Regular readers will know that the newspaper industry is in dire shape: revenues off by 20% in just the last year, with more than 15,000 jobs lost in that period. This map tells the story better than any writing could. The market capitalizations of newspaper firms, which reflect investor expectations about future performance, have fallen even more precipitously. In short, it’s hard to exaggerate how dire the situation facing the industry is. If you were in charge of a newspaper, survival in any form possible would rationally be your all-consuming focus.
Walter Isaacson, the former editor of TIME magazine and current President of the Aspen Institute, wrote a column last week arguing that newspapers should squeeze revenue out of their web sites through “micropayments.” It’s an idea with a long, but not very successful, history: Isaacson himself points out that Ted Nelson, the inventor of hypertext, imagined micropayments for written content back in the early 1960s.
Small payments, on the order of a dollar, work well for some kinds of highly valued, contextualized content, like a book to your Kindle or a song to your iPod. But “micro” payments on the order of a nickel—the figure Isaacson mentions for a hypothetical news story—have never taken off. Transaction costs, caused by things like credit card processing, are usually cited as the reason, but I’ve never found that view persuasive: It’s not hard to set up a system in which micro transactions are aggregated into parcels of at least a few dollars before being channeled through our existing credit card infrastructure.
The Occam’s razor explanation for the persistent failure of micropayments is much simpler: People hate them. The niggling feeling of being charged a marginal amount for each little thing you do exacts a psychological cost that often suffices to undermine the pleasure of the good or service you receive on an a la carte basis. That’s why monthly gym memberships, pay-one-price amusement parks, and subscription services like Netflix or, come to think of it, regular cable are popular, even when a la carte options would be (financially) cheaper for consumers.
Michael Kinsley, the former editor of Slate, responded to Isaacson in a piece headlined You Can’t Sell News by the Slice. His basic message: We tried getting users to pay for content online—in Slate’s case, as an inexpensive annual subscription—and it didn’t work. One problem noted by both Isaacson and Kinsley is that readers have come to expect content to be free, and when individual papers have tried to start charging, they’ve failed.
What can the papers do? Isaacson is on to something when he says:
Another group that benefits from free journalism is Internet service providers. They get to charge customers $20 to $30 a month for access to the Web’s trove of free content and services. As a result, it is not in their interest to facilitate easy ways for media creators to charge for their content. Thus we have a world in which phone companies have accustomed kids to paying up to 20 cents when they send a text message but it seems technologically and psychologically impossible to get people to pay 10 cents for a magazine, newspaper or newscast.
If struggling news outlets were really bold—and grimly realistic about how little they have to lose, from a business point of view—they might decide to seek revenue at the ISP level. The plan: Begin segmenting site visitors by ISP, and charge ISPs for content. Under this plan, if your ISP has paid the news syndicate, you get to see the news. If you try to visit one of the participating sites and your ISP has not paid the syndicate, then you see a different page, possibly a page that urges you to call your ISP and demand access to the syndicated content. It’s the same model controversially adopted by ESPN360.com (go ahead, check and see if you have access or not). I imagine a hypothetical where a handful of top papers, such as the New York Times, Washington Post, and LA Times, jointly with TIME and Newsweek, form a syndicate that charges ISPs a fixed rate per user-month of access. ISPs, in other words, would make a small number of large (“macro”) payments to content providers, and these would be a primary source of revenue for these outlets, along with advertising.
I am, as Paul Ohm might urge me to say, NAL (Not a Lawyer), but I suspect that such a syndicate might well pass antitrust scrutiny. The syndicate would certainly not make it hard to find news on the web: it would simply make it hard to find certain high quality sources. Participating publications might elect to offer free access to certain population segments, who cannot pay or would experience a concentrated public interest harm, such as users from developing countries. ESPN360, for example, reportedly gives free access to anyone who surfs in from a .edu domain. (No doubt this is also a marketing tactic.)
For some definitions of the term “net neutrality,” such a move by news providers would be a violation of net neutrality. Other definitions of the term would place this behavior outside of its scope. But no matter how you look at it, the substance of such a move would be troubling: it would amount to removing these great sources of journalism from the Internet proper, and placing them instead in a kind of walled garden. If that trend took off and became very widespread, it could amount to a return to the bad old days of walled garden services like AOL and Prodigy.
A second good argument that this situation would be undesirable is that it would force all users of a particular ISP to pay for content that only some users want to access. There’s a sense in which such cross-subsidies are already the norm: those who use their ISP subscriptions for email and web browsing subsidize the heavier network usage of video aficionados and other leading-edge consumers who are way out on the tail and use the lion’s share of the bandwidth. But this, in its deliberateness, would be a new and different level.
A third good argument against this idea is that it would introduce awkward relationships between news outlets and ISPs, in a manner that would impair news coverage of the Internet and telecommunications industries.
Fourthly, there’s the possibility that people will pirate the blocked content systematically by using systems like TOR to access the news content via approved endpoints. (My own thought is that this probably isn’t the strongest argument, since many users are uninterested in this sort of maneuver or even the easy Firefox plugin that would likely arise to enable it. Plus, the content syndicate would pool its resources toward aggressive litigation to stem this trend. Plus, the payments would be extracted from law abiding ISPs, not individual users.)
I can imagine a potentially compelling case being made that such behavior by content providers should be regulated or outlawed. But today I think it is neither. And given the news industry’s desperation, the fact that such a move would be unpopular could turn out to be moot if they can persuade ISPs to pay. If someone capable and hardworking set out to sell the idea to a group of newspaper and newsmagazine publishers, I fear they might prove quite persuasive.