Blake's Think Tank

When Washington Post reporter Bob Woodward was in town two evenings ago a young man from the crowd asked him what the future would hold for newspapers.  In short, Mr. Woodward said that he didn’t know, but it was likely a new model that no one had yet to discover.

Yesterday, I posted an article from Jack Shafer of Slate.com which served as a response to articles that appeared in The New York Times and The New Yorker advocating for a non-profit model newspaper.  Mr. Shafer, like Lance Turner of Arkansas Business, disagreed.

This week, TIME magazine has a cover story on the newspaper business. Walter Isaacson, author of biographies of Albert Einstein and Benjamin Franklin, among others, argues a new model to save the newspaper business: micropayments.  He writes, “The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment. We need something like digital coins or an E-ZPass digital wallet — a one-click system with a really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a penny, nickel, dime or whatever the creator chooses to charge.”

While there has been a trove of companies that have tried this concept and failed, Mr. Isaacson argues that times have changed and the success of iTunes and Amazon’s Kindle prove that consumers will pay for content. Under a micropayment system, Mr. Isaacson believes, “a newspaper might decide to charge a nickel for an article or a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough.”

The basis for his belief in paid content is this: “those who believe that all content should be free should reflect on who will open bureaus in Baghdad or be able to fly off as freelancers to report in Rwanda under such a system.”

It’s interesting to note that Mr. Isaacson abhors the advertising-only business model that applies to publications that are given away for free.  “In an advertising-only revenue model, the incentive is perverse. It is also self-defeating, because eventually you will weaken your bond with your readers if you do not feel directly dependent on them for your revenue.”

As an iTunes user I can certainly see Mr. Isaacson’s point. The $0.99 per song transactions are convenient and easy to conduct.  And clearly the model is working and working well.

I do not use the Amazon Kindle, but I was speaking to a user yesterday and the issues of newspapers came up.  She admitted that she had cancelled her New York Times subscription because she didn’t have them time to wade through it all (and newspapers stacking up in her kitchen was annoying).

She also admitted that she felt bad about getting all of the Times‘ content for free.  The Kindle has solved her problem. For $13.99 she can get a one-month subscription to the Times, delivered daily to her Kindle.  No paper to wade through or stacks to be created.  And she doesn’t feel bad about it. And she admitted to reading the paper than she ever did when it was in print.

To support her view she pointed me to this article that suggests that the Times could save 50% in costs if (a) bought every subscriber a Kindle ($359) and (b) ditched the print publication all together.  The savings, as calculated by Nicholas Carlson of Silicon Alley Insider would be in the ballpark of $346 million. And there’d be the added value of doing less harm to the environment.

A perfect solution to the Times financial woes?  Probably not. After all, there are people like me that love the feel of a newspaper. But hey, with things as bad as they are, I’m open to discussing any and all ideas.

UPDATE: Eric Etheridge, The Opinionator at The New York Times, finds this quote from Clay Shirkey’s Internet post “Fame v. Fortune: Micropayments and Free Content,” which was published in 2003.  “This strategy doesn’t work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price. . . .”

UPDATE II: More from The Opinionator.  The blogosphere doesn’t warm to Mr. Isaacson’s proposal.  The Mental Transaction cost is too high.