In the midst of a national debate over the future of newspapers, the Wall Street Journal just announced that it will be introducing a “sophisticated” micropayment system for its content sometime in 2009. They don’t divulge the price (it’s described as “rightfully high”), nor do they describe the system components or process.
But the problems are obvious, and they harken back to the disruptive innovation lessons newspapers just can’t seem to learn:
- Disruptors accept that markets are not known, and are even unknowable. They have an idea, and a “build it and they will come” mentality. The WSJ is attempting to milk its traditional market for more money. That’s the behavior of an incumbent who won’t heed the train whistle yet continues walking the tracks because they’re familiar.
- The information WSJ has isn’t exclusive, so users won’t pay for it. Financial news is more of a commodity than ever. As soon as WSJ breaks an exclusive, a few bloggers will start propagating the news. Bloggers will do this because their incentives, while smaller, are sufficient and powerful. (And bloggers can do this effectively because, as the rule of disruption goes, “The [disruptive] technology turns out to be simpler, cheaper, and more reliable.”)
- Profits and prices are lower for new entrants, so a price of “rightfully high” has incumbency written all over it.
- The fact that WSJ management is recommending this makes me think they believe people in the past were paying for content. They weren’t. They were paying for delivery, finished goods, and reliability in addition to content. Radio has no challenges for delivery, finished goods, or reliability (except for satellite, which can charge a premium for nationwide consistency), and look how much we pay for radio content. Now, the devices we’re using are the finished goods, Internet reliability is high, and delivery is ubiquitous. Certain types of content, especially news, has been revealed to be less valuable than we thought.
- The weaknesses of free information sources (e.g., there are so many of them, they propagate quickly, they have high churn and echo rates, they are written for microniche audiences) are really their strengths. Read the parenthetical again, and I think you’ll agree.
I see a very simple problem that will kill this idea right from the start. If you put a price – any price – on an article in the Wall Street Journal, people will not be able to share it. Sites like Mashable () won’t be able to link to it. Digg (), Twitter (), StumbleUpon ()…any content behind a paywall will receive zero traffic from all these social sites.
No matter how low WSJ makes its wall, even if it’s just a curbstop, it will trip them up.
At first, I was sad to read about the WSJ’s decision. It looks like a step backwards. But given the changes at the WSJ over the past decade — how it’s strayed from objectivity and into conservative mouthpiece; how it’s become a business/lifestyle magazine as much as a news outlet; how it sold itself to a media conglomerate — I can’t say I’m going to have a long period of mourning.