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 media business models series we explore the green shoots in media models – what’s working, and what’s yet to be proven.
Another year, another crisis in traditional media. Most recently, it has been The Guardian announcing it needs to cut costs by 20%, as the revenues from online advertising cannot compensate for the losses of revenue from its print editions.
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 almost half of online users aged 18 to 29 use ad-blocking software, 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.
An option to advertising challenges that is generating considerable discussion is the use of micropayments to fund journalism and other media activities.
Blendle 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”. German publishers are now working with Blendle on developing this model.
The Winnipeg Free Press in Canada has adopted a micropayments system, and the concept is attracting growing attention in the tech community, particularly as virtual currency systems such as Blockchain are being adopted and as Facebook Connect is developed for games platforms.
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 long-time critic of micropayments, 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.
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.
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, “people don’t want to spend money on the ‘what’, they want to spend money on the ‘why’”. 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 VICE 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.
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.
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.