SPECIAL IDEAS REPORT

Idea of the DayTuesday, June 23, 2009

An E-Z Pass Model for Web Content

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No single shift in business models or payment systems is going to fix the economic problems of the press. So let's concentrate on small steps with a chance of making things better rather than worse. One would be a hybrid of the NPR "pledge" model and the old royalty system for airplay of pop music on the radio. The combination could give people a way to support news operations in a nonintrusive, familiar fashion.

In principle, some form of "micropayments"--tiny royalties for each online item - will be part of the eventual solution for financing online news. The problem is that most existing systems are too big a nuisance. In a world where people willingly pay several dollars per day for cable or satellite TV programming, you'd think that a newspaper article would be worth at least a few cents. But in practice, anything that complicates or delays the act of reading a Web page or clicking a link probably sends an online reader someplace else. It's not the five cents that stops you; it's having to decide over and over again to spend the next five cents. It might be the same with TV if you had to authorize a payment each time you switched to The Daily Show.

A sustainable payment system for online news has to make the process as effortless - but still as controllable - as the EZ-pass system for highway tollbooths. Or, for a more modern reference, as the SkypeOut payment system on Skype. With EZ-pass, you decide ahead of time that you're willing to pay for tolls, so you're spared the hassle at the booth. With SkypeOut, you decide ahead of time to spend $25 or $50 on Skype's pennies-per-minute calls to landline phones, and you don't have to worry about the details for each call.

Suppose you decide ahead of time that you'd be willing to spend $100 over the next year for the news that you can get free on the Internet. Why would you make that choice? For the same reason many people now decide to pledge $100 to NPR: they know that they can still listen without paying but recognize that if everyone makes that choice, there will eventually be nothing to hear.

In NPR's case, the money is then doled out to specific shows and producers by the network or individual stations. In the case of an online journalism fund, it could be doled out proportionately to the news sites you actually visit during that year. This is much the way that, during the heyday of AM radio, stations would keep playlists and then pay royalties based on air time. The CEO of an online-collaboration company called iLab Solutions, who proposed this scheme to me (for the record: this tech CEO is my son), elaborated on how it might apply to news sites:

"Although this is something that Google could do (since it already tracks so much of what you do on the Web, and can associate it with your user name), I don't think it would actually require anything like their scale or resources to make happen. I believe that all you would actually need to do is the following:

"* Create a Web interface that allows each user to specify how much money they would like to contribute on a monthly or annual basis, and what kind of sites they would like to support (e.g., only original-reporting news; blogs; news analysis; free Web applications, etc.). Also have an interface to put in credit-card information.

"* Write a Firefox (or other) plug-in that tracks what Web sites you go to and reports them all (or only a subset) back to a central database.

"* Create an application that stores for each user the list of URLs they visited, with number of visits, etc. You'd probably want to do this in such a way that the administrator would not associate a person's name with their browsing history. This application would then calculate on a monthly or annual basis how much money each person wants to give to each site, based on their browsing history. You would compile the desired microdonations and cut a check to every site (or all the ones owed over $50). You could probably also provide some interesting statistics so people can see how much they are giving to whom.

"* The service could either be sponsored by a foundation or corporation, or maybe take 1 percent of donations for operations."

This is not the whole answer to the press's financial implosion, but it applies an established model to an emerging problem, and that's a start.

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Comments (14)

Geoff in DFW

One addition: NPR's system involves localized incentives. I can show my local affiliate card at hundreds of venues and get nice member discounts, even at the most basic level of membership. NPR is selling you a kind of "club" philosophy that ups you socially and gives you nice rewards.

They also can tie my dollar gift directly to shows that I listen to and make a cogent connection. In other words, if it costs 500k to keep Fresh Air running and I love Fresh Air, then I better pony up the dough.

I'm not getting either with the proposed system above, but you could probably implement both pretty easily--especially the latter. Microdonations could be tied not just to a news organization, but maybe to a certain section of the organization. In the Atlantic's (online) case, I ought to be able to direct $$$ towards funding the "Voices", or correspondents, or a particular beat for reporters to hit up.

great. another way to be tracked on the web, and I get to pay for it!

Any web micropayment system is going to work holy hell on the workplace. Most people can now make reasonably justifiable claims that they "need" web access at work. And every one of those people does personal business online, from work. Employers live with the productivity loss, filtering out the biggest risks or time-wasters.

But how's it going to work when my midday Atlantic browsing adds micropennies to the company tab?

SocraticGadfly

James, in a word, NO.

Clay Shirky and others have shot this idea down, down, down.

First, contra music downloads, I don't read a newspaper or magazine story 20-30 times. (I'm a weekly newspaper editor, I'll note.)

Second, within newspapers and mags, top brass would then use this to junk more and more writers because they weren't generating enough micropayments.

So, will you stop this stupidity and tell others who think it would work to do the same?

As an American living abroad who loves and relies upon in-depth investigative journalism I would be more than willing to pay a small fee to view online content. I believe that the "Skype model" of having an account that links to your credit card and then automatically recharges itself once your credit is nearly depleted would be the most feasible and easiest for consumers. The key for me would be a clear fee structure, the ease of the UI, and the access to the magazine's article archive. I additionally believe that as more and more traditional media outlets move more and more into the digital realm the weekly, bimonthly, and monthly distribution models are becoming increasingly obsolete. Articles should be published online as they are completed rather than when they can be bundled into the next release of the magazine.

Why not use a variation of the cable-TV model? Bundle a LOT of content (e.g. newspapers, periodicals, blogs, etc.) and give fast, unlimited, access to them only through a low-cost front-end which sells packages of web-sites on a subscription basis, but which imposes no further restrictions. The front-end software can easily distribute revenue to content providers based on access statistics. Make sure there are at least two of these front-ends so they need to compete.
Less attractive of course for end-users that having it all for free, but if this is not sustainable then something has to give.

TJPTJP (Replying to: SmithPM)

I like this idea. I wouldn't mind paying for content, but once I pay the fee, I want unlimited access to that content. If viewing the website of the Washington Post costs $100 per year, I want to be able to access the entire site every day as often as I want, without having a program charge me for every link I click. Sticking with the cable television analogy, once I pay Comcast for a package with ESPN, I can watch ESPN any time I want.

Similarly, the notion of being able to choose what sites make up my bundle is appealing. Again, the cable television analogy is apt. I can choose what channels I want in my package (CNN, ESPN, HBO, etc.). I want to be able to do the same with news outlets.

I am interested to know what monthly fee people would pay for a service designed the way SmithPM suggests. I don't subscribe to cable television because I think that most of what is on television is vapid. I understand, though, that average monthly fees run about $50. I would be willing to pay that for a service that allowed me to choose at least the Washington Post and the New York Times.

Micro always becomes macro. How about this? An annual fee per user paid through the internet provider. News sites get a percentage of the pot depending on number of hits.

Quick search says 70 million broadband connections.
x $10 annual = $700 million per year.

Not bad.

If you're going to advocate an "established model," you need to actually understand that established model first.

Let's clarify one thing right off the top: NPR doesn't raise money from listeners; its members stations do. Then the member stations pay dues and buy programming from NPR. The network also gets money from sponsors and foundations, plus a very small amount from CPB.

To understand the potential of the listener fundraising, let's look at those member stations's finances. According to NPR (http://www.npr.org/about/privatesupport.html) only 31% of radio station revenue comes from listener contributions.

Remember that it takes money to raise money -- including a lot of expensive direct mail to previous contributors. Net of fundraising costs, those listener contributions are just a small slice of the funding for the stations. And the stations provide only part of the network's finances.

We're down to a pretty small fraction of the total public radio ecosystem that's funded by net listener contributions. Maybe it will be a similarly small fraction of the future print/Web news ecosystem, but it certainly won't be the panacea that the newspaper industry seeks.

Advertising, which has been the primary source of revenue for newspaper and broadcast journalism for generations, and which already provides some (but not enough) real hard cash for Web news sites, is a much better bet.

jack van Dijk

Tell your son that I find it a good idea. More safeguards should be build in, many more, or in this case I should say, much more safeguards.

James Watters

I think this sort of centrally planned idea can't and won't work, at least not yet.

I trust the market here--right now readers don't yet have a problem--there is tons of amazingly good reporting available for free online, more than ever before in history in fact. From a readers perspective the market is overflowing with great content. This is what makes it hard for any one given content provider to charge more.

Readers have no economic motivation to solve the newspapers problem, which is a radical shift in how they finance themselves. Its not as if the old system was a pure pay for content meritocracy in any-case-all of that reporting went to sell classified ads.

The described approach focuses on the providers problem, which is not the readers job to solve. As one comment pointed out the NPR funding model is an outlier.

Imagine that great content suddenly begins disappearing from the web, this would present scarcity and market opportunity for a new business model. That is altogether different than shifting the model BEFORE the scarcity begins.

It has to get worse before it can get better if providers want consumers to pay up directly.

I agree with this model because I already in-effect practice it. I am a member of my local public radio and public tv station. I also give money to the ACLU, plus I maintain a subscription to The Economist,The New Yorker, and the NY Times. I would get the benefit and access to that material without paying, but by paying I am supporting the material. I would happily pay to subscribe to The Daily Show.

But you are seeing my point--and politics--here: I am an educated baby boomer Democrat and it is important to me that there be viable alternatives to Fox News. I don't doubt that Fox News would have its own constituency. I am not in their constituency, but I supposed that they could pull together enough family value hypocrites like Gov. Sanford and Rev. Haggard and Sen. Ensign and the first-namers like Rudy, Rush, and Newt to fund their own subscription service.

A subscription servce would probably hasten the process currently underway of partisan news outlets, but it was the system in the 18th and 19th centuries with party-affiliated newspapers so maybe it won't kill us. Fox News is pretty open about having point-of-view news, so maybe we should just acknowledge that it is business model that works.

Or, as an other alternative, we could disaggregate cable TV. I currently pay about $80/month for cable TV. Currently I pay for sports channels I never watch. If the additions to a basic cable package included a "Sports Package" I would decline it, but I would happily add a "Progressive Package" of another 25 or 50 dollars a month. I would happily avoid the Conservative Package, in the same manner that I happily throw away solicitations to support Republican political candidates.

I would be perfectly happy if my subscription to the LA Times and the local paper included some aggregate monies to online newspaper sites, so I can get a login from these papers that are good on the other newspaper websites for special content. That way, I'm subscribing to a newspaper. No need to throw out the old model. Same with WSJ, etc. Some researchers use a Highbeam subscription to get archived info from many sources.

I want to get good, edited reporting journalism from all across the spectrum (conservative to liberal) and therefore would not subscribe to "content channels". ISP's are controlling content and using ads, so I would not use them as a conduit.

Preserve the fourth estate! This idea kind of follows the AP wire model, but would have to be set up to track subscriptions from the big papers and the smaller dailies. We need to pay for good investigative journalists, and they *need* the protection of the newspaper (legal resources, as well as vetting) itself when faced with judicial attempts to get them to reveal sources, etc. as well as foreign correspondence work, which is dangerous sometimes.

This is great for people in the USA but what about us! I live in Australia and want Australian content as well, also what happens when you click on a link in an article you're reading and it takes you to some place you have not paid for? Does your 'error message' read - sorry, wrong country or sorry, wrong paper and country? I read content from Asia, North and South America and Europe. These countries and continents have differing views on the internet and I for one am not putting up money fto be shut down or out in another country.

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