Guardian column: Whack-a-mole with micropayments

My Guardian column this week on newspapers trying (again) to imagine a world in which they can force people to pay online. (I’m told that the print version has some dropped lines; this is my draft):

Like a gopher in the garden, the notion of newspapers charging for content online keeps popping its nose up out of the dirt. Pardon me while I whack this pesky rodent in the skull.

Mind you, I’m all for charging for content if you can. I’m charging for content myself right now (want to buy my book?). The Financial Times and Wall Street Journal—always cited in this discussion—manage to charge their readers (well, their readers’ employers). And, yes, we pay for movies, some TV, and now music (thank you, iTunes).

But online news is different for many reasons. First, as soon as knowledge is known, it’s a commodity—and not a scarce one that can be controlled. Second, there is no end of competition online. As countless publishers have observed about their nemesis, craigslist, it’s impossible to compete with free.

More important, in the complete P&L of paid content, charging brings expenses and liabilities. It costs money to market to acquire purchasers or subscribers (a magazine in the subscription-heavy U.S. market may spend £30 to get £9 in circulation revenue; profitability comes from advertising—or it used to). Charging for content reduces audience, which in turn reduces advertising revenue. And putting a wall around content keeps it out of the conversation and devalues brands (this is why New York Times columnists were said to hate their paper’s aborted effort to charge pennies for their thoughts).

But here’s the killer: When content is hidden, it cannot be found via search (not to mention bloggers’ and aggregators’ links). In a link and search economy, content gains value only through these recommendations; an article without links has no readers and thus no value. The real cost of charging for content—and it’s a cost born by the content owner—is a loss of Googlejuice.

In the complete P&L of news online, keep in mind as well that costs decline when a newspaper need no longer be all things to all people (it can, in the words of my favorite PowerPoint line, specialize: “Do what it does best and link to the rest”). Costs also fall when the paper can jettison the expense of printing and distributing its words.

It is this complete business model that we should be focusing on as we try to bring news into its next generation, not desperate efforts to shoehorn old models into a new world.

Yet whenever the downward vector of newspapers’ fortunes takes another dive, you can be assured that there’ll be calls—as there have been across U.S. media in the last month—for financial rescue in the form of micropayments; subscriptions; antitrust exemptions to enable newspaper cartels to shut themselves off behind a giant pay wall; wishes for charities to take over newspapers; dreams of government bailouts; hopes that the Amazon Kindle will become a platform for payment; and demands that Google should be forced to share its revenue. In the U.K., there have been rumors that at least one company will try to stand alone and charge for its content. Good luck.

To respond to each: Micropayments have never been shown to work except when distribution is tightly controlled (see: mobile phones and iTunes). Subscriptions have been abandoned by The New York Times and others because the costs, enumerated above, are too high. A newspaper cartel is an oxymoron, as publishers have never shown the ability to self-organize (the last attempt in the U.S., the New Century Network, was a flaming disaster). Charities are lovely, but even the Scott Trust that generously supports this newspaper rose not out of pure altruism but out of a need to avoid inheritance taxes that would have forced a sale. Government support has been discussed in these pages but I, for one, am fearful of the notion of the prey feeding the watchdogs. The Kindle is cool but has a tiny audience.

As for Google: Its detractors have the value proposition exactly backwards. Google shouldn’t be paying newspapers. Newspapers should be grateful that Google doesn’t charge them for the value it shares in links and audience. Google is their generous, free newsstand.

As various bloggers have lamented lately, all this talk of pipedreams and preservation is a waste of precious time when we should be exploring and executing new business models and exploiting new opportunities to transform journalism for a new age.