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Think Big. Move Fast.

The LA Times and Chicago Tribune are for sale. BarryDiller recently announced that buying Newsweek was a mistake. They are not alone in their distress. Newspapers and print magazine across the country are under increasing pressure as they trade analog dollars for digital pennies. 

Everyone is going online. Readers were willing to pay for content when it is printed on paper but they want it for free online. Advertisers pay less for online ads than they do for ones in print. Unfortunately, it is only getting worse. Mobile ad units are cheaper and more ineffective than online units, putting even more pressure on newspaper revenues. In the US, newspaper revenues in 2012 were half what they were in 2000.

But it doesn’t get any cheaper to run a quality newsroom – estimated at around $50-100M a year for a single, high quality national newspaper covering regional, national and international news.

Newspapers have responded by erecting paywalls in front of their content. Says, the Economist:


The number of American newspapers with some sort of paywall has at least doubled this year. More than a quarter of newspapers now have one, and most big groups that do not have plans to charge for digital access. This is a global trend: newspapers in Brazil, Germany and elsewhere are fed up with giving away their articles for nothing on the internet.

Charging for content online used to be the privilege of the lucky few, such as the Financial Times and Wall Street Journal, offering market-sensitive information readers would pay for. General newspapers opposed charging because they feared their traffic would drop—and their fragile digital ad revenues would fall rather than rise….

Newspapers have been heartened by evidence that pay systems can work. In the industry’s most closely watched experiment to date the New York Times adopted a paid-access model in March 2011. It chose a pay “meter”, which is more porous than a hard “wall”, and allows readers to view a certain number of articles each month before having to pay. The advantage of this is that search engines and social media can still direct casual readers to a newspaper’s site. Traffic typically drops by only around 20%, according to J.P. Morgan, an investment bank. This means online advertising revenue can be mostly preserved while readers are required to open their wallets. In October the New York Times and International Herald Tribune, its global sister, had nearly 600,000 paid digital subscribers. …

It is also too early to tell exactly how successful paywalls will be. They may not work at national newspapers without any real comparative advantage in news, or at newspapers in competitive districts where other papers are giving away content free. The Washington Post, which has had a tough time, has opposed a paywall so far, presumably because it worries it will not woo enough paying readers.


Newspapers have been forced to use paywalls to offer a subscription product because the cost of payments has been too high to be able to charge a penny or two to read a single article. But even a penny to read an article can be the equivalent of a $10 CPM, which is pretty rich for the online world. Would more users be willing to pay to read just what they want, versus being turned off by more expensive subscriptions?  Freemium certainly seems to have won out over subscription in the gaming industry.

Newspapers haven’t had the ability to try true micropayments to see if this could also work for them. The structure of payments costs has simply been too high. By making it possible for a newspaper to charge pennies to read a page, instead of several dollars for a monthly subscription, they may see a dramatic lift in the proportion of readers that they can charge. Whether it is a supplement or replacement for subscription paywalls, it can only add to revenue as it improves the ability to price discriminate.

One of the areas that Bitcoin could revolutionize payments is in micropayments. Since it costs roughly 30c plus 2% for a credit card transaction when the card is not present, it has been impossible to set prices at a few cents for anything. Bitcoin has zero transaction costs. It would have no problem in handling a 1c transaction, or even lower. This could be a huge boon for newspapers, and for online content more broadly.

What do you think, could Bitcoin help newspapers roll out “pay by the drink” payments systems?

  • http://www.facebook.com/indoorcycleinstructorpro John Macgowan

    This isn’t just limited to Newspapers. I run a freemium resource for fitness Instructors indoorcycleinstructor.com where I charge a $9.95 monthly or $97.95 annual fee for access. My conversion rate between paid subscribers and visitors is about 5%. Even $10 is a huge ask in our world where so much is available for free. I’d love to offer individual posts or podcasts for a small charge that doesn’t require all the cc fees. What would you suggest as the first step?

  • http://contentcurrents.com Content Currents

    Thanks, Jeremy. As always, a provocative post.

    Around 2000, a handful of companies emerged in the content micropayment space (QPass, Cha!). None of them gained traction.

    The first obstacle, I believe, is the “Penny Gap,” the idea that consumer resistance to paying $0.01 is not much greater than paying $1 or $5. The second is the consumer preference to not make frequent purchase decisions. We conduct a cost-benefit analysis for even the lowest price good.

    Consumers are far more willing to pay for digital content today than they were 13 years ago (iTunes, Netflix, Kindle).

    However, we consume songs, movies, and books differently than we do news articles, which helps explain why we buy them – and not news articles – individually online. We’re accustomed to keeping and collecting songs, movies, and books, whereas news is perishable. And unlike these other media, it’s hard to sample news articles before purchase.

  • Todd Breeden

    BitCoins are still way too deflationary a currency for this to really apply to newspapers. With the way that BitCoin currently trades as a currency, my incentive as a holder would always be to hoard and not to utilize.

    Additionally, as a customer for the newspaper, I would either try to be saavy and buy my subscription at a perceived bottom in BitCoin prices, or feel upset that the price of reading an article is changing on such a volatile basis. Either way it hurts funnel closure at the newspaper level.

    I feel like there’s room for micro-payment platforms that charge a flat-fee for real dollar transactions rather than converting the whole world to BitCoins. For instance, load $50 onto a reading card (at the standard 2% credit card fee) and then deduct pennies for reading page views and then as you get close to using up your $50, send a note telling your customer to re-up. As a means of promoting a community, then offer free reading card dollars or points as you contribute to posts or submit editorial content. That way you’re charging the people who only consume your site, while building loyalty and a sense of community amongst your current viewership that can drive monthly page-views and existing advertising channels. I don’t know what that business looks like, I’m just trying to think outside the box in the micro-transaction space that solves a problem for newspapers.

    That being said, I’m long on BitCoin as a Pick and Shovel play, but don’t think its the savior of Newspapers.

  • http://twitter.com/dantmurphy Dan Murphy

    Hey John,

    Ping me a note on dan [at] boocx.com we are 3 weeks away from releasing v2.0 of Boocx.

    Boocx will keep an account of all mirco-transactions relating to your customers, then you can use an API like @Stripe or @Balanced to debit customer credit cards when it makes financial sense to incur the 2.9% payment processing fee.


  • http://www.facebook.com/jeremyliew Jeremy Liew

    I think we’ve seen a few things tried recently and been successful that failed in the past, but it’s still far from certain. Mobile may be more fertile ground than the web where people have become more accustomed to making 99c transactions, where they wouldn’t even do that on the web

  • http://www.facebook.com/jeremyliew Jeremy Liew

    Two issues here. First is whether a deflationary currency inhibits spend. This isn’t an issue specifically for microtransactions, but for everything. I think there are different camps on this issue, and its unknownable right now I think
    Second is the “reading card” concept. It solves the transaction cost problem at the reader level, but still not at the newspaper level. You still end up having to either comingle funds or make very small payments with accompanying friction to the publisher.

  • http://www.facebook.com/jeremyliew Jeremy Liew

    You could consider signing up with Bitpay or Coinbase to take bitcoin as payments for smaller effective prices. Until bitcoin use is widespread I don’t think it will help you much though. You really need a broader usecase (like newspapers) to drive the bitcoin wallet adoption. good luck!

  • http://www.znakit.com/ Greg Golebiewski @znakit

    One does not need a fully-blown virtual currencie to save newspapers, a virtual credits (either native or platform agnostic) are enough. What is needed is an open, on demand system rather then closed silo-like paywalls to increase online revenue and engage readers more.

  • http://www.znakit.com/ Greg Golebiewski @znakit

    Or you can try Znak it! We help monetize premium content on demand using, among other payments, virtual credits (Znaks). Check us out! http://www.znakit.com.Our users’ conversion ranges from 8 to 20 percent.

  • http://www.znakit.com/ Greg Golebiewski @znakit

    Payment friction to the publisher can be lowered if you aggregate revenue from all micro transactions and pay them out once a month or week, depending on volume. Publisher can also use the accumulated credits to process discounts or award “free” trials — and thus lower the transactional costs even more.

  • http://www.facebook.com/profile.php?id=500016523 Philip Inghelbrecht

    Great thought Jeremy, thanks for sharing. It’s the best argument/example I have heard as to how Bitcoin can become mainstream (i.e. a “killer use case”).

    I do think that in the meanwhile, carriers are missing out by the way they process carrier billing. They are best positioned to batch the small amounts with the larger monthly bill (making the CC fee structure irrelevant), and as such only take a small % cut (without fixed fees) of every transaction. With a penny indeed being the equivalent of a $10 CPM, that means they can take a bite out of the advertising business.

    That’s essentially how Apple has enabled (tiny) transactions in iTunes: they have taken the (credit and transaction) risk on 99c payments by batching them (and likely occasionally taken a loss). Kuddos to them for successfully betting on a volume play.

    All of the above hinges of course on people being willing to freely dropp a few cents left & right (i.e. micropayments being frictionless). Considering that in the earlier days we send SMS at 10c/text without further thinking, I am bullish.

  • http://tedr.tumblr.com/ Ted Rheingold

    Hi Jeremy why do you think that a pre-paid service that stores a large single credit card transactions into credits for micropayments hasn’t already become a popular provider of micropayments. Why isn’t there a FasTrak for the web that’s popular. Why hasn’t PayPal tried to offer micropayments?

    I would suspect that bitcoin would be just as good as local fiat currency to whomever becomes a provider of a micropayment wallet.

  • http://lsvp.wordpress.com jeremyliew

    Ted, I think the challenge is not just on collecting money from users, but also disbursing it to publishers. Both sides of the micropayments are still payments problems.

  • http://www.znakit.com/ Greg Golebiewski @znakit

    Ted. PayPal offers micropayments, however, in the old inefficient way, making small payments — those under $2 — very expensive (and thus it reinforces the myth that micropayments do not work)

    Jeremy, the collection/distribution challenge can be solved. You are correct that ‘virtual currency” is one way to do that; however, is bitcoin that currency? Read Kasmir Hills account of her daily use of bitcoin http://www.forbes.com/sites/kashmirhill/2013/05/04/living-on-bitcoin-for-a-week-bitcoiners-are-the-new-vegans/

    From my experience with micropayments that use virtual currencies, I can say, yes, both sellers and buyers want simplicity and low cost of transaction (no cost is even better), but they also want perceived stability and convertibility of their e-wallets. That is why they prefer them pegged to USD or EUR rather than bitcoins that fluctuate so much now.

  • Steve Staloch

    With the value of those mastheads not on the national radar screen rapidly diminishing, and the industry flocking to gimmicks in hopes of slowing the demise of print, I’m convinced it’s time we allowed the marketplace of readers to decide IF and WHEN the individual pieces of content produced should be monetized, but only after free and open access feeds viral interest and triggers a micropayment requirement. Not sure how a story or video reaches its “throw weight” or is talked about around the kitchen table or water cooler if parked behind a paywall, and keeping score of how many stories I’ve read or viewed during a publisher-defined period of time is an instinctively negative experience for consumers, and technologically porous in practice. And just how many sites will a consumer subscribe to in order to read or view what they want to consume?

    Maybe not yet Armageddon, but the issues mainstream publishers face are
    debilitating and their way of doing business today, unsustainable: aging
    printing presses reaching the end of their useful life with a negative future ROI;
    employees cleverly but indefensibly disguised as independent contractors
    delivering their products; an archaic belief that readers will continue to
    support a masthead simply because of its one-time relevance and legacy; and the stark realization that with each readership study commissioned, the demos
    relied on for their very existence are looking even less like the audience
    advertisers demand they reach.

    With the proliferation of metered paywalls, the vast majority of media
    companies appear intent on writing another Darwinian chapter in their history
    by once again following the publishing big dogs over what could well be a
    fiscal cliff of their own making.

    It’s time for innovation that gives publishers the tool to create a new revenue
    stream for reinvestment in quality content based on monetizing individual
    pieces of content that are credible and virally-certified by the marketplace of
    readers as worth paying for (think iTunes or Pandora as a conduit for the proliferation and success of otherwise obscure artists), rather than replicating failed subscription models of the past.

    Steve Staloch
    President & CEO
    Tolltrigger, LLC

  • Jorj_X_McKie

    From the POV of a typical consumer, for micropayments to work, the cumulative cost shouldn’t be more than a typical newspaper subscription. People would be more willing to spend on content that they like and revisit, so perhaps clicking ‘like’, ‘sharing’, and posting comments would be reserved for paying customers or generate slightly higher payments. Most people would prefer that ads just go away, so monetizing content rather than an annoying interloper is going to happen…. I think it is just a matter of getting the details right.

  • Ed Stadum

    Walter Isaacson, in his epic 2009 article in Time magazine, laid out the case for unbundling the newspaper and selling individual articles for micropayments (see, http://content.time.com/time/magazine/article/0,9171,1877402,00.html). Somehow, no one in the publishing business was listening — and they still are not. Jeremy, you have it right, that it is largely about the cost of processing micropayments, and so it is logical to think about Bitcoins. But at present they probably bring too much complicated and negative reputational baggage to the table. A Munich-based start up I am working with has I think a much better solution by which the reader is not obligated to pay for what he reads until he has read $5.00 worth of articles at which time he must pay up. His articles are meanwhile aggregated until he reaches the $5.00 mark, and that is an amount which is economical to process. See, laterpay.net.

  • Ed Stadum

    Unfortunately, Time has now put this once-free article by Walter Isaacson behind a paywall. However, there is an amusing video of Isaacson’s discussion of his proposal with Jon Stewart at http://www.thedailyshow.com/watch/mon-february-9-2009/walter-isaacson