverage.

In recent weeks Rupert Murdoch announced News Corp. will begin shifting its newspapers to an online paid model in the next 12 months, starting with Wall Street Journal and then progressively shifting papers such as the New York Post, The Times of London, the Sun and The Australian to a paid model. Dean Singleton followed by indicating MediaNews Group will begin doing the same for its papers, including Denver Post, San Jose Mercury News, Detroit News, St. Paul Pioneer Press, and Salt Lake city Tribune.

Clearly charging for online news is likely to reduce online consumption because of elasticity of demand, but—setting aside the extent to which demand for online news will fall if a price is imposed—moving to a paid model will also creates two common, industrywide challenges.

First, it forces each publisher to bear costs of setting up their own payment system. Secondly, it imposes a heavy burden on consumers. The latter burden results not from having to pay for news, but from the fact that online readers typically do not use only one online news source—unlike the market for print newspapers in which readers typically subscribe to only one paper.

It currently appears that each online newspaper or their corporate parent will set up their own payment systems. The options being most discussed are subscriptions for use or electronic wallets from which to make micropayments for occasional use.

These factors will have a particularly negative affect on the heaviest online news users—voracious and promiscuous readers who seek news from multiple news organizations. If each newspaper sets up its own payment system, for example, these readers will have to have separate payment accounts for the New York Times, Washington Post, Los Angeles Times, Wall Street Journal, The Guardian, and dozens of other publications they wish to visit.

To deal with this challenge the newspaper industry should seek to create a joint venture or cooperative to solve the problem. Companies should work together to developing a single system that is usable across sites and one that can be extended to handle payments for other types of online content. Such a system would simplify and encourage payment for content, but also develop a new revenue stream by turning the payment system from a cost center to profit center by charging companies for its use.

Free is clearly not the right price for news, but the movement to a paid model will not be as simple as transferring the existing subscription and single copy payment models for print newspapers to their online counterparts. Seeking payment online creates new challenges and opportunities that will require new thinking about how payments are made and more cooperation across the industry.


Ian Waugh said...

Really enjoyed this post, I just discovered your blog recently, so thanks!

I've also thought a lot about the future of quality content, the money for it has to come from somewhere and I totally agree that a joint venture towards a payment system would make perfect sense.

Are there any real moves towards making something like this a reality though?

Interesting to see what the future of micropayments will be.

Bob Zender said...

A universal payment system or cooperative is just what Steve Brill has proposed with Journalism Online, a nascent but promising concept. Detailed here: http://tiny.cc/btfic

What are your thoughts on the potential of his concept?

Robert G. Picard said...

The experience from where micropayments are already being made--mostly for online games and payments for film/concert tickets, parking fees, and vending machine purposes with mobile phones--indicates the systems must be quick, easy to use, and have multiple places where they can be used to become successful.

It is possible that micropayments might work for news content, but a great deal of work and cooperation among news organizations will be necessary to meet those success criteria.

Davisull said...

Would the creation of such a thing fall under the sort of antitrust provisions newspapers are currently complaining about? Or would it have to be that one company would set up such a system and others would buy services from it.

Robert G. Picard said...

Antitrust shouldn't be a problem unless it behaved in anticompetitive ways. It could be a joint venture or a separate company from which services are bought much like Visa or PayPal.

Joe Rotger said...

There are so many things working against the survival of news outlets, that it's hard to imagine how they will survive:

* To start with, SEs have made it infinitely inexpensive to generate the encounter of a buyer looking to satisfy his need.
* Googles contextual smart ads, with revenue sharing 70% to Google 30% to the publisher.
* Blogs... which give content a value that tends to 0.
* Like you've pointed out, journalists are boring against the barrage of multimedia ipods, games...

But, I'm sure that any slim, tough, vociferous dog will always be good company to any patina aspiring advertiser-mogul.

Or, a free publication that will be able to charge gold coins for the privilege.

What Rupert does not seem to understand, is that 'free' is also free marketing of the publication. And let's not forget that on the other hand, it only takes 1-2-3 to blog, or to publish to the whole wide world.

I'm afraid this will only become clear after the dust of the collapse settles.

I have to say that I was greatly impressed by the quality of your blogging.

Devon Prangley said...

Instead of having multiple payment accounts with a variety of news sources, I think we'll inevitably see the rise of a much more efficient system of common identity platforms. These perfunctory platforms will be universally accepted and used to perform a variety of tasks on the web. By using a platform, we won't visit commercial sites like Gmail, Ebay, the Wall Street Journal, etc with an anonymity requiring the painstaking process of filling out forms for payments, but much more simply like an actual person handing over a credit card in a tangible store. The possibilities under such a system are endless, and I look forward to them with great anticipation. I do enjoy your blog. Thank you.

just like purchases made in the tangible world where one mayuniversally buy whatever one pleases with the hassle of filling in forms. All we

Gagan Saxena said...

A third challenge left out of the mix is the debate over 'copyright' material. If the content is available on pay-per-use only, it will be difficult to link during discussions across the web. The value of this content is therefore that much lower since it does not have the richness of social participation around it. Why would the consumer pay for an information silo on a regular basis?

Bettieclaire said...

It is possible that micropayments might work for news content, but a great deal of work and cooperation among news organizations will be necessary to meet those success criteria.

Cost Approved

Unknown said...

This is a beautiful example of journalism and technology working together to click the business.advertising only can't help news agencies to sustain, they need to have the relevant mews and content.
Communication Program