Post #2 – Micro-payments

I am relentless in my belief that micro-payments need to play an important role in the future of online media. While I am not alone in this belief, “everyone knows” they’ve been tried and haven’t worked.

Tell that to the cell phone companies, particularly Docomo in Japan. When you use your smartphone to consume mobile content, or just make a phone call to get some highly personalized custom content (i.e. conversation), you are using a very effective and accepted micropayment system.

Your are either paying a bulk monthly amount for a certain number of minutes or maybe an unlimited plan. You may go over your monthly limit for data (most unlimited plans are going away) and you will start paying incremental fees for your content that month. Generally the content owner isn’t getting anything unless they are part of a service offered by your carrier, but the phone company is always making money and you probably never even think about it because the incremental cost is so low.

The same would be true if there were an underlying account charging you for each page you access or for each video you watch (or a per minute charge for video). For prices as low as a fraction of a cent, you are unlikely to avoid content you really want. You wouldn’t really have to think about it as long as the price was reasonable.

The problem of course is that there’s no way currently for content owners to put a micro price tag on their content and get paid. “Everybody knows” that micropayments don’t work. The reason is that a start up can’t get the critical mass. Only a handful of companies could implement such as system, but if they did, they would reap huge rewards.

The big ISP’s, like Comcast and Verizon, could do it, particularly if they co-operated to jointly exchange of customers. Amazon could do it. Google might be able to. Yahoo! has a shot at it, which could revive their growth hopes if successful. Netflix has a chance for a video-only version which could expand into other content.

There is a still a lot of high value content that is locked up because it’s too valuable to give away with only advertising banner support. If there were a viable micropayment system, a lot of owners would switch some portion of their content to it.

There are millions of dollars in fractions of a cent waiting for someone.

One thought on “Post #2 – Micro-payments”

  1. With not much of a twist, it’s where AOL was until 1996 until they turned their business upside down. Prior to that AOL content providers, nearly all of whom were independent of AOL, were paid a small fraction of the hourly connection fee. That was micropayments by another mechanism.

    To your list I would add Apple, or anybody else with a wide (Amazon) not vertical (CBS, NYT) distribution base. Microsoft might play (given the ubiquity of their platform(s)) if they ever elected to do something original. Alas, everyone on the content side is still trapped in the really old model “You are my subscriber, you must pay full price” or the newish-old model “I give it away on the internet and maybe interest you enough to convert you to the really old “full price” system.” As Napster and later iTunes broke the music industry’s “album” mode, perhaps someone somewhere will decide to broach a “sell it piecemeal” plan for other content. Hulu and Netflix are beginning to do it to the television business, but there’s so much more that could be done.

    For print, for instance, I don’t need to choose between free access to 20 articles a month or full subscription at the Washington Post or New York Times, (or worse at the Wall Street Journal or Time Magazine) but at the moment there’s nothing in between. I suspect most media outlets are leaving money on the table by forcing a choice between the two extremes.

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