As you may have seen for yourselves, media’s ‘new e-business’ aspirations have caused quite a stir. I have ToingToing!ed about it here and The Financial Times Online offers a decent detailed assessment of the situation, both pieces are offered for free, I hasten to add. Advertising does not bring in the money anymore (did anyone tell the agencies, BTW?) and so, content providers, such as Rupert Murdoch, CEO of News Corporation, are desperately looking for new ways to generate revenue. In an earlier piece I ToingToing!ed about Murdoch’s conundrum: he is trying to recoup a USD 209M loss in quarterly profits incurred by his newspaper division. In what seems like an overreaction, Murdoch decreed that usage charges will be introduced to premium publications (such as the Wall Street Journals, aka WSJ) and that “users would pay “handsomely” for WSJ content.” This is where the legendary producer Max Bialystock would quip “You keep saying that, but you don’t say how…” Increasingly, many content providers who push so-called ‘new media business models’ name micropayment as their ‘how’. The Business Dictionary Online defines micropayment as a “[t]ransaction in small amounts, costing a few cents to usually less than five dollars, typically involving sale of information on internet.” Imagine that content repositories would offer millions of infobites at a nominal fee. Content seekers, then, would use an electronic turnstile (the term turnstile is used here metaphorically, of course) micropayment system that would charge them for each item bought.
Darren Libonati, president of Las Vegas Events and director of the Vegas Sam Boyd Stadium alludes to inherent shortcomings in turnstile-type payment systems. Speaking about a Vegas festival in which 50,000 daily visitors were expected, he said “if we can turn the turnstiles and fill up the seats, we know the business model will take care of itself. I do know this is an affluent group of people because […] people will have had to spend $1,000 already to get here.” Libonati identified the main flaw in using the turnstile based business model for content: making sure that many people pass through your turnstile and pay the required fee is not enough; visitors need to have both the intention and the ability to spend much more, over and above the basic entry fees they pay at the turnstile. Often (and this is crucial) turnstile fees are actually waived in order to support “further spending.”
Turnstiles are great, says Walter Isaacson, former Time editor and the current President and CEO at the Aspen Institute. Turnstiles worked for Apple’s iTune, who commoditised a basic information unit (a file including a single track) and now we can all hear Appledom’s turnstile erupting in jubilation to the sound of revenue streams.
The New Your Times’ opinionator blog is referring to a speech entitled “A Bold, Old Idea for Saving Journalism” presented by Isaacson at the University of California Riverside, quoting Isaacson as saying that “the key for attracting online revenue, I think, is coming up with an iTunes-easy, quick micropayment method. We need something like digital coins or an E-Z Pass digital wallet – a one-click system that will permit impulse purchases of a newspaper, magazine, article, blog, application, or video for a penny, nickel, dime, or whatever the creator chooses to charge.”
This is perfectly logical, Mr Isaacson, but where is the money to be made here? Can you and your former colleagues at NYT survive on nickels and dimes they’d get from occasional content seekers? The example Isaacson uses is valid – but not applicable to previously-printed media. iTunes offers music tracks, while virtual money used on social networks and digital games buys, yet again, Items of a high desirability value. Does Isaacson believe that people would be motivated to buy the latest WSJ information in the same way they feel compelled to get the latest Coldplay track or swap Nintendo Wii gaming points?
And even if News Corp finds such avid turnstile spinners for the digital version of the newspaper, will there be enough of them to make a dent in Murdoch’s enormous shortfall? Not a chance. Murdoch is not likely to recoup his losses through a turnstile because turnstiles rely on a high number of people paying low attendance fees. Let’s assume that an average piece would cost US 20c per turnstile spin. Murdoch will require over a billion spins to make up his quarterly profits shortfall. How many WSJ information seekers are needed in order to affect one billion turnstile spins?!
There is no doubt that Journalism can benefit greatly from micropayment – using mobile accessibility, online bit-by-bit communication (aka ‘Twitter of the future’) and existing online content channels (RSS could do greatly here), content providers could make money – bit by bit, digital coin by digital coin, spin by spin. This is likely to leave Mr Murdoch and his shareholders with a staggering shortfall.
Sponsored turnstiles may offer a light at the end of Murdoch’s tunnel – let the great spenders sponsor content channels, so you and I can get the content for free. It works in Las Vegas – it may work elsewhere too. Or will it? I doubt it that Coke, Nike, British Airways or Toyota will be interested, for example, in sponsoring investigative journalism? They are much more likely to go for high-turnover, hyperactive traffic makers and consumption-biased content. Once content is determined by sponsored turnstiles, what chance does an award-winning movie like The Children of Darfur have against Hannah Montana?
Are we facing a media doom-and-gloom scenario? Yes, if we are a massive conglomerate like News Corp. but probably not, if we are a lean and mean content machine. Smaller operators might be able to get by – and some may even do well, with a combination of written content, podcasts and flash-pointers designed for the web, e-mail, social networks, mobile devices, RSS, SMS and Twitter-like platforms. Suddenly, after many years of living in the shadow of mammoth-sized content provider, smaller operators may have a better chance of surviving.