C. Shirky vs. W. Isaacson on small payments and newspapers

Clay Shirky finally has a weblog, and his first post "Why Small Payments Won't Save Publishers" is, like everything else he writes, worthy of your attention (via delicious/cshalizi). Not much new here if you've read his previous critiques of micropayments, but worth reviewing nonetheless in light of recent noise w.r.t. funding news publishers via small payments. I have a couple of (extended clumps of) remarks...

1.

First, Shirky writes:

Faith in salvation from small payments all but requires the adherent to ignore the past, whether existing critiques (e.g. Szabo 1996; Shirky 2000, 2003; Odlyzko 2003) or previous failures. Isaacson’s recent Time magazine cover story on micropayments, How to Save Your Newspaper, a classic of the form, recapitulates the argument put forward by Scott McCloud in his 2003 Misunderstanding Micropayments. That McCloud advanced the same argument that Isaacson does, and that the small payment system McCloud was proselytizing for failed exactly as predicted, seems not to have troubled Isaacson much, even though he offers no argument different from McCloud’s.

It's worth reading the above-linked critiques by Szabo, Shirky, and Odlyzko, and then Isaacson's article, to realize just how terrible the latter is. It goes on a jaunt through the history of paid content, including AOL and CompuServe and (no kidding) Ted Nelson's Xanadu system and a half-dozen failed micropayment startups, and ends up with the conclusion that this time, small payments just might work!⁰ Isaacson breezily dismiss criticism of small-payment systems as follows:

Many tracts and blog entries have been written about how the concept can't work because of bad tech or mental transaction costs.

But things have changed.

This is literally the article's only attempt to engage the logical arguments of small-payment critics. He gives no description of the actual "bad tech" or "mental transaction costs", and he does not even seem aware that critics like Odlyzko have discussed considerably more than the technological shortcomings and transaction costs of particular payment systems.

And what exactly has changed, according to Isaacson?

"With newspapers entering bankruptcy even as their audience grows, the threat is not just to the companies that own them, but also to the news itself," wrote the savvy New York Times columnist David Carr last month in a column endorsing the idea of paid content. This creates a necessity that ought to be the mother of invention. In addition, our two most creative digital innovators have shown that a pay-per-drink model can work when it's made easy enough: Steve Jobs got music consumers (of all people) comfortable with the concept of paying 99 cents for a tune instead of Napsterizing an entire industry, and Jeff Bezos with his Kindle showed that consumers would buy electronic versions of books, magazines and newspapers if purchases could be done simply.

In other words:

1. "Newspapers are more desperate than anyone's ever been, so it's just gotta work!" (By the same logic, if you've never gotten laid, an Olympian athlete/particle physicist/supermodel with an extraordinarily dextrous tongue will surely show up at your doorstep tonight with a bouquet of flowers and a bottle of wine.)
2. "By generalizing from services that run on proprietary vertically-integrated hardware-software-service stacks, we can predict the success of small-payment systems for the Internet!" (Isaacson makes this same error when he cites text messaging elsewhere in the article.)

So, Isaacson's article displays objectively shoddy analytical reasoning. Furthermore, by failing even to outline the arguments of small-payment critics, he leaves his readers in the dark about an important aspect of his subject (duty to inform be damned). And to top this stupidity sundae with a cherry of irony, this terrible article about how to save journalism was just published on the cover of one of the nation's leading newsweeklies, in a week when Congress is passing a $800 billion economic stimulus package with huge implications for the national and world economy.

Why did Time's editors choose to run this article, rather than, for example, an article by Shirky or Odlyzko or any number of people who would write something more clueful? I hypothesize two reasons. First, Time's editors themselves do not have a clue, and also do not have any problem publishing articles on a subject they have no clue about. Second, look at the author blurb at the bottom of the article (emphasis mine):

Isaacson, a former managing editor of TIME, is president and CEO of the Aspen Institute and author, most recently, of Einstein: His Life and Universe..

When you're a member of the club, your buddies will publish any old crap you write; better you than some stupid professor nobody knows. We've seen this before.

I mentioned irony earlier. Isaacson has filigreed the irony with extraordinary precision. His article is inferior to material produced for free online by people who draw their paychecks from other sources (Shirky and Odlyzko are both professors who also work(ed) in the private technology sector). Furthermore, it is inferior as a direct consequence of structural weaknesses of traditional magazines. Despite its inferior quality, it presumes its own superior status by ignoring or dismissing contributions to the discussion which occurred outside of traditional "journalistic" media. Finally, taking that superiority as a given, it argues, poorly, that people ought to pay money for products like itself, because (quoting Bill Gates) nobody can "afford to do professional work for nothing".

In short, Isaacson's article not only fails to make its case, it actively undermines its own case while doing so.

2.

Second, Shirky writes:

Another strategy among the faithful [small-payments-advocates] is to extrapolate from systems that do rely on small payments: iTunes, ringtone sales, or sales of digital goods in environments such as Cyworld. (This is the idea explored by David Carr in Let’s Invent an iTunes for News.) The lesson of iTunes et al (indeed, the only real lesson of small payment systems generally) is that if you want something that doesn’t survive contact with the market, you can’t let it have contact with the market.

Apple’s ITMS (iTunes Music Store) is perhaps the most interesting example. People are not paying for music on ITMS because we have decided that fee-per-track is the model we prefer, but because there is no market in which commercial alternatives can be explored. Everything from Napster to online radio has been crippled or killed by fiat; small payments survive in the absence of a market for other legal options.

I think Shirky's overstating the case a bit here. ITMS, Kindle, and cell phone ringtones operate in functioning, albeit flawed, markets. The iPod/ITMS stack has considerable competition: there are numerous music player devices and ways of paying for music online (Amazon, eMusic, Magnatune, etc.). Kindle's not the first or only ebook reading device; it's just the best blend of convenience and device quality currently available. And you can buy unlocked phones and swap in a SIM card from your phone provider (for some providers)¹.

What distinguishes all of these cases is that they are, as I mention above, proprietary vertically-integrated products in which end-user hardware plays an integral role. Unlike software, hardware is currently inconvenient to copy or modify. Therefore, control over the end-user's physical device makes it comparatively easy to control the digital supply chain. Unsurprisingly, this enables restriction of the content supply so that users will tolerate making small payments for access to the available content.

(Naturally, this answer raises the question of why people choose to consume music, books, and mobile conversations on devices which, compared to the highly promiscuous and capable general-purpose computer, amount to Puritanical, crippled shut-ins. I think the answer is fourfold. (1) For obvious reasons, it is easier to build a seamless user experience for a specific application on a vertically-integrated special-purpose platform. (2) A lot of our cultural output is still published² by old-media businesses that feel more comfortable distributing their content on less-capable devices. (3) Users do not commonly process music, books, and conversations through authoring and sharing tools, and without such tools there is only a very weak "demand pull" towards general-purpose device platforms. (4) This will all change; someday your kids or grandkids will have portable devices running an open OS on commoditized general-purpose networked computing hardware, and they will use it to record, copy-and-paste, annotate, remix, and share bits and pieces of music, books, and phone conversations, as we do today with web pages and photographs.)

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[0] Lest I be accused of misrepresentation, Isaacson does not cite AOL and CompuServe content as examples of small-payment systems, which they were not. They're just part of his tour of failed user-pays business models of the past, and frankly it's bizarre that he would lament that ISPs don't pay content providers for content as AOL and CompuServe did. The fundamental differences between an open network and a proprietary network are exactly what made AOL and CompuServe fail.

[1] Naturally, unlocked phones are pricier than locked ones, as unlocked phones are not subsidized by the phone plan. That's perfectly fair. (OTOH it grinds my gears that phone companies don't let you opt-out of your plan's phone subsidy if you bring your own phone, and I believe this bundling should be outlawed, but that's a long argument I won't get into here.)

[2] Note "published", not created. Creative work is created by individuals or small groups of individuals: writers, musicians, etc. Creative work is only published — which is to say bundled, converted into distributable form, and then distributed — by these companies. A publishing company's job is to pack things together and move things around, and we should not let them assume for themselves the aggrandizing aura of the creative process.