paychoice

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One of the geeks here at the Berkman Center walked into a room recently and started poking his index finger down on a newspaper that was laying on the table, as if expecting it to do something electronic. “This isn’t working,” he said.

So true, in so many ways.

Take for example the Boston Globe, New England’s landmark newspaper, and one to which we have subscribed since we got here in 2007. Like nearly all newspapers, the Globe is in Big Trouble. Here’s the opening paragraph from today’s bad news story:

The New York Times Co., which has threatened to shutter The Boston Globe, is seeking deep concessions from the Globe’s largest union that could include pay cuts of up to 20 percent, the elimination of seniority rules and lifetime job guarantees, and millions of dollars in cuts in company contributions to retirement and healthcare plans.

The Times may own the Globe in a legal sense, but in a much broader way the Globe also belongs to the people of Boston and New England. Everybody in New England benefits from the Globe, even if they don’t read or subscribe to it. It was in this sense that Scott Lehigh‘s column yesterday was titled, Readers, have a say in saving your paper. Here’s the long gist:

We’re suffering from a double whammy: A bad recession and a self-defeating business model. Troubled times have sent advertising revenues plummeting. Meanwhile, we’re selling the paper with one hand and giving it away on Boston.com with the other. That’s never made any sense – the more so since website ads aren’t anywhere near the revenue-generator that print ads are.

…I also doubt we’ll be able to maintain the kind of quality newspaper and website readers expect unless we start charging online visitors who don’t subscribe to the paper.

Newspapers, eyeing several earlier failed experiments, including one by the New York Times, are skittish. That approach has worked for the Wall Street Journal, however. And as someone long wary about giving away our product on the Web even as we sell it in print, I think it’s time to try.

So back to my question: What does the Globe mean to you?

Would you pay to read the paper online? Seven-day home delivery currently costs $9.25 a week in the Boston area. Would it be worth $10 or $12 a month to read Globe content on Boston.com? Another idea under discussion in the news industry is micropayments. You’d give a credit card number once, and then be charged a small amount – a nickel, say – for each story you clicked on. Which would you prefer, a subscription or micropayments?

Some think charging for Web content will only deter readers, while keeping links to our website from appearing on other sites. Any payment system must be voluntary, they say. I’m dubious. But tell me, if we nagged you incessantly – ah, make that, politely prompted you at frequent intervals – would you make a voluntary payment of some sort?

Finally, can you think of better ways to have online readers pay for Globe offerings?

Yes, I can. It’s the fifth item in the series of posts below:

  1. Newspapers 2.0 (October 5, 2006)
  2. Still at Newspapers 1.x (August 15, 2007)
  3. Toward a new ecology of journalism (September 12, 2007)
  4. Earth to Newspapers: Abandon Fort Business. (September 19, 2007)
  5. PayChoice: a new business model for newspapers (February 5, 2009)

PayChoice (later re-named EmanciPay) will be an easy way for listeners to pay stations for public radio programming. It is in the early stages of development, aimed toward appearing later this year in the Public Radio Tuner on iPhones. At last report, downloads of the tuner were moving past 1.5 million, so far.

We could do PayChoice for newspapers as well.

Informing PayChoice on the Public Radio Tuner will be a Listen Log, which is one form of Media Logging. We can do a Read Log as well, at least for the electronic versions of newspapers. Among the many things I’d like the log to perform is what I call ascribenation. That is, the ability to ascribe credit to sources — and to pay them as well. Among other things, this addresses the Associated Press’ concerns about ‘misappropriation’ of its role as the first source for many stories for which it goes uncredited.

Jon Garfunkel also has a good idea worth considering. It’s called PaperTrust.

The bottom line here is that a lot of good people are working on solutions. These solutions are not the same old stuff in new wrappers. They’re original ideas, some of which the papers will have no control over.

But they can help. They can tune in to tech development efforts like the ones I descibe here, and welcome their geeks’ participation in them. They can write and post linky text. (The Globe is better than some in this respect, but still link-averse on the whole.) They can finish following the other recommendations they’ll find here (the first of which isn’t too far from what Scott would like to do).

And, it might still be impossible to save the paper.

The question comes down to living without advertising. Can it be done? If so, how? I guarantee that the answer to those questions will come from the outside. From geeks, mostly.

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Some do. My long-time favorite magazine is The Sun. I bought one of the first issues Sy Safransky sold on Franklin Street in Chapel Hill, in 1974, and found myself writing regularly for the magazine for several years after that, watching it improve with every issue.

Back near the turn of the 80s, Sy and his staff decided to improve the magazine by getting rid of advertising. They did that by becoming a non-profit; but that was secondary to the main purpose, which was to become an instrument for readers and writers, and not of one for advertisers. In other words, advertising was beside the magazine’s journalistic points. The Sun publishes for readers, and readers pay the magazine for good writing. Not surprisingly, The Sun’s subscribers are highly involved, contributing an abundance of letters, plus my favorite section: Readers Write (on a different topic every month).

My point is that it’s possible to have an excellent journal that lives on subscriptions, which are a value-for-value exachange. In the VRM community we propose another: PayChoice, which I wrote about in my last post. The idea here is for readers (or listeners, or viewers) to pay any amount for anything they like. The price is not under the seller’s control. Nor are other forms of signalling by the customer.

Direct support from readers (or listeners, or viewers) matters more and more for media where advertising contributes less and less. I’ve been thinking about this lately, as I contemplate a world with fewer (or no) newspapers and many fewer magazines.

Both newspapers and magazines have been supported in most cases primarily by advertising and secondarily by subscriptions. When print publications need to cut overhead, it’s the writers who get cut. Sometimes whole sections go away. The Boston Globe killed its Northwest section last week. Far as the Globe is concerned, where we live is now West. And how long will that last?

I pay the same for the Globe every week, but they deliver less and less, because their advertisers are buying less and less space. Yet I don’t read the Globe for the ads. I read it for the writing, the editorial content. Would I pay more, to take up the slack? Or would I look for the Globe to cut overhead other than just editorial? The latter, I would think. Still, either way, I’m a paying customer.

As a paying customer with an interest in seeing the Globe survive, I would like to know what the costs of producing the paper itself are. What are the costs of printing and distributing the paper? And what are the costs just of editorial? Never mind advertising for a minute, and what it buys. Just tell me what it costs to support the editorial staff, and to put the paper up online.

What would I have to pay if there were no advertising?

I’d ask the same of magazines.

Just fact-seeking here.

Where I’m going is toward where The Sun is today. I’d like to help publications survive by subscriptions and other forms of direct payment, rather than by advertising.

I’m not against advertising here. I’m just trying to pull the topics apart so they’re easier to discuss.

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Thesis #74 of The Cluetrain Manifesto says, “We are immune to advertising. Just forget it.” We wrote that in 1999, when everybody thought that advertising was going to be THE model for businesses on the Internet. The crash came less than a year later.

Then the next bubble came, and this time everybody thought (surprise!) that advertising was going to be THE model for businesses on the Internet. This time they were right, because Google made it so. In fact, Google makes billions with advertising, not just for itself, but for millions of other sites, including countless blogs. Google does it by making advertising accountable, and by moving the wasteful side of guesswork. They take it off ink, paper, airwaves and billboards, and shift it to server cycles, pixels, rods and cones.

Still, most advertising is still wasted. The difference now is that advertising is accountable while it wastes less costly things. This is fine as far as it goes, which is pretty far, even in the current crash.

But advertising is still a bubble, and has been since it was invented more than a century ago. I’ve been saying this for many years, including last month right here.

In fact, last May I reported how Mike Arrington of TechCrunch was “outraged” by my suggestion that advertising was a bubble (or something to that effect… it’s in this podcast somewhere… maybe one of ya’ll can hunt down the quote). [Later… Dave Wallace found a clip.]

Now comes Why Advertising Is Failing On The Internet, by Eric Clemons, Professor of Operations and Information Management at Wharton, writing in TechCrunch, no less. When I read it the thought balloon over my head said “Yess!” and “Amen, brother!” over and over. For example:

Pushing a message at a potential customer when it has not been requested and when the consumer is in the midst of something else on the net, will fail as a major revenue source for most internet sites.  This is particularly true when the consumer knows that the sponsor of the ad has paid to have this information, which was verified by no one, thrust at him.

Exactly what we said in Cluetrain, and what most people say when they look for havens from advertising, which they find with TiVo and many ad-free places on the Web.

Clemons follows that with this:

The net will find monetization models and these will be different from the advertising models used by mass media, just as the models used by mass media were different from the monetization models of theater and sporting events before them.  Indeed, there has to be some way to create websites that do other than provide free access to content, some of it proprietary, some of it licensed, and some of it stolen, and funded by advertising.

At ProjectVRM we have been working on one, called PayChoice. [Later… changed to EmanciPay.]  Since most of you don’t follow links, I’ll drop the first two sections in right here:

Overview

PayChoice is a new business model for media: one by which readers, listeners and viewers can quickly and easily pay for the goods they use — on their own terms, and not just those of suppliers’ arcane systems.

The idea is to build a new marketplace for media — one where supply and demand can relate, converse and transact business on mutually beneficial terms, rather than only on terms provided by thousands of different silo’d systems, each serving to hold the customer captive.

PayChoice is a breed of VRM, or Vendor Relationship Management. VRM is the reciprocal of CRM or Customer Relationship Management. VRM provides customers with tools for engaging with vendors in ways that work for both parties. PayChoice is one of those tools. Or a set of them.

Background

We now live in a media environment where goods previously sold directly or paid for by advertising are freely available and shared widely over the Internet. A number of factors contribute to a business and social conundrum for suppliers of those goods:

  • Easy copying and sharing makes the goods freely available at growing ease and convenience.
  • Copying and sharing is so widespread and common that punishment for copyright and other usage violations touches only a small minority of offenders, and has proven to be a losing proposition.

What the marketplace requires are new business and social contracts that ease payment and stigmatize non-payment for media goods. The friction involved in voluntary payment is still high, even on the Web, where one must go through complex forms even to make simple payments. There is no common and easy way either to keep track of what media (free or otherwise) we consume (see Media Logging), to determine what it might be worth, and to pay for it easily and in standard ways — to many different suppliers. (Again, each supplier has its own system for accepting payments.)

PayChoice will create a “buy button”-simple payment system to allow readers, listeners and viewers to pay whatever they like, at their discretion, for whatever media products they use. For too many media the traditional business models — subscriptions, newsstand sales, advertising and underwriting — are not sufficient. (Especially in the current economic environment, which is akin to an earthquake that won’t stop.) Nor do they support full participation and involvement with their users.

PayChoice differs from other payment models (subscriptions, newsstand, tip jars) by allowing the customer to pay any amount they please, when they please, with minimum friction — and with full choice about what they disclose about themselves. PayChoice will also support credit for referrals, requests for service, feedback and other relationship support mechanisms, all at the control of the user. For example, PayChoice can provide quick and easy ways for listeners to pay for public radio broadcasts or podcasts, for readers to pay for otherwise “free” papers or blogs, and paid request for stories or programs to be expressed and aggregated, without requiring the customer to disclose unnecessary private information, to become a “member”. This will scaffold real relationships between buyers and sellers, and for supporting journalists covering what Jake Shapiro calls “microbeats.” It will also give deeper meaning to “membership” in non-profits. (Under the current system, “membership” means putting one’s name on a pitch list for future contributions, and not much more than that.)

PayChoice will also connect the sellers’ CRM (Customer Relationship Management) systems with customers’ VRM (Vendor Relationship Management) systems, supporting rich and participatory two-way relationships. In fact, PayChoice will by definition be a VRM system.

Micro-accounting

The idea of “micro-payments” for goods on the Net has been around for a long time, and has recently been revitalized as a potential business model for journalism by an article by Walter Isaacson in Time Magazine. What ProjectVRM suggests instead is something we don’t yet have, but very much need: micro-accounting for actual uses. These including reading, listening and watching.

Most of what we now call “content” is both free for the taking and worth more than $zero. How much more? We need to be able to say.

So, as currently planned, PayChoice would –

  1. Provide a single and easy way that consumers of “content” can become customers of it. In the current system — which isn’t one — every artist, every musical group, every public radio and TV station, has his, her or its own way of taking in contributions from those who appreciate the work. This can be arduous and time-consuming for everybody involved. What PayChoice proposes, however, is not a replacement for existing systems, but a new system that can supplement existing fund-raising systems — one that can soak up much of today’s MLOTT: Money Left On The Table.
  2. Provide ways for individuals to look back through their media usage histories, inform themselves about what they have been enjoying, and to determine how much it is worth to them. The Copyright Arbitration Royalty Panel (CARP), and later the Copyright Royalty Board (CRB), both came up with “rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller” — language that first appeared in the 1995 Digital Performance Royalty Act (DPRA), and tweaked in 1998 by the Digital Millennium Copyright Act (DMCA), under which both the CARP and the CRB operated. The rates they came up with peaked at $.0001 per “performance” (a song or recording), per listener. PayChoice creates the “willing buyer” that the DRPA thought wouldn’t exist.
  3. Stigmatize non-payment for worthwhile media goods. This is where “social” will finally come to be something more than yet another tech buzzmodifier.

All these require micro-accounting, not micro-payments. In fact micro-accounting can inform ordinary payments that can be made in clever new ways that should satisfy everybody with an interest in seeing artists compensated fairly for their work. An individual listener, for example, can say “I want to pay 1¢ for every song I hear on the radio,” and “I’ll send SoundExchange a lump sum of all the pennies wish to pay for songs I hear over the course of a year, along with an accounting of what artists and songs I’ve listened to” — and leave dispersal of those totaled pennies up to the kind of agency that likes, and can be trusted, to do that kind of thing.

Similar systems can also be put in place for readers of newspapers, blogs and other journals.

What’s important is that the control is in the hands of the individual, and that the accounting and dispersal systems work the same way for everybody.

No, we don’t have it yet, but we do plan to put it in the Public Radio Tuner in due time. It will help that well over a million of those tuners have been downloaded so far for iPhones.

Back to Eric Clemons’ piece:

The internet is the most liberating of all mass media developed to date.  It is participatory, like swapping stories around a campfire or attending a renaissance fair.  It is not meant solely to push content, in one direction, to a captive audience, the way movies or traditional network television did.  It provides the greatest array of entertainment and information, on any subject, with any degree of formality, on demand.  And it is the best and the most trusted source of commercial product information on cost, selection, availability, and suitability, using community content, professional reviews and peer reviews.

My basic premise is that the internet is not replacing advertising but shattering it, and all the king’s horses, all the king’s men, and all the creative talent of Madison Avenue cannot put it together again.

This is exactly where we were going in Cluetrain. Back then, and still today, people tend to think of the Net as yet another one-way producer-to-consumer “medium” for “delivering messages” along with goods that “consumers” pay for. But the Net was and remains a place that serves demand at least as well as it serves supply. The demand side just hasn’t been fully equipped yet. That’s what the VRM movement (which includes but is not limited to ProjectVRM) is all about providing. When we (and others) succeed, we won’t just be consumers anymore. We’ll be customers in full standing.

Eric Clemons goes on to explain many reasons why advertising is a bubble. I agree with all of them, though I am not as pessimistic about Google, for the main reasons Jeff Jarvis visits in What Would Google Do? The fact remains that Google, more than any other large company operating on the Web, gets the fundamentals of abundance: that you make money because of it rather than with it. They know the vulnerability of advertising as a model, and I expect them to work no less hard disrupting the model than they have at building it out. (Perhaps in their secret labs they are already at work on this. I don’t know. But if they’re smart, which they are, they’re on the case.) Clemons closes with this:

The internet is about freedom, and I suspect that a truly free population will not be held captive and forced to watch ads.  We always knew that freedom comes at a price; perhaps the price of internet freedom and the failure of ads will be paying a fair price for the content and the experience and the recommendations that we value.

Among the other tools we need are pricing guns for customers. We haven’t had that since before Industry won the Industrial Revolution. But we’ll get them. PayChoice is one example of them. There will be more. And they’ll work because not paying will be increasingly stigmatized.

Right now, for example, most music is available for free. Never mind that some of us call downloading it “theft” or “piracy”. The other price is 99¢, which millions pay in iTunes and through other online stores. Those two price points are not enough. We need ones we can set on our own.

For years Congress and its regulatory arbitrators (first the Copyright Arbitration Royalty Panel and later the Copyright Royalty Board) have been saying there is no “willing buyer” to match the “willing seller” in the online radio, or streaming, business. That is, Internet radio. So, in the absence of that buyer, these panels have handed the pricing gun to the sellers (the RIAA and its collection agency, SoundExchange), but set the prices first. Last I heard, the royalty rate was set to peak at $.0019 per recording, per listener, in 2010.

If you pay 99¢ per song, you’d have to listen to it, what, 521 times to equal the same rate? If you use iTunes, check and see how many times you listen to any song.

So I’m thinking, hey, I’d be glad to pay a penny a recording for what I hear on the radio. These days you have a huge choice of radio stations on the Net. Most play music. All could carry data about that music. I’d be glad to account for that listening, and pay accordingly. And I’d like right now to set that price at a defaulted penny a song. I’d be glad to aggregate my listen-logging with others, with a pledge or an escrow account containing a sum of money for dispersal to artists at that rate. And see what happens.

In fact, that’s what I want to do with PayChoice after we work out the kinks by providing a supplementary business model for public media. Stay tuned.

Oh, and this topic will be among the many I’ll talk about at lunch tomorrow at the Berkman Center. More here.

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