Douwe Osinga's Blog: Micropayments and Free Content

Sunday, September 14, 2003

Clay Shirkey's latest essay asks a valid question: why Micropayment schemes don't work. Even if you don't agree with Shirkey's answer, it is an important question. Weren't Micropayments going to allow web-publishers to finally make money on the Internet. The 'old' publishing industry packages a lot of information together in a magazine, newspaper of CD and charges for the whole packages. The realities of the physical world make this necesary, it is undoable to charge per article, but on the Internet this was going to be different. People would pay as they went for content, a quarter for a good article and maybe a dime for a joke. No longer would you pay for content you didn't read. Think about all the newspapers thrown away without being read. A nice future, that somehow didn't happen.

Why not? Why isn't there a generally accepted way to pay for content? Shirkey's argument goes like this: there is an abundancy of content available on the Internet, directly from the authors. These authors do not have great costs getting the content on the Internet and a great need for recognition. Given the choice, they'll choose fame over money. In the totally open information ecosystem of the Internet there will always be a substiture for information, so the cheapest one wins. The most important costs are not the monetary charges, but the fact that any time you make decision whether to spend or not, you're stopped in what you're doing.

There might be some truth in this, but it doesn't always work like that as the success of Apples iTunes proves. In Europe, paying by phone (usually involves receiving or sending a SMS text message) for information works pretty ok. People buy weather information, ring tones and of course porn. iMode also seems to work. But in the end people tend to prefer free over non-free and usually eat-all-you-can over pay-as-you-go. I also doubt whether the Internet will be able to supply free versions of all information subcathegories. Blogs will be free of course, because there are enough people writing blogs. Literature and music might become free for the same reason. But there are a lot of information categories for which you will have to spend money, simply because gathering the information will cost money.

Apart from micropayments and advertising supported media, there is a third model possible for Internet: the walled garden. AOL has content only AOL subscribers can view. A lot of bigger Internet companies have tried this, though most have failed. What these faillures have in common, is that the content was centrally produced, thereby missing an important advantage of the normal Internet. But what if you could have a system where premium content could be protected and only be viewed by members who would pay, say 10 dollars a month and all proceeds of the system would be split according to the number of page views over the content producers? Basically, it would be a eat-as-much-as-you-can model with a micropayment back end for the content produceres.