There’s debate in publishing circles about whether consumers will pay for online content. Rupert Murdoch recently moved from the free content camp to thinking out loud about charging readers micropayments to view news (see Will readers pay for Murdoch’s web content?)

Now Murdoch’s Wall Street Journal says it will press ahead with a micropayment scheme as well as more conventional subscriptions.

Reuters columnist Eric Auchard looks at possible newspaper business models for The Guardian in Pay a small toll to read this news story.  He concludes; “the newspaper industry must find a way to make work one or several of these proposals to make consumers pay for online news. The alternative is to accept that newspapers have had their day.”

Why micropayments?

In theory the subscription model should be perfect for delivering digital content. In practice only a handful of businesses have succeeded in persuading consumers to pay an upfront fee for pure online content – the best known examples are the adult sites.

There have been famous failures to attract subscription revenue. Slate magazine started out free, then attempted to move to the subscription model. Less than 5% of readers were willing to pay even a modest fee to read the magazine. It has since returned to the ad-supported free online newspaper business model. This five percent figure crops up a lot in the context of online subscriptions, but few publishers have ever reached such giddy heights.

Buy print subscription, get digital free

There are interesting variations on the subscription theme, such as The Economist a British weekly newspaper-magazine has an excellent website. Initially only subscribers to the print edition had full access to the entire site. Today, The Economist also offers a digital only subscription, it’s about 20 percent of the price of a print subscription. The New Scientist has similar offers.

Another variation is where Internet users can trade their personal information for a subscription. The New York Times allows access to a basic set of pages, but for full access you have to fill out a questionnaire. Fairfax Media’s Stuff site in New Zealand allows registered users to customise pages and news feeds. Fairfax’s Australian sites let registered users take part in competitions and receive custom alerts. In some cases the data from these schemes is used for simple information gathering, in other cases once you’ve signed up you’ll see a never-ending stream of spam.

One reason why many content publishers haven’t yet managed to sell subscriptions is that online payment is still based on credit cards. Although many companies have attempted to introduce micropayment systems, none have taken off. Credit card transactions are simply not economically viable below, say, $10.

Rocky road to micropayments

Although as a journalist and ex-publisher I’d love to find ways of turning my skills into a reliable income once more, I see three big problems with getting readers to pay for online content.

First, for readers to pay money, content has to be valuable and consistently good. The Economist and the New Scientist offer consistently good reading and are reliable, credible information sources.

The same cannot be said for all newspapers. The most popular news stories online tend to be trashy tabloid pieces about celebrities – often hinting at sex or with vaguely sexy pictures. These drag in the punters for online advertising, but few people would pay money for this material.

Second, micropayment schemes would send price signals to journalists. While an economist would argue this is a good thing, it may kill the news business. Newspapers earn their credibility with their markets by the breadth, depth and independence of their coverage. If the easy micropayment dollars all accrue to the trash stories, then quality journalism will be quickly eliminated or relegated to backwaters.

Micropayments will give newspaper managers instant financial feedback on the profitability of stories, genres, beats and individual journalists. Journalist will quickly learn to write for salability. Tech Dirt has an interesting perspective on this in Wait… Wouldn’t Micropayments Be Bad For Journalism?

Third, readers may need to set up multiple accounts with multiple publishers. It may be helpful if there was an iTunes style clearing house for online news, but I can’t see a realistic way this could be made to work.

Lastly, the idea of charging readers to access news adds considerable friction to the process. Stories behind pay content walls become invisible to search engines. The mere process of a reader stopping and thinking ‘do I have enough credit?’ or ‘is this worth paying for?’ will erode numbers. Regardless of their willingness to pay, the frictionless, free content sites will win the traffic everyday.

2 thoughts on “Paying for online content

  1. Bill, we toyed with micropayments when running our subscription content site, but were always thwarted by the problem you raise with the cost to the merchant of low value credit card transactions, by the time we’d paid the bank fees, card gateway fees etc, the numbers didn’t stack up. PayPal looked to be an option, but again fees are a killer. If someone could crack an inexpensive micropayment system there’s a real opportunity out there.

    Cheers…David

    http://www.NicheContentMillionaire.com

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