tag:theconversation.com,2011:/africa/topics/micropayments-24281/articlesmicropayments – The Conversation2017-12-14T23:41:15Ztag:theconversation.com,2011:article/883682017-12-14T23:41:15Z2017-12-14T23:41:15ZHow Star Wars battlefront ‘loot boxes’ & The Last Jedi change video games<figure><img src="https://images.theconversation.com/files/199138/original/file-20171214-27558-qbuo22.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Players of video game _Star Wars Battlefront II_ can emulate a dogfight from the new film _Star Wars: The Last Jedi_ in TIE and X-wing fighters.</span> <span class="attribution"><span class="source">(Handout)</span></span></figcaption></figure><p>When Star Wars fans bought the latest video game in the franchise, many hoped to immerse themselves in discovering events across the saga’s eras — perhaps particularly between the original film trilogy and the latest instalment, <em>Star Wars: The Last Jedi</em>.</p>
<p><em>Star Wars Battlefront II</em>, the newest game, has sparked a heated <a href="https://www.polygon.com/2017-best-games/2017/12/14/16772900/loot-boxes-loot-crates-2017">debate</a> among players and industry, but not because of the storylines, fast-paced action, cutting-edge graphics or online play that enables people to pit their skills online against dozens of friends and strangers at a time.</p>
<p>Instead, many are questioning the methods through which game publishers make money from their players by selling features and upgrades to games. The debate is likely to have repercussions throughout the video game industry and beyond.</p>
<p>As academics who research and teach video game design and economics, respectively, we are already seeing a significant impact on the experience of playing video games. Perhaps more importantly, we foresee this debate — particularly the strong push-back from players — sparking a shift in game revenue generation and the value placed on players’ time.</p>
<p>At the centre of the <a href="https://www.gamespot.com/articles/star-wars-battlefront-2s-loot-box-controversy-expl/1100-6455155/"><em>Star Wars Battlefront II</em> debate</a> are so-called <a href="http://www.rollingstone.com/glixel/features/loot-boxes-never-ending-games-and-always-paying-players-w511655">“loot boxes,” a substantial revenue generator</a> for game publishers. They give players a different set of incentives than traditional downloadable content (DLC), such as new game levels or missions for standalone and subscription-based games. They also enable publishers to make money, especially on major productions whose costs can rival those of Hollywood blockbuster movies like those in the Star Wars series. </p>
<h2>Advantages and style</h2>
<p>Loot-box rewards typically fall into two categories: In-game advantages or strictly cosmetic upgrades. In the case of advantages, players pay to improve character abilities, speed up tedious tasks or unlock advanced features or items that are designed to propel them ahead of players who don’t buy in. </p>
<p>Cosmetic upgrades, in contrast, let players pay to customize visuals that have no impact on play or game outcomes, but often act as a <a href="http://www.pcgamer.com/rocket-leagues-dlc-cars-ranked-from-best-to-worst/">status marker</a> of their commitment to the game, such as the colour, design or style of their character’s clothes, vehicles and other possessions.</p>
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<a href="https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=472&fit=crop&dpr=1 600w, https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=472&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=472&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=593&fit=crop&dpr=1 754w, https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=593&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/199140/original/file-20171214-27572-1yftkpn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=593&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In-game economies and loot boxes can be used to unlock access to coveted video game characters. Captain Phasma, commander of the First Order’s stormtrooper legions in <em>Star Wars: The Last Jedi</em>, is depicted in the game <em>Star Wars Battlefront II</em>.</span>
<span class="attribution"><span class="source">(Handout)</span></span>
</figcaption>
</figure>
<p>The <a href="http://www.emeraldinsight.com/doi/pdfplus/10.1108/IntR-04-2013-0082">network economy</a> of massively multi-player games — online video games that connect hundreds of thousands of people in a shared digital world — drives competition between individuals and teams. </p>
<p>At the same time, the relatively low cost of loot boxes compared to traditional DLC enables more players from a broad range of economic circumstances to buy and benefit from them.</p>
<p>What has made loot boxes controversial is their element of randomness — they’re digital grab-bags whose specific contents are unknown until opened. Rather than paying for a guaranteed item, players are buying an inexpensive chance to receive a reward, which may turn out to be a desired item, an undesired one or one they already own.</p>
<p>Recognizing that this method of delivery can lead to <a href="https://www.forbes.com/sites/insertcoin/2016/06/10/the-math-behind-why-overwatchs-loot-boxes-are-exhausting-to-unlock/">frustration</a> — particularly when paid loot boxes produce undesired items — many games include a limited number of loot boxes or other progression methods that don’t require paying real-world money. </p>
<p>Players who don’t pay extra can collect the same items, but typically over a much longer period of time, often through a process called “grinding” — racking up rewards through repetitive, tedious game play.</p>
<h2>Revenue generators and enjoyment</h2>
<p>There are many examples of <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2533973">successful revenue generation</a> through <a href="https://charlieintel.com/2017/02/09/activision-blizzard-made-3-6-billion-game-content-sales-2016/">in-game transactions</a>, including loot boxes. </p>
<p><em>Overwatch</em>, a team-based “first-person shooter” with over 35 million players, offers two <a href="https://kotaku.com/overwatch-director-says-the-game-s-loot-boxes-are-good-1820271057">loot boxes</a> containing <a href="https://www.theverge.com/2017/5/28/15702686/overwatch-blizzard-loot-box-business-model-masterpiece">cosmetic items</a> for US$1.99. <em>Rocket League</em>, a hybrid game akin to soccer with bumper cars that has more than 33 million players, offers <a href="http://ca.ign.com/articles/2016/07/12/rocket-league-to-get-counter-strike-y-loot-crates">cosmetic item loot boxes</a> for free within the game, but sells the keys required to open them for $1.49 each. Both games offer discounts for multiple purchases. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/DXVwK2x422Q?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption"><em>Overwatch</em> has successfully incorporated loot boxes into the game. (Blizzard via YouTube)</span></figcaption>
</figure>
<p>In another approach, <em>Star Wars Galaxy of Heroes</em>, a tactics-based role-playing game for mobile devices, does not offer cosmetic items. Instead, they offer their own version of loot boxes, called “data cards,” which contain partial or fully unlocked characters and upgrades starting from $5. </p>
<p>Unlike <em>Overwatch</em> and <em>Rocket League</em>, <em>Galaxy of Heroes</em> offers players the option to purchase guaranteed items — as opposed to surprise random items — at a much higher price of $10 to $100.</p>
<h2>Unpopular combination</h2>
<p>Pricing is sensitive to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1463321">participants in the market</a>, and every game has <a href="http://www.sciencedirect.com/science/article/pii/S0747563214001289">different types of players</a>. The publisher of <em>Star Wars Battlefront II</em>, EA recognizes this explicitly in their official response to the uproar, saying “some players have <a href="https://www.gamasutra.com/blogs/MikeLu/20140110/208428/Lessons_on_Mobile_Gaming_from_a_Whale.php">more time than money</a>, and some people have more money than time.” </p>
<p>Unfortunately, <em>Battlefront II</em>’s original economic and progression systems met the needs of neither group. While it implemented loot box-based player progression, the system was largely seen as overly convoluted and confusing to players. </p>
<p>In particular, it was unclear how cash transactions related to the in-game economy could unlock coveted characters such as Darth Vader.</p>
<p>Also, to speed up the seemingly excessive time required to grind for characters, a substantial cash investment, as well as significant luck, was required on top of the game’s initial retail purchase price of $80 to $100.</p>
<p>Another game, <a href="https://www.polygon.com/2017/9/6/16263326/destiny-2-microtransactions-silver-ships-sparrows-shells-weapons-mods"><em>Destiny 2</em></a>, has also been heavily criticized by players and industry critics for adopting a loot-box pricing structure that works well for free-to-play (F2P) games like <em>Galaxy of Heroes</em>, which have little or no initial cost. </p>
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<a href="https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=239&fit=crop&dpr=1 600w, https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=239&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=239&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=300&fit=crop&dpr=1 754w, https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=300&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/199332/original/file-20171214-27558-1a6775k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=300&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"><em>Destiny 2</em>, published by Bungie/Activision, switched to a loot box system that generated major player backlash.</span>
<span class="attribution"><span class="source">(Handout)</span></span>
</figcaption>
</figure>
<p><a href="https://www.forbes.com/sites/erikkain/2017/11/29/loot-boxes-are-at-the-heart-of-both-star-wars-battlefront-ii-and-destiny-2-backlash/">Both games are sequels</a> to popular and successful games where player progression was incorporated into more traditional game play. Players of the previous titles were likely expecting a similar experience. However, the introduction of loot-box economies has fundamentally changed the experience for many.</p>
<h2>Changing the game</h2>
<p>Clearly, the decision to rely heavily on loot boxes and micro-transactions to motivate players is not universally effective. The backlash has had a <a href="http://fortune.com/2017/12/08/star-wars-battlefront-ii-sales/">negative impact on sales</a> and <a href="https://www.polygon.com/2017/11/29/16715388/electronic-arts-stock-price-battlefront-2-analysts">publisher stock prices</a>. </p>
<p>EA has removed <em>Star Wars Battlefront II’s</em> loot system temporarily, cut play time required to unlock new characters and offered new content for free. Similarly, <em>Destiny 2</em>‘s developers, Bungie, are considering changes to address balance and player experience, and have <a href="http://mashable.com/2017/11/27/destiny-2-xp-scaling-bungie-statement/#YeMmgJxdOiqc">offered some in-game items as compensation</a>. </p>
<p>The cloud over loot boxes is affecting other games as well, including EA’s <em>Need for Speed: Payback</em> which recently underwent a <a href="https://www.engadget.com/2017/11/23/need-for-speed-loot-box-patch/">loot box overhaul</a> to make them more generous.</p>
<p>Perhaps the most important and potentially game-changing development to come from the recent loot box debate is the response from various <a href="https://www.gamasutra.com/view/news/310446/British_Gambling_Commission_worried_about_potential_risk_of_loot_boxes.php">federal</a> <a href="https://arstechnica.com/gaming/2017/11/belgium-denounces-loot-boxes-as-gambling-hawaiian-legislator-calls-them-predatory/">gambling regulators</a>.</p>
<p>Governments’ concerns are based on the fundamental design of the loot boxes themselves. Animations, sound cues and inconsistent payouts all resemble gambling systems such as slot machines and promote gambling behaviour, some allege. <a href="https://www.gamasutra.com/view/news/311463/New_Zealand_says_lootboxes_do_not_meet_the_legal_definition_for_gambling.php">New Zealand has said loot boxes are not gambling</a>.</p>
<p>Given that many games with loot boxes are <a href="https://www.theguardian.com/games/shortcuts/2017/nov/26/how-much-star-wars-battlefront-ii-and-the-problem-with-paid-for-video-game-rewards">marketed towards minors</a>, this poses a concern that extends well beyond player frustration with game play progression.</p>
<p>It’s unclear how developers and publishers will respond to player, critic and governmental pressure.</p>
<p>What is clear is that the discussion surrounding loot-box economies is just getting started.</p><img src="https://counter.theconversation.com/content/88368/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Star Wars Battlefront II, which lets you play parts of Star Wars: The Last Jedi, ignited debate among gamers, industry and governments that may change how video games are played and make money.Aaron Langille, Mathematics, Computer Science, Science, Engineering, Architecture, Laurentian UniversityCharles Daviau, Master Lecturer Economics and Labour relations, Laurentian UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/521252016-07-07T08:21:18Z2016-07-07T08:21:18ZHow blockchain could help musicians make a living from music<figure><img src="https://images.theconversation.com/files/129553/original/image-20160706-12703-wp7g3y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">guitar case</span> </figcaption></figure><p>In the decade and a half since Napster, it’s got harder for musicians to make a living, at least from recorded music. Falling CD sales, illegal downloads, the <a href="http://www.informationisbeautiful.net/visualizations/spotify-apple-music-tidal-music-streaming-services-royalty-rates-compared/">low payments from legal music streaming platforms</a>, and a shift towards buying single tracks rather than whole albums all play their part.</p>
<p>Recently, a number of music industry projects have turned to a particular technology as a possible solution to these problems. These include <a href="http://www.forbes.com/sites/georgehoward/2015/07/17/imogen-heaps-mycelia-an-artists-approach-for-a-fair-trade-music-business-inspired-by-blockchain/#6e9ff1015912">Mycelia</a>, launched by singer, songwriter and producer Imogen Heap, and <a href="http://dotblockchainmusic.com/#welcome">Dot Blockchain Music</a>, launched by PledgeMusic founder <a href="https://medium.com/cuepoint/bc-a-fair-trade-music-format-virtual-reality-the-blockchain-76fc47699733">Benji Rogers</a>. Then there’s <a href="http://ujomusic.com">Ujo Music</a>, <a href="http://www.blokur.com/">Blokur</a>, <a href="https://www.aurovine.com">Aurovine</a>, <a href="http://resonate.is">Resonate</a>, <a href="http://peertracks.com">Peertracks</a>, <a href="https://blog.stem.is/">Stem</a> and <a href="http://bittunes.co.uk/about-bittunes">Bittunes</a>, which already claims users in 70 countries. What links these projects is that they all are based on blockchain. </p>
<p>Blockchain is the software that underpins <a href="https://bitcoin.org/bitcoin.pdf">bitcoin</a> and <a href="https://theconversation.com/after-bitcoin-are-you-ready-for-the-next-generation-of-cryptocurrencies-37927">other cryptocurrencies</a>. Comprised of blocks of data cryptographically chained together in chronological order, it has two key features. It is immutable: data cannot be modified. And it is distributed rather than centralised: many exact copies are maintained independently of each other. </p>
<p>Blockchain technology has been touted as the answer to problems facing industries as diverse as <a href="http://www.techworld.com/picture-gallery/e-commerce/bitcoin-beyond-how-banks-are-investing-in-blockchain-technology-3625324/">banking</a>, the diamond trade, online gambling and fashion – even <a href="https://theconversation.com/blockchain-could-challenge-the-accepted-ways-we-shape-and-manage-society-53647">how we govern society</a>. How might it help musicians?</p>
<h2>Owning it</h2>
<p>The first problem facing musicians comes down to the fact that no comprehensive database of music copyright ownership exists. There are several databases, but none features every track in existence, and when a track appears in more than one database the details don’t always match up. The blockchain, as <a href="https://vimeo.com/161183966">Vinay Gupta put it in a recent talk</a>, is both database and network. If music copyright information were stored on the blockchain, via a cryptographic digital fingerprint (like a barcode), then up-to-date information could be accessible to all users, rather than being held by particular gatekeepers.</p>
<h2>Getting paid</h2>
<p>The second problem is payments. Listeners can access tracks immediately with a click, yet according to a <a href="http://www.rethink-music.com/research/">Rethink Music report</a> it can take years for royalties to reach those responsible for making the music. Smart contracts, implemented on the blockchain via software, could split royalties in agreed proportions as soon as a track is downloaded or streamed. Such micropayments might not be feasible with current systems, but systems built around using cryptocurrencies such as bitcoin could facilitate payments in fractions of pennies. </p>
<h2>Shining light into black boxes</h2>
<p>Third, the mechanism by which royalties are calculated and paid is often opaque. Some revenue ends up in a “black box” beyond the reach of the artists and songwriters to whom it rightly belongs. In a culture of confidentiality and non-disclosure agreements, artists (or their managers) cannot properly audit their payments if they are not certain how much they are due. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129560/original/image-20160706-12708-1fsdgra.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Recording music is expensive, and musicians have to get paid. Blockchain could help.</span>
<span class="attribution"><span class="source">Nejron Photo/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Funding the future</h2>
<p>The final issue is cash, required upfront to help musicians create new music. It’s often said that artists no longer need record labels, but funds are required to compete commercially – and that still usually means the backing of a substantial label, especially one of the three remaining “majors”: Sony, Universal and Warner.</p>
<p>The transparency offered by blockchain technology could help attract new funders, including investors currently put off by the difficulty of seeing a clear route to profitability for musicians. It could also see the emergence of “artist accelerators” similar to those available for tech start-ups, where early support is rewarded by a stake in future income, monitored and paid automatically via smart contracts. The same transparency and traceability could encourage crowdfunding, with artists issuing shares to be cashed in against future earnings.</p>
<h2>Possible risks and possible rewards</h2>
<p>This is new technology and new terrain. Away from the music industry, another blockchain-related project called <a href="https://daohub.org/">The DAO</a> (a “decentralised autonomous organisation”) crowdsourced millions of dollars of funding, only for the site to be <a href="http://www.wired.com/2016/06/50-million-hack-just-showed-dao-human/">hacked and the money stolen</a>. Bitcoin survived a similar crisis when <a href="https://www.theguardian.com/money/us-money-blog/2014/feb/25/bitcoin-mt-gox-scandal-reputation-crime">millions were stolen during the Mt Gox scandal</a>, so while this won’t spell the end for blockchain technology it is a reminder of the risk, as well as the potential. </p>
<p>Blockchain has the support of banks and even some governments, and there has been significant investment in a number of industries, including music: Stem, a company that tracks and organises revenue from streaming platforms, <a href="https://news.bitcoin.com/blockchain-stem-raises-4-5-million/">raised a reported US$4.5m</a> earlier this year. Certainly some claims made of blockchain are inflated, but blockchain does have the potential to transform the music industry. </p>
<p>We have to consider, though, whether this is the right way of looking at it. For one thing, there isn’t a single music industry – sometimes, wrongly, assumed to be synonymous with the record industry – but multiple music industries. Blockchain technology would not necessarily affect them all in the same way. In any case, the fact that change could happen is no guarantee that it will. There are considerable barriers to overcome, from issues with the cryptocurrencies themselves to concerns over the integrity of the data, as well as the resistance of industry figures who perceive this new technology as a threat. </p>
<p>Perhaps we should not ask whether blockchain technology has the capacity to change the music industry (singular). Instead, we should ask whether the will to change exists and, if so, where; how the considerable barriers to adoption might be overcome; and what the effects, both positive and negative, might be on a number of music industries. </p>
<p>With my <a href="http://www.mdx.ac.uk/our-research/research-groups/blockchain-for-creative-industries">research colleagues at Middlesex University</a>, in a <a href="http://www.nemode.ac.uk/wp-content/uploads/2012/12/ODair-The-networked-record-industry-REPORT-1.pdf">report</a> and at a <a href="https://www.eventbrite.com/e/music-on-the-blockchain-possible-futures-tickets-26145277228?aff=ebrowse">panel discussion in London</a>, these are the questions we’re asking. But it’s only the start.</p><img src="https://counter.theconversation.com/content/52125/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marcus O'Dair has received funding from NEMODE (New Economic Models in the Digital Economy). He is convenor of the Blockchain for Creative Industries research cluster at Middlesex University.</span></em></p>Bitcoin, blockchain and automatic royalty payments could transform how musicians earn.Marcus O'Dair, Senior Lecturer in Popular Music, Middlesex UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/535862016-02-24T15:26:22Z2016-02-24T15:26:22ZAre micropayments a viable way to support the news business?<figure><img src="https://images.theconversation.com/files/112391/original/image-20160222-25855-d1852n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Janaka Dharmasena/Shutterstock</span></span></figcaption></figure><p><em>Journalism is in an existential crisis: revenue to news organisations has fallen off a cliff over the past two decades and no clear business model is emerging to sustain news in the digital era.</em></p>
<p><em>In the latest in our series on <a href="https://theconversation.com/uk/topics/media-business-models">business models for the news media</a>, journalist and academic Jane Singer looks at the use of micropayments.</em></p>
<p>Once upon a time, the gap between the relatively low supply of something in high demand – timely and trustworthy information – generated enormous profits for news publishers. But over the past 15 years or so, the digital, social and mobile revolutions have all but obliterated that gap.</p>
<p>In response, publishers have scrambled for new revenue streams, and much recent attention <a href="http://www.bbc.co.uk/news/business-20395407">has turned to “micropayments”</a> – the payment of a very small amount to access a comparably small bit of content, such as a single story. </p>
<p>The traditional media world is one of <a href="http://www.economist.com/blogs/schumpeter/2014/03/newspapers">bundled information</a>, with a lot of diverse content in one package that aims to provide something for everyone. The digital world, though, is an unbundled one. It enables each individual to select one item at a time from among the billions of things on offer. Are we willing to pay for this content? Sometimes yes – see iTunes. </p>
<p>But the question for news outlets is whether personalised news can follow the lead of personalised entertainment in generating interest and – in their fondest dreams – income. </p>
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<span class="caption">Blendle is poised to take on the US market.</span>
<span class="attribution"><span class="source">Blendle</span></span>
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<p>So far, news micropayment initiatives are – at best – a work in progress. The most buzz has been around a Dutch service called <a href="https://blendle.com/">Blendle</a>, which claims half a million registered users in Europe and is poised to tackle the US market. Most items on Blendle, which come from diverse outlets, cost between 10 cents and 90 cents and come with a money-back guarantee: you only pay for stories you actually read – and if you then don’t like them, you can ask for your pennies back. </p>
<p>The slick interface appeals to fans, as does the lack of advertising (and advertising’s attendant clickbait). But others have <a href="https://medium.com/@wfederman/micropayments-for-news-articles-are-a-terrible-horrible-no-good-very-bad-idea-267930d95a3a#.xb3x05vzl">flatly predicted the concept is doomed to fail</a>. News consumers want to pay nothing, they say, and even a very small amount of money is not nothing. </p>
<h2>Who pays the piper?</h2>
<p>But perhaps the model here is not an “iTunes for journalism”, if by journalism we mean big-name branded content. Perhaps a crowdfunding site such as <a href="https://www.kickstarter.com/">Kickstarter</a> offers a better template – the ability for users to stack their coins behind ideas they want to see developed rather than existing stories they want to read. </p>
<p>Experiments with crowdfunded journalism have proliferated. One flavour is essentially a low-cost membership model that allows its member – or donors – to steer journalists to topics of interest. MinnPost, a <a href="https://www.minnpost.com/about">non-profit site in Minnesota</a>, has made good use of this approach. For instance, a New Americans beat, which covers the state’s immigrant and refugee communities, was launched last October based on pledges from interested donors. </p>
<p>In Scotland, a new investigative journalism site called <a href="https://theferret.scot/">The Ferret</a> also pursues topics that its users say they want; <a href="https://theferret.scot/?s=fracking">fracking</a> was an early example. And in the Netherlands, <a href="https://medium.com/de-correspondent/heres-what-happend-to-that-world-record-in-journalism-crowdfunding-cc5bac50b812#.ve7qe4mso">de Correspondent</a> drew donations of more than a million euros in just eight days simply on the promise of delivering high-quality stories about important topics rather than “the latest hype”.</p>
<p>The other approach reverses the process, in a way, and is closer to the familiar crowdfunding concept – journalists propose ideas they would like to pursue and users back the ones they like. Stories that meet their funding target get written; those that don’t, don’t. Perhaps the most innovative example came from a British site called <a href="http://www.contributoria.com/">Contributoria</a>, backed by the Guardian Media Group. Over a period of 21 months in 2014 and 2015, Contributoria published nearly 800 articles on topics from <a href="http://www.contributoria.com/issue/2014-09/53983b9dde2e235b6e000001/">urban regeneration in Beirut</a> to <a href="http://www.contributoria.com/issue/2014-12/544128ff96bd93a404000051/">a day in the life of a bookie</a>; its writers earned a total of £260,000 over that time, most of it built up from quite small individual payments. </p>
<h2>Sustainability</h2>
<p>However, such experiments have proved hard to sustain. Contributoria closed in October 2015, with its co-founder declaring that crowdfunding was <a href="https://www.journalism.co.uk/news/contributoria-closes-but-its-team-still-sees-a-future-for-people-supported-journalism-/s2/a566305/">just one piece of the puzzle</a>. What the initiative really showed, he told journalism.co.uk, was that people have a “voracious appetite … to be part of the journalism process, including the way it gets financed”. </p>
<p>Perhaps that is, for now, the takeaway point on micropayments. The desire being given voice is less about paying for journalism than for having a stake in it. News organisations fervently hope that stake will be financial, but for users, “ownership” of the news seems more important than the payment involved.</p>
<p>As information proliferates wildly, consumers are saying they want a sense of control over it. Digital media gives them the ability to be reporters, but mostly, they seem to want to be editors: the gatekeepers who decide what news they will see by commissioning a freelance article, or steering an investigative team toward a topic, or engaging with this niche news app but not that one.</p>
<h2>Getting the mix right</h2>
<p>For news organisations, then, micropayments are just one option among many in a fragile and fractured digital ecosystem – something to add to the revenue mix if doing so requires only small investments of time, effort or money. </p>
<p>While experimentation is all to the good, the pay-off from this option seems inherently small. The vast majority of online users <a href="http://www.cjr.org/analysis/reuters_digital_news_report.php">do not pay now for digital news and have no plans to change their ways</a>. There’s no evidence of a massive demand from users for the ability to pay upfront to read news content – and, even if there were, the small amount of revenue generated on any given day would fluctuate considerably depending on what was on offer. This is not the most desirable funding model for organisations that need a stable financial base to support staff, infrastructure and the <a href="http://www.cbc.ca/newsblogs/community/editorsblog/2014/06/holding-power-to-account.html">ongoing ability to hold the powerful to account</a>. </p>
<p>The reverse option – enabling news consumers to steer the direction of journalistic investigations – seems more plausible and the various non-profit enterprises I’ve mentioned are among those offering examples of ways this might work. </p>
<p>But news users aren’t the only ones who like to be in control. Journalists tend to be fiercely committed to the notion of editorial independence – which is another way of saying that they like to decide for themselves what is and isn’t news. Whether they will be willing to share that control – and, if so, what they might be able to extract from users in exchange – remains to be seen.</p><img src="https://counter.theconversation.com/content/53586/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane B. Singer is affiliated with the Online News Association and several academic organisations in the field of journalism studies. </span></em></p>It worked for ‘iTunes’, but news organisations experimenting with ‘pay-to-read’ models are finding that users want to have a say in what makes the news.Jane B. Singer, Professor of Journalism Innovation , City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/532872016-01-27T04:04:40Z2016-01-27T04:04:40ZAd blockers are here to stay, micropayments less so<figure><img src="https://images.theconversation.com/files/109308/original/image-20160127-19660-1h7n9ve.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will the plethora of conflicting market signals be too much for news consumers to bear?</span> <span class="attribution"><span class="source">Image sourced from shutterstock.com</span></span></figcaption></figure><p><em>The global media sector continues to adapt slowly to digital disruption. Paywalls are yet to make up for the loss of print advertising revenue, and experiments continue with sponsored content and micropayments. In this <a href="https://theconversation.com/au/topics/media-business-models">media business models</a> series we explore the green shoots in media models – what’s working, and what’s yet to be proven.</em></p>
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<p>Another year, another crisis in traditional media. Most recently, it has been The Guardian announcing it needs to <a href="http://uk.reuters.com/article/uk-media-guardian-idUKKCN0V31Q8">cut costs by 20%</a>, as the revenues from online advertising cannot compensate for the losses of revenue from its print editions. </p>
<p>The situation with online advertising is worsening, not only because the rates advertisers are prepared to pay continue to fall – they are quite simply spoilt for choice in terms of online outlets – but because more and more people use ad blocking software. It is now estimated that <a href="http://www.campaignlive.com/article/ad-blockers-gain-ground-consumers-say-enough/1326412">almost half of online users aged 18 to 29 use ad-blocking software</a>, for reasons that range from concerns about third-party access to their search data, performance issues, and a hostility to advertising being a part of their online experience.</p>
<p>An option to advertising challenges that is generating considerable discussion is the use of micropayments to fund journalism and other media activities. </p>
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<p><a href="https://medium.com/on-blendle/blendle-a-radical-experiment-with-micropayments-in-journalism-365-days-later-f3b799022edc#.q9galajen">Blendle</a> in The Netherlands has now operated for more than a year on a micropayments model, where users register once only, only pay for the news stories they access, and can request a refund if they were dissatisfied with the story they accessed e.g. if they thought it was “clickbait”. <a href="http://www.niemanlab.org/2015/09/the-micropayment-platform-blendle-is-expanding-to-germany/">German publishers</a> are now working with Blendle on developing this model. </p>
<p>The <a href="http://www.theguardian.com/media/greenslade/2015/sep/14/canadian-newspaper-uses-micropayments-system-to-charge-online-readers">Winnipeg Free Press</a> in Canada has adopted a micropayments system, and the concept is attracting growing attention in the <a href="http://thenextweb.com/media/2016/01/25/future-media-monetization-cryptocurrencies-micropayments/#gref">tech community</a>, particularly as virtual currency systems such as Blockchain are being adopted and as Facebook Connect is developed for games platforms. </p>
<p>Micropayments are a logical extension of both the unbundling of media content, particularly in news, and an increasingly user-driven online experience. But they have also long had their critics. Social media theorist Clay Shirky has been a <a href="http://shirky.com/writings/fame_vs_fortune.html">long-time critic of micropayments</a>, arguing they risk enveloping users is an endless decision-making loop, and that the “mental transaction costs” of deciding whether or not to pay for particular items of content would ultimately prove too burdensome to users. </p>
<h2>Endless choice</h2>
<p>Most debates about micropayments have focused on the consumer side. Is it a desirable option to have, or are we being spoilt by too much choice? Once we start pricing individual pieces of journalism, will the plethora of conflicting market signals be too much to bear? Should we be paying for the story, or paying the journalist, and so on. If a news outlet is one whose journalism you are particularly keen to support, it arguably makes more sense to make a one-off donation to it than make large numbers of small transactions on individual stories, particularly if that donation is tax deductible. Critics such as Shirky rightly point to a fallacy of assuming people do not notice small payments as compared to large ones: once there are a lot of them, they certainly do. </p>
<p>The bigger problems, I would argue, reside on the supply side. The founders of Blendle readily acknowledge that their 250,000-plus users will not pay for news, but will pay for quality commentary. As they put it, <a href="https://medium.com/on-blendle/blendle-a-radical-experiment-with-micropayments-in-journalism-365-days-later-f3b799022edc#.q9galajen">“people don’t want to spend money on the ‘what’, they want to spend money on the ‘why’”</a>. But the providers of quality content typically require a stable source of income – the “gig economy” model is less likely to work for detailed analysis of a subject than it is for quick, real time reporting on particular events. A story like the famous account in <a href="https://www.vice.com/tag/isis">VICE</a> of what was going on inside ISIS, which established VICE as a significant news outlet and which is the sort of content for which people will pay, requires people who are prepared to embed themselves within a location for a period of time. </p>
<p>And for that kind of work, they require either cash up front, or the security of other forms of full-time employment (a news organisation, a university etc.). The personal risks of doing such stories in the subsequent hope that people will pay for them are simply too great. This is one of the reasons why the situation for public service media is better, not worse, than it was two decades ago. We have seen how vulnerable the business models of commercial media have turned out to be, in terms of generating content, attracting paying consumers, and being able to recruit and retain talent. </p>
<p>So I would be expecting a certain amount of activity in 2016 around news micropayments. It is the topic of the moment, and news organisations are prepared to try anything, particularly as the online advertising market becomes more and more fragmented. But it is at best a supplement to other revenue generating strategies, more akin to the online dating sites and weekend creative writing classes that have generated alternative revenue streams in recent times. The core of the news business will not be funded by micropayments.</p><img src="https://counter.theconversation.com/content/53287/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Terry Flew receives funding from the Australian Research Council. He is part of an ARC-Discovery Project researching politics, the media and the future of democracy in Australia. </span></em></p>Media consumers are spoilt for choice, making new revenue models difficult for publishers.Terry Flew, Professor of Media and Communications, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.