Business models: things not to do

From Clay Shirky a demolition of the notion that some form of micropayments can save publishers:

The essential thing to understand about small payments is that users don’t like being nickel-and-dimed. We have the phrase ‘nickel-and-dimed’ because this dislike is both general and strong. The result is that small payment systems don’t survive contact with online markets, because we express our hatred of small payments by switching to alternatives, whether supported by subscription or subsidy.

The other key piece of background isn’t about small payments themselves, but about the conversation. Such systems solve no problem the user has, and offer no service we want. As a result, conversations about small payments take place entirely among content providers, never involving us, the people who will ostensibly be funding these transactions. The conversation about small payments is also not a normal part of the conversation among publishers. Instead, the word ‘micropayment’ is a trope for desperation, entering the vernacular of a given media market only after threats to older models become visibly dire (as with the failed attempts to adopt small payments for webzines in the late ’90s, or for solo content like web comics and blogs earlier in this decade.)

…

Because small payment systems are always discussed in conversations by and for publishers, readers are assigned no independent role. In every micropayments fantasy, there is a sentence or section asserting that what the publishers want will be just fine with us, and, critically, that we will be possessed of no desires of our own that would interfere with that fantasy.

Meanwhile, back in the real world, the media business is being turned upside down by our new freedoms and our new roles. We’re not just readers anymore, or listeners or viewers. We’re not customers and we’re certainly not consumers. We’re users. We don’t consume content, we use it, and mostly what we use it for is to support our conversations with one another, because we’re media outlets now too. When I am talking about some event that just happened, whether it’s an earthquake or a basketball game, whether the conversation is in email or Facebook or Twitter, I want to link to what I’m talking about, and I want my friends to be able to read it easily, and to share it with their friends.

This is superdistribution — content moving from friend to friend through the social network, far from the original source of the story. Superdistribution, despite its unweildy name, matters to users. It matters a lot. It matters so much, in fact, that we will routinely prefer a shareable amateur source to a professional source that requires us to keep the content a secret on pain of lawsuit. (Wikipedia’s historical advantage over Britannica in one sentence.)

Nickel-and-dimeing us for access to content made less useful by those very restrictions simply isn’t appealing. Newspapers can’t entice us into small payment systems, because we care too much about our conversation with one another, and they can’t force us into such systems, because Off the Bus and Pro Publica and Gawker and Global Voices and Ohmynews and Spot.us and Smoking Gun all understand that not only is a news cartel unworkable, but that if one existed, their competitive advantage would be in attacking it rather than defending it.

The threat from micropayments isn’t that they will come to pass. The threat is that talking about them will waste our time, and now is not the time to be wasting time.

From Silicon Alley Insider,  on a tip that the New York Times is considering some form of online subscription:

The Wrong Way

• Erect a paywall that limits access to all New York Times content to paid subscribers.

This won’t produce enough revenue to save the paper, and it will just make its content irrelevant.

IMPORTANT: Charging An Online Subscription Fee Will Not Save The Paper

An incremental $50-$75 million a year will buy the company more time to sell assets, restructure its business, and pacify its creditors, but it won’t save the place.  The only way to do that, in our opinion, is to radically cut costs.

The Right Way

• Charge an online subscription fee ($75/yr?) to access most of NYTimes.com. Provide free access to classifieds, AP stories, and a handful of viral NYT stories a day.  Charge for the rest.  Give print subs a major discount on the online fee.
• Make the entire site crawlable by Google and readable/linkable by bloggers and other sites. The paper’s content will thus stay firmly embedded in the online conversation.  Each article will be available online for free (through Google), but if someone wants to read “The New York Times,” he or she will need to pony up. This is the way the WSJ does it, and the WSJ’s traffic is half the NYTimes.com traffic, even with an $80/yr subscription fee.

In time, this will likely generate an incremental revenue stream of $50-$75 million (1mm subs paying $50-$75/yr).  The traffic to individual articles and NYTimes.com free stuff, meanwhile, should allow the company to preserve its existing ad revenue. (With less of an inventory glut, the company will also be able to charge more per ad unit.)