The free me

The free me
: Clay Shirky has a smart piece (well, duh) about the inevitable failure of micropayments — simply because there is more and more and better and better free content (like Shirky’s own essay) competing with content that costs more and is less convenient to get … and because the barrier to payment, any payment, is high … and because technology now puts the power of publishing into the hands of authors instead of publisher and authors are fueled by ego first, money second.

I thought I was going to write a short reply to recommend the piece but I ended up spending my Saturday morning writing much more. (So click on the “more” to see what Clay and I have to say:)

The fact that digital content can be distributed for no additional cost does not explain the huge number of creative people who make their work available for free. After all, they are still investing their time without being paid back. Why?

The answer is simple: creators are not publishers, and putting the power to publish directly into their hands does not make them publishers. It makes them artists with printing presses. This matters because creative people crave attention in a way publishers do not. Prior to the internet, this didn’t make much difference. The expense of publishing and distributing printed material is too great for it to be given away freely and in unlimited quantities — even vanity press books come with a price tag. Now, however, a single individual can serve an audience in the hundreds of thousands, as a hobby, with nary a publisher in sight.

This disrupts the old equation of “fame and fortune.” For an author to be famous, many people had to have read, and therefore paid for, his or her books. Fortune was a side-effect of attaining fame. Now, with the power to publish directly in their hands, many creative people face a dilemma they’ve never had before: fame vs fortune.

Clay’s quite right about all of this. I’ve struggled since I’ve been in this online business to think up some pay-for-content scheme that would work and with one small exception, everything I produce is free. It’s the right way to go.

: But Clay does sidestep one important question: How micro is micro? What the line at which payments will and won’t work?

He tears down the pipe dreams some publishers and now webloggers have of the mythical nickel payment — “Gee, if I had a nickel for every time somebody read me, I’d be rich, I tell you, rich!” (to which my West Virginia pa would reply, “Yeah, and if a frog had wings he wouldn’t bump his ass every time he jumped”). No, the reader is never going to decide to pay a dime before reading a piece.

But I have paid $200 to read an industry paper online.

So where is the line between micro failure and real success with payment?

The usual definition of micropayment, I’ve been told by people in the business, is $2.50 because it doesn’t pay to process a credit-card transaction for anything less (and credit cards are the only way any payment scheme can work, especially in America, because the inconvenience of all other forms — yes, including and especially PayPal — is way too burdensome to ever expect any sales volume). This is also why companies try to sell subscriptions vs. one-time payments, but that really raises the barrier to payment.

Apple is making payment work for under $2.50 because it is assuming, rightly, that you’ll buy enough to cross the credit-card threshhold — and it can make that assumption only because, at last, it has enough labels offering enough music to make that bet reasonable. Last week, my son bought two songs on for 79 cents each and so they’re probably still waiting for me to buy more so they can get their money. They’re carrying a $1.58 float for me. They’re gambling. But it’s a good gamble.

So is there a point at which payments do work? Yes. There is a critical point defined by a number of factors: high value (I want this song, damnit); low competition (there’s no substitute for this song); high convenience (buying it online is easier than shlepping to the store); low price (note with Universal’s announcement this week that online pricing is now driving offline pricing), and a critical mass of choice, otherwise known as a marketplace (this won’t work buying one song here, one there; it works because I get one-stop shopping).

So there is no magical dollar (or cent) mark that defines micro and whether people will pay. But there is still a line at which people will pay for some things, whether that’s expensive reports or lots of songs.

: But, as Clay says, there may be good reasons for the content owner not to charge — once you discover that your product is your best marketing tool — and this will have huge impact on the economics of future content.

In the print world, it’s worth putting up some content from a publication because that will attract readers who may be enticed to buy or subscribe to that publication. Because the publication already owns that content, this amounts to damned cheap marketing.

It makes perfect sense, then, that a music company should give away some free music to build an act so fans will want to buy more of that music (and attend concerts). They have done that for years on radio. They will do that more and more online as they try to reinvent the music business.

In the world of weblogs, I often point to Glenn Reynolds and say that he has branded himself online in ways that he could not in the classroom or in journals, and this is sure to pay off for him not just in audience and ego but also in wealth: Because he is the famed Instapundit, he is more likely to get book deals, TV deals, and a cushy Yale teaching gig.

I keep doing this weblog for many reasons — gratification (I like writing again), ego (I like having an audience), learning (this weblog has helped me understand how to bring weblogs to my work), community (I like you people, I really do), but also some distant bet that it may help me get a book deal or a teaching gig. Thus, it’s hard to see where fame leaves off and fortune begins; the line blurs.

: There’s another big implication to all this: Free content shifts advertising and marketing dollars and changes the economics of media in fundamental ways that reach beyond just the repricing of content.

First, all this free online content provides, as Clay points out, a superb advertising vehicle because it is highly targetable (that is the secret of Google), is highly trackable, has a large and growing audience, and is inexpensive. Ad agencies haven’t figured this out yet (and the online content providers — including webloggers, damnit — haven’t yet done enough to help them figure it out). But they will. They must. And it’s starting (I just saw a story that says TV is shrinking as an outlet for local auto dealers while the Internet is growing).

But there’s another issue for media: Content becomes not just a vehicle for marketing but it also becomes the marketing itself. Putting up free content is a way to advertise your content. Look at it another way: Amazon stopped advertising and instead put that budget toward free shipping and it has paid off for them, but meanwhile, media properties lost Amazon advertising. The more that music companies put up songs to attract audience to buy online or off, the less they will buy ads to do that (shh, don’t tell anybody). Ditto movie companies (which are spending more online and less in print). Ditto book companies (when they wake up).

So you will see an increasing shift of marketing dollars to online. Some will go to targeted advertising (and weblogs should figure out how to join in that party — especially since they’re never going to get rich on micropayments). But some will go to simply putting up content to advertise content (marketers will still need to advertise to tell the audience where to find that free stuff, but the mix will change and that, in turn, will continue to change the media business).

: Clay’s provocative lead is that micropayments won’t work. But what he’s really saying is that free content will work — is working — in ways that are more revolutionary than we even know.