Micropayments: Holy grail or delusion?

by Mathew on September 21, 2009 · 9 comments

No matter how many times people like Clay Shirky or Mike Masnick try to pop the bubble of faith around micropayments as a cure for what ails the newspaper industry (or even the media industry as a whole), another believer emerges to argue that a secure and extensible micropayment system is a big part of the answer. The latest to make an impassioned plea is Jeff Reifman, the co-founder of NewsCloud, a “community-driven news aggregator” funded by the Knight Foundation.

In a recent blog post, Reifman outlines why he believes that micropayments can solve the newspaper industry’s problems. His post is a response to one by Steve Outing at Editor & Publisher, which carried the somewhat argumentative title “Your News Content Is Worth Zero To Digital Consumers,” and argued that charging people for news isn’t going to work unless that news is highly targeted to a specific niche. (Google CEO Eric Schmidt made a similar point recently about why The Wall Street Journal has been able to charge, and Paul Graham echoes that point as well.)

If you want to go back through some of the reams of text that have been written about micropayments for news, Clay’s essay from 2003 is a good place to start — especially since it lists the half-dozen or so attempts to create such a system that failed miserably. (Are you listening, Steve Brill?) There’s also a good roundup at the Freakonomics blog from awhile back that is well worth reading.

Reifman defends his approach by pointing to several successful models of payment for services, including iTunes, text messaging, TiVo, and broadband Internet. The first thing that leaped out at me is that three of those four things — iTunes, text messaging and broadband Internet — are a result of something approaching a monopoly (or an oligopoly or cartel, in the case of text messaging and broadband Internet). Apple can charge for music because it controls access to the songs from all the major record labels. Phone companies and cable companies can charge usurious rates for text messaging and Internet because they have little or no real competition. How does any of that apply to newspapers?

(please read the rest of this post at the Nieman Journalism Lab)

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