This is one of those posts that is a speculative thought written as fact. That said, it may actually be true. It starts with a conjecture: no one has ever sold information. Well then, how does one explain the payments people make for (physical) newspapers, books, and all manner of other stuff? I am going to contend that what people are paying for and have only ever paid for is delivery (or more broadly, something other than information).
[DDET Read on]
I am writing this in the context of the recent debate regarding micro-payments for newspaper articles. This is something I previously commented on, was a lead story in Time, objected to by others, and discussed here and here. That debate notes that (a) people value information and (b) it is costly to produce that information and so that means people can and surely will fork out to cover information costs. Fair enough except that it doesn’t appear to happen when it should and maybe, as I will argue here, ever.
Let’s start with books. Books represent a collection of information. But in pricing books publishers and booksellers take into account various factors including the quality of paper and binding as well as timeliness — charging more for books closer to the time of release in many cases. So the same information is sold for differing prices depending on how it is delivered. And we see this being expanded to electronic books too. And all this occurs when books can be easily borrowed from others. So what book sellers are competing with are those other modes of delivery. That is why, except in extremely rare cases, households only tend to buy one book.
Now, let’s move on to music. Previously, the issue in delivery was quality (albums to CDs) and portability (cassette tapes). Then came digitisation (actually that came with CDs) and supposedly every thing changed. Yet, iTunes is able to sell music despite the fact that you can get that very same music for free (albiet illegally but nonetheless). The obvious reason is that it allows for easier delivery. Pandora radio — something that I suspect could charge for a subscription — does delivery differently but allowing tailoring and experimentation. Indeed, it works like radio that way — the obvious delivery-based competition for music sales.
I could go on but let’s get to newspapers and the current apparent dilemma. The claim is that newspapers when they lost classifieds, moved to unprofitability. In reality what happened was that newspaper content and classifieds shared a delivery mechanism — timely and regular delivery to readers. But classifieds found a better mechanism and one that made search easier as well as involved lower costs. News content could also use that mechanism. The problem was that classifieds still had their traditional customers — advertisers — while news content was now much less about delivery and more about information. According to my hypothesis, that is the problem.
So the response has been, let’s work out how to get people to pay for information. One example of this is Chris Anderson’s notion of “freemium.” You give away 99 percent and charge for 1 percent. The idea there is to charge for some premium content. But my conjecture here is that is wrong. What you need to do is charge for better delivery. Ad-free is an example of this but customisation is another way.
Now I don’t have the ‘solution’ for newspapers but my guess is that once they start thinking about giving away content and charging for delivery, payment mechanisms will come (something that Jonathan Rosenberg was groping towards).