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The Media The Almighty Buck

Fame, Fortune and Micropayments 177

Posted by michael from the please-deposit-5-cents-for-the-next-two-pages dept.
adharma writes "Clay Shirky is at it again. Addressed previously, his new article discussess the failures of Micropayments and the joys of free content."
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Fame, Fortune and Micropayments More

Fame, Fortune and Micropayments

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  • Free, or I'll do Without! (Score:5, Funny)

    by Schezar ( 249629 ) on Saturday September 13, 2003 @06:21PM (#6953638) Homepage Journal
    Honestly, I can live without most things. Sure, I listen to music, and I watch DVDs, and I play video games, but only while they're free. (I mooch from my friends) Were these friends to suddenly become unavailable, I would do without.

    Same goes for web content. I enjoy slashdot, but I'd give it up in a second before I'd spend one red cent.
    • "one red cent"

      What are you? Some kind of Red? Go back to Russia or neo-Russia (Canada), you filthy hippie.
    • So because web content sucks, you shouldn't have to pay for it? Ever ask yourself why it sucks? Because the only way to pay for "free" content is to sell advertising, and there's only so much ad

    • Re:Free, or I'll do Without! (Score:5, Funny)

      by LostCluster ( 625375 ) on Saturday September 13, 2003 @06:34PM (#6953701)
      Whose wi-fi bandwidth are you mooching to read /.?

    • Getting what you pay for (Score:4, Insightful)

      by fm6 ( 162816 ) on Saturday September 13, 2003 @06:51PM (#6953773) Homepage Journal
      So because web content sucks, you shouldn't have to pay for it? Ever ask yourself why it sucks? Because the only way to pay for "free" content is to sell advertising, and there's only so much money to be made that way. If there were another way to pay for quality web content, you'd see a lot more of it.

      An observant person (don't seem to be a lot around here) will have noticed that one of the few pay-for-access web sites that actually have customers is the one owned by the Wall Street Journal. Not a coincidence that it caters to people who have deep pockets -- or like to pretend that they do. Clearly the bucks are there if you have something people want at a price they can afford.

      These "micropayments don't work" rants all fall down because they ignore a fairly conspicuous fact: micropayments not only work, but have been in use for a very long time. Do you have to buy a subscription to read a newspaper? No, you drop a quarter in the machine and you take one. (Or a buck for the WSJ.)

      But wait! That's different! You don't get to pick out individual articles and just pay for those. But that's a technical issue. It isn't practical to build a machine that would do that. The smallest unit that is practical is an entire newspaper.

      Somehow, nobody's managed to carry this idea over to the web. Perhaps this is technical and economic too: payment systems are too hard to implement, computers you can read in bed are still a marginal item, etc. But I suspect there's also a conflict with established interests. (Doesn't it bother anybody that not a single online newspaper has experimented with micropayments, even though they're all desperate for revenue?) Owners of "intellectual property" are very nervous about distributing it in electronic form. (Hence ebooks that cost more to buy than hard copy books.) And existing financial institutions can't be infatuated with payment systems that would compete with their lucrative credit card businesses.

      • Re:Getting what you pay for (Score:5, Interesting)

        by Pharmboy ( 216950 ) on Saturday September 13, 2003 @08:30PM (#6954220) Journal
        An observant person (don't seem to be a lot around here) will have noticed that one of the few pay-for-access web sites that actually have customers is the one owned by the Wall Street Journal.

        Rush Limbaugh's 24/7 program is similar in that you pay around $45 a year ($75 for two years) for both the monthly newsletter and premium web access combined. $10 less for no newsletter.

        Been a member for 2 years now, and I find it's worth it, even tho I only hit it 2 or 3 times a month. Also give access to higher bandwidth audio stream of the live show, which is nice in a steel building with no reception. Plus tons of good links, video feeds, access to tons of audio and video links, and archived shows. When you listen to the archives, there are NO commercials, and when you listen live online, you get bumper music instead of commercials when you are a paying member.

        My opinion is that the Rush program works because it is not "all things for all people" but rather a very focused delivery system for specific content, conservative politics.

        Not everyone is into it, but they have a ton of members and provide exceptional content for those who like it. If you like the Rush show (I do) it provides very nice access with no commercials. It is a pretty good model for others.
        • My opinion is that the Rush program works because it is not "all things for all people" but rather a very focused delivery system ...
          Which sort of describes everything Mr. Limbaugh does, no? ;)
          • Which sort of describes everything Mr. Limbaugh does, no? ;)

            True. No matter what anyone thinks about his politics, he has always been on the cutting edge of marketing himself AND his ideas.
            • I was thinking more along the lines of "narrowly targeted". I've never known anyone who so completely dedicated themselves to preaching to the choir.
        • If you like the Rush show (I do)...

          Tequila: It's not just for breakfast anymore!

          And that's everything you need to see, right there.

          Yes it's a cheap shot, but I'm not proud.

      • I'm confused by your post. You start off with:

        So because web content sucks, you shouldn't have to pay for it?

        And then go off into a long rant based on this, but I am not clear on who said "web content sucks"?

        The parent post to which your reply didn't say that -- he merely said he could do without a lot, arguing that his minimum mental transaction cot is high (to use the terminology of the article), so he would rather do without a lot before paying even a little, even for things he enjoys.

        The

    • Behold! The Tragedy of the Commons! (Score:2, Insightful)

      by Anonymous Coward
      You get points for candor, but yours are the words of a parasite. Forget micropayments and websites - focus instead on these poor "friends" of yours. "Prey" would be more accurate. Just what exactly do you do for them, give them all blowjobs?

      And please, you would never willingly "do without". If your "friends" became "suddenly unavailable" - an experience that I'm sure you're quite familiar with - you would immediately go looking for other "friends" to take their place in providing you as much as you ca

      • I moderately enjoy DVDs, video games, and the web. They are not, however, integral to my life and/or well-being. My friends enjoy them more than I, to the point that they feel it worthwhile to pay for these things. I have better things on which to spend my money.

        Wine. Books. Good food. I buy and share them. Most everything else I can do without ;^)

      • I don't see how the grandparent poster can't do the same as his friends have done to him, in some other fields (such as wine) he is more interested in. Then it is a fair game.

        Indeed, whether it's web sites or OSS software, the average consumer/producer ratio tends to be very high (if not, the producer will probably want free-riders, so it is not relevent to this problem), so everyone only have to contribute a very small amount to balance the system.

        By the way, I don't like calling people "parasites" ju

    • Free Rider Problem (Score:5, Insightful)

      by David Hume ( 200499 ) on Saturday September 13, 2003 @07:06PM (#6953846) Homepage

      Free, or I'll do Without!

      Honestly, I can live without most things. Sure, I listen to music, and I watch DVDs, and I play video games, but only while they're free. (I mooch from my friends) Were these friends to suddenly become unavailable, I would do without.

      Same goes for web content. I enjoy slashdot, but I'd give it up in a second before I'd spend one red cent.


      If with respect to DVDs, CDs and video games everyone adopted your attitude, you would have to do without them because they would not be available.

      This is the classic free rider problem [stanford.edu] (see also Wikipedia [wikipedia.org]).

      • Don't you think you're over-simplifying things just a bit? It's hardly a choice between: a) fund these goods and services on the free market, or b) they will cease to exist.

        "If with respect to DVDs, CDs and video games everyone adopted your attitude, you would have to do without them because they would not be available."

        I don't think you understand. It is not a "problem", because it is not worth any price at all to me to fund them on the free market. What's the problem? Yet, we will not fail to fund wha
        • I don't think you understand. It is not a "problem", because it is not worth any price at all to me to fund them on the free market. What's the problem? Yet, we will not fail to fund what we must.

          Read what was linked to. Whether it's an emotionally-charged "problem" for you or anyone else, the situation described does fall under the definition of the free rider problem. You are benefitting from a resource but others are paying your way. You are riding for free, as it were.
    • Sure, I listen to music...but only while they're free. (I mooch from my friends)

      Watching friends' movies? Our lawyers will be right over!

      -RIAA
    • The success of micropayments will not be determined by whether of not people like to get things for free. Its success will depend on finding an entrypoint where successful entrepreneurs start getting rich using micropayments. The partcular verticle niche that launches the micropayment industry will not be any that you've discusses. Someone will invent the niche. www.futureofmoneysummit.com
    • Yeah, and I mean, I wouldn't dream of paying a subscription for /.! Besides, I block their ads. There's not any cash-flow coming from here to /. Cool, eh?

      However, if there were micropayment information, and say once a week, it pops up a box which asks me to pay a little something, voluntarily, I would for the best articles. Well, actually, if /.ers themselves could include payment information in their comments, I'd even drop them something for an insightful comment.

  • Sure I'd love to have my bank statements... (Score:5, Insightful)

    by Currawong ( 563634 ) <sd&accounts,amos,io> on Saturday September 13, 2003 @06:23PM (#6953644) Homepage Journal
    ...500 pages long with 3 zillion transactions. *Thats* why it'd fail ;)
    • That's exactly why it would fail. Every "electronic payment" transaction eventually comes back to your credit card or bank account, and that has to be properly documented on your statement. Until our financial service providers completely do away with paper statements, there's no way they're going to get the cost of processing a single transaction low enough... which is why micropayments will always have to be grouped into multi-dollar units.

    • 500 pages long with 3 zillion transactions

      I think the model that will make the most sense is something analogous to prepaid cellular service. I don't use a cell phone enough to justify the typical flat monthly fee, but it's nice to have it for when I do want to use it. So, even though I'm not exactly their target demographic, I went with Virgin Mobile [virginmobile.com]

      Calls are 25 cents a minute for the first 10 minutes in any day, and 10 cents a minute for the rest of the day. There are other services that can be

    • Mod this Funny if you want, but not Insightful.

      BitPass, the micropayment system Scott McCloud is using, works like a prepaid phone card. You buy a BitPass for as little as $3, and spend it on content you like until its gone. There's only one charge on your bank statement.

    • 500 pages long with 3 zillion transactions

      That's some small print :)

  • Micropayments are doomed (Score:5, Funny)

    by Eponymous Cowboy ( 706996 ) on Saturday September 13, 2003 @06:23PM (#6953645)
    I honestly can't think of a single web site [slashdot.org] where people would be willing to spend $0.005 to view a page.

  • micropayments suck (Score:2, Insightful)

    by nnnneedles ( 216864 )
    Everyone with half a brain realized this years ago, no matter how many hype articles there was in the media. Micropayments is great for companies, and a pain in the ass for consumers..

    e-cash? Shut up. We got credit cards, paypal and we dont want more accounts and stuff to keep track of.

  • But, but, but... (Score:4, Funny)

    by Anonymous Coward on Saturday September 13, 2003 @06:26PM (#6953660)
    The RIAA said nothing is really free! There are poor people starving in China because I didn't buy the Macarena song.

  • instead of subscriptions, maybe (Score:3, Interesting)

    by midgley ( 629008 ) on Saturday September 13, 2003 @06:33PM (#6953694) Homepage Journal
    There are things I would pay a penny for (0.01p) (I thought we have pennies, and the US has cents, but we seem to be swapping the words) that I won't take out a subscription for, and things that I am happy to subscribe to such as The Independent newspaper. [independent.co.uk] I found Jakob Nielsen's Alertbox articles moderately persuasive, including the suggested interface for feding back to the user the rate at which virtual coppers were leaving the virtual purse. I remember a broker explaining to me that people won't pay for information, and therefore the busines model for the company being set up was of a walled garden...I thought he was wrong then. You won't have heard of the company, it sank.

  • Music and Movies (Score:3, Informative)

    by blackmonday ( 607916 ) * on Saturday September 13, 2003 @06:33PM (#6953697) Homepage
    He barely mentions music and movies, but Hollywood is eager to charge us per vieweing, rather than a pay-once watch/listen forever deal. Pay-per view and Video on demand are a current example. Of course, as long as DVDs and CDs remain mainstream, we won't have to worry about paying 10 cents every time we listen to the "Macarena".

    • Yes, but they can't collect units smaller than the price of a postage stamp. They can charge-per-view in the form of a subscription environment in the form of buying 100 "points" for $10, but they can't charge 10 cent per view with the option of walking away after the first view because that's a unit that the financial system is just not willing to support.
    • A movie has a certain amout of percieved value to the consumer - it's 'worth' 4 to rent the DVD so the video shops succeed. However is a web page 'worth' 0.001p? The value is too small to have much meaning, but there's still the idea that you're paying for it, which is offputting.

      Also there's basic supply and demand - if slashdot started charging it'd quickly be replaced be a free alternative... after all coming up with a dozen 'microsoft sux' articles a day can't be that hard :)

      In a similar vein if a

  • Shirky is wrong. (Score:4, Insightful)

    by Anonymous Coward on Saturday September 13, 2003 @06:37PM (#6953712)
    phone calls, local and long distance, often are pay per unit of some sort. calling 411 too... yet, people can and do "calculate" that calls are worth making, and they pay for them.

    He's sunk his teeth into a clever sounding argument here, and he won't let go, but it doesn't make sense. It is potentially true that the web has brought the price of info down to nothing, but that doesn't mean it's because micropayments fail.

    • phone calls, local and long distance, often are pay per unit of some sort.

      Long distance especially is an excellent example of a micropayment system, too. You could theoretically use a different long distance provider for every single long distance call you make. Sure, most people don't do that, but it is possible. I myself don't have any particular long distance provider set up on my home telephone line, but just use a 10-10-whatever whenever I for some reason am not using my cell phone for a long dis

      • Re:Shirky is wrong. (Score:5, Insightful)

        by JayBlalock ( 635935 ) on Saturday September 13, 2003 @06:58PM (#6953803)
        Actually, they'd be a perfect example of why micropayment systems DON'T work. The reason the telephone charging system works is that people DON'T stop and think about it. You don't have to fish a quarter out of your pocket and plunk it into your home phone. You just pick up the phone and dial - which makes the charges invisible to the user, and most likely, almost totally ignored. (how many of you, honestly, actually think about what a call is costing, until you've been talking and suddenly say "oh crap, it's been two hours! This is gonna cost me a fortune!")

        If you DID actually have to make a conscious decision to place a financial transaction every time you used the phone, long distance calls would plummet. And THAT'S what this article is arguing. For a web-based micropayment system to work, it would have to follow the TelCo model - you hand the website in question your credit card, and then you don't hear a word about the cost of the services again except once a month in the mail. And this is, for reasons too obvious to bother typing out, NOT a good idea for internet-based systems. And that's why Internet micropayments don't really work.

        • Actually, they'd be a perfect example of why micropayment systems DON'T work.

          Considering that they are a micropayment system, and that they DO work, I think you're wrong there.

          The reason the telephone charging system works is that people DON'T stop and think about it.

          There's no reason an internet micropayment system couldn't work the exact same way. In fact, AOL used to work that way. It succeeded for a long time, and then the internet came along and undercut it with free content. But not all cont

        • Well, you do have a point here, but there are examples that may indicate the opposite:

          Around here, payment per SMS is a huge thing, there are billions in this market, and it is all micropayments. People charge their accounts with cards they purchase somewhere, and they spend an amount for something small by sending an SMS to whoever sells it. It works well, it is micropayments, and it seems to be a quite stable situation.

          Where it stands out from web content is that you pay in advance, and I don't think

      • Still, do any of those 10-10-whatever numbers let you buy simply 1 minute of long distance from them per month for less than 50 cents?

        They either hit your with a heavy fee for making your first call of the month with them, or they have minimum per-call charge, such as the "first 15 minutes for 99 cents" pricing model that still charges you the full 99 cents for a one minute answering machine message.

        Besides... you're not exactly gonna write a check for 99 cents anyway, their charges get tacked onto your s

        • Still, do any of those 10-10-whatever numbers let you buy simply 1 minute of long distance from them per month for less than 50 cents?

          Yes. For example, 10-10-321 charges 18 cents a minute, and to quote their website:

          # You don't have to switch phone companies.

          # You don't have to sign up.
          # No monthly plan fees.
          # No minimums, no per call connection fees.

          18 cents is under 25, and qualifies as a micropayment, I'd say.

    • I've got to disagree with you. We don't pay utility companies in micropayments, we pay them a rate for their service.

      We're not buying a one minute conversation from our phone company -- we're buying a rate that covers an entire conversation. The cost of an entire conversation is where we make our value judgement.

      We're not buying 1 kWH of electricty from our electric company -- we're buying a rate that covers our entire month of TV watching, etc. The cost of the entire month is where we make our value j

    • phone calls, local and long distance, often are pay per unit of some sort. calling 411 too... yet, people can and do "calculate" that calls are worth making, and they pay for them.

      That's because "everyone" lacks the presence of IP phones. If everyone had sip phones in their homes and could call anywhere essentially free, would they still use the clunky old RJ11 boxes? Look at cellphones: I have a cousin up north who has cellphones for himself and his wife. They don't even bother with landlines anymore, a

    • phone calls, local and long distance, often are pay per unit of some sort

      Really? The only person I talk to long distance is my mother, and she's never charged me anything for talking to her.

      I'm quite certain she doesn't charge anyone else, either.

      Perhaps you might read the article, before blathering on about something you don't understand.
    • The funny thing is, though, that they're also an example of how people don't like micropayment systems. To wit, the introduction of plans like MCI's Neighborhood, an integrated plan where $50-70 depending on what state you're in gets you unlimited local and domestic USA long distance, so you can call wherever you want for as long as you want and not have to worry about how much of a bill you might run up. People who might not even necessarily make enough LD calls to get their money's worth are signing up

  • Micropayments will fail because.. (Score:5, Insightful)

    by rf0 ( 159958 ) <rghf@fsck.me.uk> on Saturday September 13, 2003 @06:40PM (#6953722) Homepage
    Expierence has shown that whenever people start trying to charge for content that people will find other sources which are free. We have become use to information being free and feel (wether rightly or wrongly) that it should be

    My $0.000002

    Rus
  • but with micropayments, maybe it could be. DSL costs what, $50/month? Web hosting costs what, $5/month? Most computers could easily host 10 websites a month, and with micropayments the people paying for the hosting wouldn't have to commit to long term contracts. Just pay by the day, and have an automated script move you over if your provider goes down.

  • Free is good... or is it?

    One of the great things about the internet is that anyone can publish, no matter how small and insignificant they are. One of the really bad things about the internet is that anyone can publish, no matter how loony and horrendusly wrong they are.

    As he points out in the article, one of the reasons why people thought that micropayments would work was filtering. But as Google does that for free, all you need to do to make your pages popular is to get lots of people linking to you..

  • Micropayments are the Next Big Thing(TM)... (Score:3, Interesting)

    by JessLeah ( 625838 ) on Saturday September 13, 2003 @06:44PM (#6953743)
    ...and have been so since 1993. And probably will be so in 2013. :)

  • What's this guy smoking? (Score:3, Interesting)

    by Stary ( 151493 ) <stary@novasphere.net> on Saturday September 13, 2003 @06:45PM (#6953745) Homepage Journal
    Analog publishing generates per-unit costs -- each book or magazine requires a certain amount of paper and ink, and creates storage and transportation costs. Digital publishing doesn't. Once you have a computer and internet access, you can post one weblog entry or one hundred, for ten readers or ten thousand, without paying anything per post or per reader.

    Sure. I'll be contacting him shortly about hosting some sites... since he's figured out how to do it for free, regardless of the bandwidth usage. In the end, someone pays. You may or may not do it directly, which /. is a good example of, but you do pay.

    • Unless you're serving something herendously huge (video/audio files), the cost of 'bandwidth' is minimal. Many webhosts don't even give you a limit (netmegs.com [netmegs.com]).

      At roughly 50-100k per page (graphics + html), you'd need a *lot* of hits to even approach the limit on even the cheapest providers.

      • Ok, so the only "content" worth serving on the ever-evolving net is text/pictures? I'll agree to that you need alot of hits to approach the limit with those, but with anything larger, you'll be there fast. Also, if your application/content relies heavily on dynamic things, you could quickly bog down servers with that.

        The problem with the net is that popularity limits itself. Once your site gets too popular, you'll hit limits and need to start paying alot more. Naturally, you (providing free content) don't
        • Ok, so the only "content" worth serving on the ever-evolving net is text/pictures?

          Well, that's the one they're planning on charging for with Micropayments. I see no problems charging for music downloads (if that ever works out). I think fileplanet.com (or something) charges for file downloads.

          You can always try to sell banner space; if getting a lot of hits those could actually bring in the needed capital.

          Otherwise yes, I'd agree that basically you are the one who has to fork over the money. It's not a
      • Analog publishing generates per-unit costs [...] Digital publishing doesn't.
        Sure. I'll be contacting him shortly about hosting some sites... since he's figured out how to do it for free, regardless of the bandwidth usage. In the end, someone pays.

      Sure, he's wrong literally, but in many ways his point is still valid:

      1. The cost of webhosting doesn't go up linearly with bandwidth. For example, I recently upgraded to a better webhost and got something like a 1000% more bandwidth, and I'm only paying abou
  • This guy is bang on in many points. Even a free registration is annoying, I stopped reading New York Times when they fixed the archive.nytimes.com hole. Fileplanet? I have to register to wait in line for 3 hours to download a patch? Micropayments are even more of a hassle. I liked the way the author described the way people evaluate purchase decisions, and he's right: I wouldn't pay for a newspaper that charged by the article, or word. Penny Arcade, RPGWW, Poisoned Minds, GU Comics and others tend to have

    • Micropayments are even more of a hassle.

      The whole point of micropayments is supposed to be to avoid registration hassle. If all you had to do was put in your credit card number, and you could be guaranteed that you would only be charged a certain amount on that account, it wouldn't be too much of a hassle, would it? A properly implemented micropayment system would work even better than that. You'd only have to sign up once, and after that you'd only have to click a button to authorize a payment.

      Sure,

  • the value of a service (Score:3)

    by TheSHAD0W ( 258774 ) on Saturday September 13, 2003 @06:48PM (#6953753) Homepage
    I'd have to disagree that micropayments won't work; I think micropayments do have potential, though establishing the system may take some work.

    Given the choice between, say, downloading a song off Grokster for free, or paying a dime to download it directly from the artist's web site, it's true that many people will choose to grab it for free. But if the version off the web page is known good while the one on Kazaa may have glitches, that ten cents may not seem to be such a big deal. The good feeling one gets in "donating" to an artist one likes helps as well.

    The bugaboo in micropayments isn't whether people will do it; it's in getting such a system emplaced. What good is being able to pay someone a nickel over the net if you've got to buy $9 worth of nickels first, with an extra buck for a transaction fee?

    I suspect what we need is a "killer app". For instance, someone selling a nice, useful tangible service and ONLY accepting this micropayment as currency. An entity doing so would also need to bear the cost of sustaining this electronic currency.

  • It's the impetus of opening your wallet (Score:4, Interesting)

    by Leeji ( 521631 ) <`slashdot' `at' `leeholmes.com'> on Saturday September 13, 2003 @06:48PM (#6953758) Homepage

    Shirky makes good points -- I think the real problem with micropayments is that you have to counteract the momentum of a closed wallet.

    People are frugal -- especially online. I pay for the occaisonal shareware, and I subscribe to the occaisonal service. Like Shirky mentions, I can easily determine the value of spending $20 to support a software author I like. When I see enough value, I open my wallet.

    When it comes to $0.25 for a comic strip, though, we have no point of reference when it comes to value. We're buying something of "fractional" value; 1/365th of a yearly subscription, or 1/2 a laugh, for example. Is a comic really worth 5 cents a frame? If I'm doing it for moral reasons -- to support the author -- will he even notice the $0.25? What exactly is a good deal for $0.25, anyhow?

    When it comes to something buying something with such fractional value, it's simply not worth consumers' time to make that buying the decision. It's definitely not enough to counteract the momentum of a closed wallet.

    • I think in things like that, people generally compare it to real-life equivilents. Like in the case of Bloom County, which I know a bunch of /.ers subscribed to when it became available. $10 gets you a year of Bloom County which, if you bother working it out, is far cheaper than buying an equivilent number of books. Plus you get access to their library of comics - I suspect most of the Bloom'ers are also getting Calvin and Hobbes. And whichever other ones they want, so that perceived value is multiplied

  • How About a nice Counterpoint? (Score:5, Informative)

    by gallavad ( 662421 ) on Saturday September 13, 2003 @06:53PM (#6953782)
    For a view from the other-side (that of the independent content provider) check out Scott Mccloud's response [scottmccloud.com] to Shirky's latest essay.

  • clearly argued (Score:3, Interesting)

    by urbazewski ( 554143 ) on Saturday September 13, 2003 @07:04PM (#6953838) Homepage Journal
    I usually end up gnashing my teeth when reading articles about the economics of the internet, but this one was well thought out. It's interesting to contrast his argument that the web and other forms of technology that allow people to produce and distribute their own work will undermine micropayments with the overall trend towards a "winner take all society" or "blockbuster/bestseller society" where fame and fortune are increasingly concentrated on a small minority of winners. (Economist Robert Frank and co-author Phillip Cook outline the argument in their book The Winner Take All Society [amazon.com].)

    The web shows the same pareto distribution that Frank & Cook discuss, with a few sites getting a huge number of hits and the vast majority getting just a few.

    However, Shirky may still be right that the proliferation of free content will prevent even wildly popular sites from turning their fame into fortune. It's also possible that the continued emphasis on blockbusters is a flawed business model that causes publishers/producers to overlook vast markets for a greater variety of content. It's the unwillingness to see beyond the huge profits of a Britney Spears or Madonna album that leads the music industry to pursue shortsighted strategies of squelching online access to music.

  • People pay for quality. (Score:5, Interesting)

    by xanderwilson ( 662093 ) on Saturday September 13, 2003 @07:04PM (#6953840) Homepage
    The author uses two pretty low-quality examples. Just as people are loathe to pay $20 shareware for software worth about $5, the two examples (.10 for PowerPoint slides) don't sound worth it either. When valuable content comes priced at or below their value--that's when Micropayments have a chance to succeed. Not when people continue to follow the paradigm of overcharging customers, just on a smaller scale now.

    I thought McCloud's comic was well worth the 25 cents and BitPass was pretty easy to use. I might experiment with it on a future project of my own--alongside free content.

    I don't remember exactly what separates a "micropayment" from a "small payment," but consider the apparent success of iTunes. I've talked to a lot of people who are amazed at how easy it is to click and buy--at $.99 even--and they're more willing to spend than they thought they were. Can people find these same songs for free? Probably. But they're paying for how much more convenient the paid service is to them than the free version.

    I'd love to see how well or how poorly McCloud has done with his comic. Here's someone who has demonstrated his value to the consumer in the past with both free and priced content. I think finding out if people were willing to follow HIM from free to .25 will be more telling than this article.
    • Can people find these same songs for free? Probably. But they're paying for how much more convenient the paid service is to them than the free version.

      How about people paying to not have to illegally download music? (or maybe they don't know how/where to look?)

      I'm sure nobody would be paying anything for music if it was legally available online from the artist's website (click a link and download, etc.)

      While music is hard to compare (you pay for the singer - so even if someone else sings a similar song,
    • Can people find these same songs for free? Probably. But they're paying for how much more convenient the paid service is to them than the free version.

      Ultimately, the value of something downloaded from the web has less to do with the dollar cost than with the value of your time. To make a non-internet comparison, consider the pros and cons of DIY home repairs: you might think that it's always preferable to fix your own plumbing rather than pay someone else $50/hour to do it for you. But what if you were

  • The forgotten segment (Score:5, Insightful)

    by Perianwyr Stormcrow ( 157913 ) on Saturday September 13, 2003 @07:15PM (#6953896) Homepage
    If I can buy pre-paid BitPass cards without a credit card, with a similar level of convenience, then we have a winner.

    Either that, or anything targeted at teenagers will never be able to charge.
  • I have a really substantial, insightful post for this discussion, however, before you can read it you must PayPal me 10 cents at the address in my profile. Thanks!

  • one problem I see with micropayments is crowd psychology. if someone's car breaks down on a deserted road, it's quite likely someone will stop to help them. If the same car is on a busy highway, it's actually less likely ... because all the driver's by figure someone else will be stopping any time now. The end result is, sadly, it takes longer for someone to pull over and help said person, or said person has to fend for themselves.

    How does this apply to micropayments ... well since something is on the ne

  • i think the most critical components to getting a micropayment system off the ground are:
    • seamless integration with web-browsing experience
    • trusted intermediary handling the payments

    i think that google is perefectly situated at the moment to use its widespread goodwill for this purpose. the micropayment system could be integrated into the google toolbar [google.com]. users would prepay a certain amount to google that would reside in their account (google would keep a commission, say 10%). the balance on your acco

  • The rule is simple, but so many people try to argue around paying ( or charging ) for anything.

    If you try to charge for something creatively generated...be it software, art, music or whatever, someone somewhere will pull out the Elsworth Toohey method of attack and claim your brainchild should be public domain.

    Conversely, too many people think they can charge astronomical prices for minimal or poor content. I like Scott McCloud's work, but 25 cents seems like a lot per comic strip. So, if 25 cents is too
    • The key point of Shirky's article was that publishers are removed from the scenario. There is no middleman, and an artist can publish his own work for whatever price he wants... compounded by the fact that it's usually easier to publish it for free and (as Shirky said) you'll get the competitive advantage in doing so. So while the example with Seinfeld makes sense for television, if anyone could produce similar material without landing a 'deal' with NBC, then no one would bother paying his ridiculous salar
  • Back in the mid 80's, long before the World Wide Web, Case Western University in Cleveland, Ohio started a free dial-up Bulletin Board System, paid for by the University and donations from local businesses. Soon, it was so popular that their budget just wasn't enough to pay for the expansion that the system so badly needed.

    So they figured out how much it cost to run the system and divided that by the number of users. The number they came up with was quite small -- literally a few cents per user per month
  • I am not a big fan of micropayments, but I do think that we need a kind of digital cash. I don't consider PayPal or any of its direct competitors suitable.

    Unfortunately the guys who came up with the implementations of digital cash (and therefore own the patents) have been dreadfully pathetic at getting it going in the real world.

    You won't see micropayments, etc. go anywhere until those patents expire. Then I wouldn't be too surprised to see something useful come around with hope of getting adopted on a
  • Well, my friend Dave Copeland [davecopeland.com] posted a couple of musings to RedPaper. Someone even decided to plunk down the $0.15! If you don't believe me, check it out for yourselves here [redpaper.com]. And who says micropayments can't work!
  • What bloggers, online comic strip authors, etc. need is a system set up like Adult Pass or SexKey. (No links, use google find it when you're at home, not work.)

    Like the telco model mentioned earlier, you join, pay a low monthly fee and all member sites get a cut. You don't get an itemized bill, but that may not even be worth thinking about. SexKey just has to make sure that it's cash flow is positive, and that member sites are getting their requisite amounts of payback depending on membership class.

    No men

  • But, of course, you've got it upside-down... (Score:3, Interesting)

    by skia ( 100784 ) * <skia AT skia DOT net> on Saturday September 13, 2003 @08:40PM (#6954261) Homepage
    This article is well thought-out as far as its arguments go, but fails to look at the big picture.

    The author seems to think micro-payments are doomed to fail because it is not macro-payments that are deflecting customers -- it's the mental action of deciding whether or not to buy something.

    I can see his point in the short-term. If a site I read regularly suddenly switches to micro-payments, I have to decide if I think the site is "worth it" anymore. I might very well stop visiting it all together. If you force any significant number of people to make a decision -- any decision -- you'll end up with people on both sides of the fence.

    Likewise I agree with the author that, if I was bored and randomly surfing a list of micro-payment-enabled content, I would have to subject each offering to an uncomfortable level of scrutiny that may turn me off from clicking the "Buy" button.

    But these two scenarios are not what micro-payments are trying to address. Micro-payments really shine when the decision to buy has already been made.

    The large percentage of all things bought are premeditated. It's not often that someone drives by an auto dealer and decides on the spur of the moment that he's going to buy a car. People do not go to a book store and just wander aimlessly and sometimes accidentally buy a book.

    If a person goes shopping, it is with the intention to buy.

    So now lets look at the more likely scenario of a micro-payments shopper. Say a young boy longs to find some entertaining reading material. He's already decided that he's willing to pay for it. So he goes on line to sort out his options. He finds a comic book store, but it's in the next town, a half-hour drive away. He discovers he can subscribe to his favorite comic, but that's expensive, and it will take the comic book company forever to ship it to him. There are some free comics on the web, but he's read all of those, and some of them are of questionable quality. Then he comes upon a comic that can be purchased with micro-payments. Let's look at the questions this boy is going to ask himself:
    • Which is the best value?
    • Which gives me the quickest gratification?
    • Which is the least amount of hassle?
    • Which looks the most interesting?
    Notice how whether to buy or not was never a question asked? Notice how micro-payments encourage a positive response to three of the above four questions? If you manage to bat .750 with a customer, chances are you will make a sale.

    People will only balk at being asked to buy something if they are not shopping to begin with. And it's a fact of business that it's hard to get people who are not shopping to make impulse purchases. But micro-payments should not be misconstrued as being designed to attract the impulse buyer. While their low cost does give them a foot in this door, micro-payments will really only come into their own when used to sell goods that the public is looking to buy.

  • Shirky's Folly (Score:4, Insightful)

    by Dan Crash ( 22904 ) on Saturday September 13, 2003 @11:18PM (#6954824) Journal
    By way of setting up a straw man, Shirky asks: "Would you pay 25 cents to view a VR panorama of the Matterhorn?" As if one's personal preference for Matterhorn photography had anything to do with the success or failure of micropayments.

    Make no mistake; like ALL business ventures, some people will fail with micropayments. Some will fail because they didn't know how to market their product, or because they set their prices too high or too low. But so what? That's endemic to capitalism, not just micropayments. Just because Crystal Pepsi failed doesn't mean capitalism itself is a failure. Engaging in these kind of arguments is a beginner's mistake, and most of Shirky's thoughts on micropayments surprisingly and unfortunately exhibit this same kind of sloppy thinking.

    His "mental transaction costs" argument, for example, is predicated on users being forced to engage in one or two cent transactions every time they want to view a page. But most micro advocates have abandoned this line of thought. The idea of charging a penny-per-page is history. What they want in the 21st century is the ability to sell their products -- songs and webcomics, mostly -- at a fair price. And micropayments enable them to do that. Shirky endlessly flogs the dead horse penny-a-page model, but conveniently ignores the 99-cents-a-song model that's made iTunes Music Store such a success.

    Scott McCloud himself writes that 1,354 readers bought Part One of "The Right Number" at 25 cents a pop. Considering that he was the very first BitPass seller ever, and that everyone who wanted to see his comic had to go through the effort of signing up for BitPass, that's remarkable, and worth talking about. It certainly flies in the face of Shirky's assertion that consumers on the internet are so lazy and indiscriminate in their tastes that they'll bolt to free content at the first opportunity. Scott's readers had to not only pay, but go through the effort of risking $3 signing up for a new, untested service. Scott's experience demonstrates that failure to get people to pay for your product has everything to do with your relationship to your audience and nothing to do with micropayments. But Shirky ignores it all the same.

    Finally, Shirky's views on micropayments completely fail to address the idea that micropayments can work with other forms of payment, such as subscriptions or bundling, instead of replacing them. Buying content ala carte may be the step that convinces you to subscribe to a site, for example. Micropayments aren't an either/or, they're an and. One more choice, not one less. And of course, micropayments can work exceptionally well alongside free content. Any public television pledge drive shows this principle in action; even small tchotchkes can induce many people to donate. Any thoughtful analysis of the future of micropayments ought to examine this phenomenon, but Shirky doesn't.

    In some ways, it's nice to see that Shirky hasn't changed his tune. At least he's willing to go down with the ship. But his analysis is -- by any standard -- unbelievably shallow. As the market for micropayment content increases, it will be interesting to see how he tries to spin reality.
  • While I would tend to side with the economic argument of Shirky over the more emotional argument (and hopes) of Scott McCloud, I think that they both miss the point.

    This system does not count as "micropayment"!!!

    In fact, it costs $3.00. The reason for this comes from our credit card system, which really doesn't allow for transactions that small. You get charged a transaction fee by an amount depending on the merchant agreement and that eliminates your micropayment profit margin. And you always pay a p

  • I'd say the real issue here is how you are billed for your micropayments. In the case of bitpass, you have to pre-pay with a credit card. Now unto it's self, pre pay isn't a bad idea, however the exicution stinks. The only real insdustry where pre-pay works is the phone card industry. However, if people couldn't pick one up anywhere in exchange for chash, check, or charge that industry wouldn't exisit.

    I wouldn't mind if I had $20 in "internet cash" that I could by premium content with, aslong as it was
  • Consider a "micropayment" system that DOES work, and that system is EZpass. How that works is a little bit different. They charge your Credit Card $25.00, and use that money to set up an account for you within their system.

    Thereafter, they bill your account with the $25 dollars in it, even if the amount is only a dime (but you can imagine that amount could be made even smaller for a true micropayment system).

    Since the amount is simply deducted from your "tab", there's no real processing fee like you get w
  • I don't think $0.25 is too much for a long comic - but I can't read this new The Right Number because it's in Flash format. Gaaah!
  • I'd been meaning to visit McCloud's site and sign up....

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