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This is the sixth in a series of blog reports on the status of the news landscape and a challenge to create a new one. The series is authored by Bill Densmore, a 2008-2009 RJI Fellow and originator of the Information Valet Project. View the series here.

When it comes to getting paid, who are news organizations competing with, and what can they do about it?

First answer: They aren’t competing with each other. They are competing with all of the other things consumers spend information-access dollars on.

If all American households were the same, each would have spent $1,300 in 2009 on information services (source: U.S. Census statistical abstract). They bought subscriptions or single copies of newspapers, magazines, books, video, film, music, cable and Internet access and other services — not including basic phone service (wired or wireless), which might easily double the total.

If all American households were the same, each would have spent $1,300 in 2009 on information services.

How much of that $1,300 per year might be spent on services that provide — at least in part — trustworthy, appealing information about civic issues? Newspapers’ share of the $1,300 was an average of $72 for subscriptions. With circulation revenues peaking and advertising revenues plummeting, more digital ads alone likely won’t sustain journalism as we’ve known it.

One way or another, a bigger burden will need to come directly from users — via subscriptions, donations, transactions, events or aggregated small payments across many services — or the cost of producing journalism will need to shrink. Otherwise, there will continue to be less professional reporting.

“I think the only future for journalism is reader revenue,” Andrew Sullivan, founding editor of the subscription news blog “The Dish,” told Capital New York in October 2014. “Without it, you are in danger of becoming a public relations or advertising company disguised as journalism, like BuzzFeed and even The Guardian. BuzzFeed is really an ad agency with some journalistic window dressing.”

In this report we'll:

  • Highlight the current environment for “charging” for news, and point to some experiments.
  • Suggest why they aren’t working.
  • Probe what users want, including personalization.
  • Consider what has to change to economically deliver personalized experiences.
  • Envision what our media ecosystem will look like as a result — a shared-user network for trust, identity, privacy and information commerce.

The experiments at “charging” for news

There have been many experiments over the past two decades at methods to pay for content. “Right now, it’s easier to buy Angry Birds on your iPhone than it is to buy journalism on your phone,” wrote DigiDay reporter Chris Smith in a Nov. 11, 2014, story.

Payment experiments underway fall into two general categories — traditional payment services and those that promote some element of gifting, donations or crowdfunding.

Payment experiments underway fall into two general categories — traditional payment services and those that promote some element of gifting, donations or crowdfunding.

Some of the most-cited provisional success stories in supporting journalism are well beyond experiments and easier to understand. The New York Times, The Wall Street Journal, Consumer Reports — and all-digital startups such as the — are making progress with direct-from-user payments. A case study of Mother Jones magazine by DigiDay reporter Lucia Moses is also a promising model for a hybrid system of donor-subscriptions.

Several of these services seek to support a subscription that works across multiple sites or services. In general, the user has to set up an account with a central service. The two Netherlands services, Blendl and MediaID, may allow a subscription at one publisher to work at other sites. Also envisioned by Blendl is purchase of articles for the equivalent of as little as one U.S. dollar.

What’s the best answer: Paying for news, or paying for a service?

 News organizations have made at least two marketing mistakes in trying to get paid:

  • They allowed critics to take control of the message, when the term “paywall” became the dismissive description of what in most industries would be called the check-out lane. Most current user-management systems are anything but paywalls, with a variety of methods that allow free sampling — as if a supermarket allowed you to exit with a certain number of items for free.
  • They have focused on their need for revenue, rather than their obligation to present a service and experience so appealing to consumers that they will happily consider it worth paying for. And they are failing to reach millennial readers, listeners or viewers, according to former newspaper editor and tech entrepreneur Alan D. Mutter.

“It’s up to content owners to decided if they want to charge, and it’s up to users to decided if they want to pay,” Google Chairman Eric Schmidt observed in his 2011 MacTaggart Lecture in Scotland.

Dan Sinker, Chicago-based director of the Knight-Mozilla Open News Project, says news organizations need to spend time finding out what their users want — especially potential new users such as teens and young adults. “These kids are getting information,” he says. “How are they getting it? How are they learning about the smaller community they live in? You need answers to those questions. And then you begin to build prototypes around that.”

For journalism, the options for getting paid boil down to advertising, donations, philanthropy, subscriptions, single copy/play and ancillary services.

Getting paid for the delivery of a valuable service is the bottom line for any business. For journalism, the options boil down to six: advertising, donations, philanthropy, subscriptions, single copy/play and ancillary services.

Whether the user is asked to pay — or donate — by subscription or per click, the emphasis is on paying for an object — a story — rather than an experience. In 2009, when she was still head of National Public Radio, Vivian Schiller argued that efforts to put up “a big fat paywall” would merely drive users to NPR’s free, donor- and grant-supported services. “News is a commodity, I’m sorry to say,” she concluded.

But does the news experiencehave to be a commodity?

Is their promise in personalization?

One possible answer is “personalization” — the idea that each user of an information service would be able to request an experience that is uniquely customized to their needs and interests. Network technology allows us access to abundant information quickly. Increasingly, it also allows us to customize the acquisition and presentation of that information to reduce our perception of information and attention overload.

Older technology (presses, broadcast, books) required the creation of a fixed product — fixed physically or in time — and it was not economically feasible to either: (1) create a unique product for each user or, (2) allow the user the opportunity to pick-and-choose the content package as they might, say, assemble items at a supermarket. Digital technology makes both possible and the evidence is that popular services are capitalizing on it:

  • Every Google search result is unique to the user requesting it.
  • Every Facebook user’s news feed and home page are unique to that user.
  • Every Amazon purchase process includes recommendations for additional products presented uniquely to that user.
  • Every Netflix movie selection includes customized suggestions for others.
  • Lists of selections in a Pandora music station appear unique to each user.

“As people are using multiple platforms they are actually increasing their consumption of news but they want different formulations on different platforms at different times and they want people to follow them on this,” says Robert Picard of the Reuters Institute for the Study of Journalism at the University of Oxford. “We're having to learn that that is really hard for us. We are so used to creating one product for everybody.”

Each of the services cited above (Google, Facebook, Amazon, Netflix, Pandora) is able to customize and personalize because they record and save information about unique users between visits. They assemble a profile, and create what amounts to a commercial persona for the user. “Because rich data — not mass audiences — will be the name of the game in the future, every local media company should be gathering as much data as possible about every household and individual in the community it serves,” Mutter advises in a September 2014 post, “Get ready for mobile payments.”

The supermarket, bundling and the box car

The collection of user persona information — a profile of personal interests — is necessary to provide a personalized, customized service to users. It also becomes something of great value for the outfit collecting it — because it can be used to enrich the user experience and present targeted commercial messages to users who are — hopefully — willing to receive them.

But for personalization to be feasible we have to move from an era of pre-bundling by the producer — broadcasts, books, magazines and newspapers — to just-in-time-bundling controlled by the user.

Think of the supermarket as an analogy. Each of us arrives at checkout with a shopping cart of items we’ve assembled. The supermarket must keep tens of thousands of product items at the ready so we can pick our personal bundle. Personalization requires the ability to pick our own bundle, and the ability to acquire the pieces of our bundle instantly. In the old analog world of presses and broadcasts, we couldn’t choose our own bundle; we had to take a bundle assembled for mass or niche market by editors or producers and available at a particular time of day and not before.

For personalization to be feasible we have to move from an era of pre-bundling by the producer to just-in-time-bundling controlled by the user.

Users want to be free to go anywhere for information, to put together their own package. But — most importantly — they also want it to be easy. For it to be personalized, it has to come from many sources. That's why individual sources have to position their content so that it can be sold on the fly when a particular user's personalization engine needs it. Each content provider can never "sell" their piece of content in the infinite forms and packages needed for personalized content. So they just have to have it ready for picking — and paying — when the personalization engine comes by to pick it up.

Think of content as rail cars in a rail yard. Jane Doe's switch engine comes by to pick up the cars she needs to assemble for the train of content I want. The cars have to be ready to go. And they have to be replicable so that when I pick up, there's a replacement for the next person who wants one. That's what's nice about digital information — when you sell one, you can make another one instantly. Infinite inventory. That’s an advantage that networked information providers have over the supermarket — no physical inventory requirement.

So this approach — instant, infinite inventory — requires a standard protocol for exchanging pricing and sale offers between Jane Doe's personalization engine and the content box car owner — in real time, with no pre-arranged contract. Thus personalization packaging systems won't work if the content isn't broadly available in atomized, disaggregated form — the boxcars — available for just-in-time, on-the-fly-negotiated transactions.

Is microaccounting aggregation needed?

If the boxcar analogy makes sense, consumers need a way to aggregate their pickup of content boxcars from multiple locations. Since the World Wide Web origins in the early 1990s, there have been numerous experiments (Outlit is the latest) with micropayments — the idea that it might be possible to purchase non-physical goods in discrete pieces for pennies on the dollar.

“[T]he absence of a micro-payment system led to the evolution of the Web in a dysfunctional way,” wrote British author John Naughton in his 2014 book, “From Gutenberg to Zuckerberg: Disruptive Innovation in the Age of the Internet.” He continues: “Companies offered ‘free’ services that had a hidden and undeclared cost, namely the exploitation of the personal data of users. This led to the grossly tilted playing field that we have today, in which online companies get users to do most of the work while only the companies reap the financial rewards.”

Significant ongoing debate rages about whether people want to be nickled and dimed when making purchase decisions, with the key question being whether the transaction is easy and the amount relatively trivial — little mental friction. For example, we don’t worry about the metered cost of turning on a light for a few moments in our house. But the tracking of discrete value exchanges is already occurring in the advertising world. Google AdSense tracks views on ads on millions of websites, and sorts out — through microaccounting — what to pay each site every month.

There is definitely a need for microaccounting, like recording minutes on the telephone.

“There is definitely a need for microaccounting, like recording minutes on the telephone,” says Bill Anderson, a retired chief technology officer at Seattle’s Seafirst Bank (now part of BankAmerica Corporation) and an expert participant in how banks began and built the Visa credit-card network. “Aggregation is going to be necessary but the models of how to do it are all over the place.” (See Dec. 12, 2014, interview with Joel Getezendanenr: “Dee Hock and the creation of the ‘Visa’ card: Lessons for an Information Trust Exchange?”)

Anderson envisions a single subscription that might track, for example, his access to The New York Timesbusiness section, The Seattle Times local-news section and The Guardian’sU.S. politics coverage. He sees each publication getting discrete records of access and paid based on a bundled subscription priced by whichever service offers it. The offer could come from any of the three news organizations, or perhaps from a specialist in bundling, such as Amazon. Anderson became interested in the challenge of network content payments and subscriptions during visits to RJI and consultation with the Information Valet Project.

“The actual striking of the code, we could do that,” says Anderson. “But we need others to tell us what they want it to do. You could pick IBM to operate it, or First Data, or EDS.”

Anderson finds ApplePay intriguing. “Apple is in charge of the identity tracking; no one else gets access to it,” he says. “They are doing it, I presume, so they can control the data, just like the iTunes store. They are the ones that know when I touch my iPhone to a grocery store or clothing store. They know what I bought, they know exactly where I bought it. They know my patterns.”

The logical result — a wholesale-retail pricing marketplace

In a world of personalized information assembled from a virtually infinite inventory in real time, the pricing of goods that make up the information service bundle can’t be controlled by a central authority. Not only would it raise antitrust concerns, it would be impractical. One person’s valuable information is another person’s drivel. (See: When Selling Digital Content, Let the Customer Set the Price). So pricing has to be in control of the seller and the buyer at the real-time point and time of sale — just as occurs today with digital advertising exchanges.

But if consumers are reluctant to be nickled-and-dimed by micropayments, then the user’s agent — call them a retailer or publisher— has to be able to acquire the wholesale products in real time and bundle their cost to the user as a subscription.

If consumers are reluctant to be nickled-and-dimed by micropayments, then the user’s agent has to be able to acquire the wholesale products in real time and bundle their cost to the user as a subscription.

Imagine this scenario: The New York Times might send you an email about a special offer: for an extra $1 a month, you get 10 to 15 clicks per month from a set of French-language publications. It’s just $1 a month and you’ll have that Francophile bonus. What would happen when you click to an article at Le Figaro? They would have some price they had set on that article — maybe it is five cents (converted from Euros). When you click on that article as a New York Timesuser, the exchange should record a wholesale payment to Le Figaroof five cents and record a charge to The New York Times (acting as the retailer) of five cents. But whether you as a consumer ever pay anything other than that extra $1 ought to be up to The New York Times.

Thus, if you have a system where the parties on a business-to-business basis agree to pay back and forth among each other the wholesale costs of people surfing within the system, then all it becomes is a strategic business exercise how much The New York Timesshould charge you per month. The New York Times might do this for awhile and find they are losing money by just charging you $1 a month, so they might come back to you and raise the package to $2 a month. Or maybe it has a cap on it of 30 clicks per month — then you have to pay more.

One can’t presume to guess how all those things will work out. What we need to create is a system that enables all of that and then allows the free market to operate as it does so well —- which is to have pricing and packages find their equilibrium. What is described is a free market for digital information — an economic libertarian’s delight! But don’t we need to start by enabling those kinds of capabilities? (See Martin Langeveld’s “Elements of a Content Clearinghouse: Some Ideas.”)

Rethinking the media ecosystem

If news organizations want to get paid, they are going to have to:

  • Understand their multiple niche audiences, including millennials.
  • Create a service method that allows just-in-time personalized bundling.
  • Enable a collaboration around wholesale-retail pricing.

“If they are going to survive, much less thrive, in the new world, they’re going to have to do some things they’re not comfortable doing, like working together, either to produce a common infrastructure, or to find ways to work without an infrastructure at all,” wrote TV news-industry veteran Terry Heaton, author of “Reinventing Local Media,” in a Nov. 2013 NetNewsCheck column.

In 2009, I wrote that in five years “the notion of publisher may seem anachronistic.” But if anything, five years later, it looks as if there is a continuing role for publishers: not as gatekeepers, but as information valets. And if they listen to their audiences, and collaborate on technology and business rules, they may be able to sustain profits — and journalism. The forthcoming RJI report, “From Persona to Payment,” will outline a path.

It looks as if there is a continuing role for publishers: not as gatekeepers, but as information valets.

But there is something journalists have to learn first, something inherent in the way public television and radio already operate.

American alternative rock icon Amanda Palmer, singer, pianist and lyricist/composer of the duo the Dresden Dolls, struggled to reach $25,000 in sales with a conventional record label. In 2012, she turned to online and real-life crowdfunding and received $1.2 million from 25,000 millennial fans in the biggest music crowdfunding project to date. Palmer’s book, “The Art of Asking,” was published in November. Reporters kept asking her why she gives away her music, Palmer recounted in a March 2013 TED Talk — seen so far by over 6 million people. Her answer: She let her own direct audience set the price.

“And the real answer is, I didn’t make them. I asked them. And through the very act of asking people, I’d connected with them, and when you connect with them, people want to help you. It’s kind of counterintuitive for a lot of artists. They don’t want to ask for things. But it’s not easy. It’s not easy to ask. And a lot of artists have a problem with this. Asking makes you vulnerable.”

It’s time to stop talking about walls, start talking about asking in new ways, listening to the responses, and modifying services accordingly.

Bill Densmore  
 
Residential fellow



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