Monday, August 31, 2015

Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership


[Update 8/16/17: A newer post, The Missing Piece of the Membership Puzzle -- Agreeing on Value for Each Member, updates some aspects of this, but this post remains highly relevant.]

Who will pay for journalism? The turbulent first decades of our new digital era suggest no one -- or at least too few. Commodity news is free and advertising values are collapsing. Those who seek to preserve serious journalism, who believe we need more than clickbait and the uncritical crowdsourcing of news, have been scrambling -- and they are actually finding many ways to get revenue (as summarized below). Nevertheless, it is hard to have conviction that even the best of them can be sufficient.
These are very turbulent times for journalism. But as Peter Drucker said, "The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic." What we need is a new logic. What I suggest is a new logic that draws synergy from all relevant revenue streams, in a way that leverages digital, to radically transform the relationship of journalists with their audiences.

 Customer or patron? 

Why be a customer? Why pay? The only way for journalism to survive in this new century is to refocus on a new logic for patronship -- getting readers to patronize content providers in the fullest sense: "to give money or support to." To find sustainable business models for journalism in a digital world, me must figure out how to find patrons (in this broad sense), and how to work with them so they are happy to contribute at sustainable levels.

 Newspapers, magazines, and news video services are struggling to find a logic that works. Paywalls, "soft" "metered" paywalls (a form of freemium), have been adopted by many publishers as a primary model (but avoided by many others). They seem to be just marginally working, even in the best of cases. But we have been looking at the trees, not seeing that there can be a new kind of forest.
  • Paywalls (soft or not) treat customers as faceless, undifferentiated cattle to be herded and milked. There is no invitation to be a patron, no personalization of the value proposition, even though individuals vary immensely in how they value and consume journalism. How can a single price possibly be right for all subscribers? 
  • Premium level subscriptions (such as Times Premier) have emerged as a supplementary strategy to try to get the most loyal patrons to pay more, based on the realization that some of them can be enticed to pay more. But here too, value propositions are not customized, 
  • Patronship at the high-end has always been a key support for journalism, from the rich owners of times past, to Bezos, Henry, and Omidyar today.  That is a nice contribution but it seems a shaky foundation for something so important to the public -- something that should be answerable only to its public. 
  • Crowdfunding seeks to move patronship to a wider base, but that seems fragmented and very limited as well.
  • Membership has become the latest hot topic (subject of a CUNY / Tow-Knight conference led by Jeff Jarvis on August 26 that I attended). This gets much closer to the core ideas of patronship. These efforts are a big step toward recognizing the need for more flexible targeting of value propositions, and addressing the many different kinds of value can be exchanged. This can include a very wide spectrum of offers to the audience(s) -- from added features, access to journalists, events, and bling, to pure contribution (drawing on the model of public radio and TV memberships). It also begins to recognize that value also flows from consumers to providers of journalism, the "reverse meter" suggested by Jeff Jarvis in 2011. It was evident at the conference that membership is a rich and promising area, already generating some success, but how to manage this almost too-rich variety of value propositions is a challenge.
    • This is not to forget that advertising remains an important source of revenue, even if increasingly limited. Many of the audience would pay to reduce that burden -- and some might accept more (to get more value, another reverse meter) -- but, again, there is little customization of such value propositions.
    The bigger picture

    We have a growing variety of revenue sources, but none a silver bullet. Where is the overarching synergy? What is tomorrow's logic?  

    I suggest the answer is to link this rich constellation of value propositions into a coherent, adaptive process -- one that seeks to find the right combination of value propositions for each individual, match them to their willingness to pay, and serve them in a customized bundle -- in a cooperative way that makes every regular customer into a true patron. If journalism has value, shouldn't those who are served by it recognize that value, and pay to sustain it? (As has been observed, "if you are not the customer, you are the product.")

    That can be done in many ways, and many are being tried and improved on, but I suggest the most effective way to apply the best methods in concert will be by drawing them into the FairPay architecture. This is touched on on the HBR Blog, and in more detail in this blog's Overview page. This architecture shapes a platform for applying all of the best methods in unison, to cooperatively find the right value proposition (and the right price) for each patron.

    Since I am co-organizer of an event on The Future of Journalism: “Why Should I Pay for Quality Content?” for MIT Enterprise Forum of NYC (October 27), this seems a good time to revisit my perspective on these issues, and to summarize how FairPay points the way to win-win solutions.

    Re-engineering the value proposition of journalism for the digital era

    The big picture idea is that FairPay refocuses journalism businesses on their relationship with their individual audience members -- with all the tools of the digital era -- to center on personalized, win-win value propositions. It builds this relationship on a cooperative understanding of individualized value that integrates all of the relevant elements on both sides of the value exchange. It seeks to enable a holistic view of value (and revenue) related to all aspects of the service that journalism provides -- basic subscriptions, premiums, membership options, perks, and any other kinds of offers, over all aspects of the value exchange.

    From the provider to the consumer, FairPay focuses on the total value of all kinds, as actually delivered to each particular consumer -- the value-in-use for exactly what is consumed and how (what items, how many, how intensely), including content, membership perks, etc. -- the value of that experience and potentially even the outcomes that result (enjoyment, appreciation, and even the results enabled -- did our advice improve your health or you stock market returns?). This can also include "soft" values, such as
    • service and support
    • participation, listening, and responsiveness (comments, access to the journalists) 
    • events and merchandise
    • the social value of investigative journalism, community services, and good corporate citizenship.
    From the consumer to the provider, FairPay considers not just monetary payments (subscription or membership fees, or pay-per-use), but other currencies. Thus it factors in credits (the "reverse meter") for
    • attention to advertising (including the possibility of customized levels of ad loads) and 
    • personal data that can be used or sold (again with possible customization)
    • the value of user-generated content
    • the value of viral promotion and leads
    • up-sell/cross-sell revenue potential
    • volunteer-provided services to the provider
    An ideal economic exchange would fully consider all of these aspects of value, and determine how to balance the exchange in a way that shared fairly the "economic surplus" (of value over cost) between the provider and the consumer -- as described in Harnessing the Demons of The Digital Economy. That post explains how this is not only an economic ideal, but how FairPay provides a practical process for getting consumers and providers to cooperate in approximating that ideal -- an adaptive engine for jointly evaluating the value actually received, and sharing fairly in the surplus.

    FairPay re-engineers how the providers of journalism interact with their audience members to deal with value, compensation, and sustainability, and creates a new balance of power. It recognizes that journalism co-creates value with its audience(s), and applies an adaptive method of co-pricing that (1) gives audience members the power to pay commensurate the value they perceive and can afford, while (2) retaining the power for providers to demand that be done fairly and sustainably.

    This approach draws support from
    • The latest thinking in marketing theory, in which journalism is recognized as being not a product but a service -- and in which services involve not a unidirectional transfer of value from a producer to a consumer, but a joint co-creation of value. 
    • Recent behavioral economics findings on how people will pay voluntarily for services, if asked in the right way.
    • The success of "value-based" pricing (or "performance-based" or "outcomes-based" models) for pricing industrial equipment used by companies like GE -- where a cooperative team of both producer and customer negotiate not a specific price, but a method for analyzing value as actually achieved by the customer in use, and then basing the price on that after the data is known. Just as the Internet of Things is making that more widely applicable, FairPay points to how a lightweight, heuristic variation on that theme can work for computer-mediated mass consumer markets.
    Making it work -- How to serve patrons and how to price for that

    This may seem very abstract and impractical, but the Overview page and the How FairPay Works box in the sidebar (at FairPayZone.com) explain more of how this can actually work, building on a simple balance of powers. Other posts on this blog explain the mechanics in detail, and how it can apply to journalism and similar content businesses.

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    A guide to  further details is at the end.
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    Why take the risk?

    Journalism is in a downward spiral, with a shrinking market of people willing to pay for it (at least on current terms). FairPay brings a robust and coherent strategy that applies across the spectrum of patronship:
    • For the long tail of pricing, FairPay promises to make it more affordable for the huge population of people who might pay something, but do not pay at all now because they will not pay as much as paywalls demand. FairPay's customized pricing can adapt to the lower, but still profitable, payments of the large population who consume lightly.
    • For the fat head of pricing, FairPay also promises to capture a larger "share of wallet" of those who are already paying. Unlike the complex and confusing value propositions of membership and other set-price premium subscriptions, FairPay can tailor rich value propositions to the desires of each patron, especially those willing to pay to get what they really want, not just some arbitrary, standard bundle.
    The result is a holistic view of value propositions, and how monetary payments fit in with other aspects of value, that enables the engine to individually manage a win-win relationship over time.  It motivates a very wide range of consumers of journalism to act as patrons, who provide an individualized mixture of money and other currencies of value that are a fair and sustainable exchange for what the consumer uses and values. It works as an adaptive, emergent process that identifies desired value propositions, delivers on them, tracks the results, and sets prices that patrons accept as fair and are happy to pay, Subscriptions, premiums, membership, and patronship fit together into an integrated engine of value creation and exchange, one that patrons can understand and fully buy into. This goes beyond the old invisible hand -- which is no longer operative for digital services -- to the more collaborative balance of an invisible handshake.

    While FairPay is very much aligned with the latest thinking in marketing and e-commerce, applying something so unconventional is not without risk. Established businesses will want to test FairPay first at the margins, in limited, controlled trials. This can be done in many areas, including premium tiers, acquisition offers, and retention offers (see the slide on “'Toe-in-the-water' examples for News Subscriptions" -- currently slide 18). Even if it does not work quite as expected, FairPay points us in the right direction -- that of constantly learning about realized value propositions and adapting to what each individual patron wants and values at any given time. 

    Trying it will lead to learning how to do it right -- how much power to give to your patrons, in what way. Really listening to our customers is now something that technology not only greatly facilitates, but requires us to do very well. It is not optional, something that can be neglected -- it is now central to the co-creation of journalism --and the business of journalism.

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    [Addendum 9/3/15 -- Aggregation and FairPay]  Until I do a fuller post on this soon [Update: see the "Additional posts" just below, especially "Risk -Free..." and "The Case Against..."], here are some quick notes about news aggregation and how FairPay enhances that:

    Aggregation is valuable to make it easy for consumers to access journalism from varied sources. Blendle has gotten much recent attention, and the proposal for The Internet Trust Exchange seems very promising. These approaches generally rely on micropayments to address varying levels of usage. Micropayments have had a troubled history (as Clay Shirky summarized long ago), but they do partially address the challenge of linking price to value when usage varies widely.

    FairPay is very applicable to use by aggregators, and it addresses the problems of micropayments directly, so that consumers need not fear the ticking meter, as explained my posts on "post-bundling" (focused on TV but also applies to journalism) and on “all you can eat” subscriptions. Post-bundling builds in volume discounts after the fact. With full FairPay, these volume discounts are soft and forgiving suggestions that are not binding, so consumers need have little anxiety about usage.

    Even without the more radical aspects of FairPay, if we do nothing more than apply pre-set discount rates from a provider-specified discount schedule, there is still a significant benefit. Why should my incremental cost for one more article be very low (actually zero) if I am an average subscriber on an unlimited usage subscription plan, but high if I have the same activity level using a micropayment system? The incremental charge for an added article should be very small (once beyond some minimal level of volume). The reason consumers hate micropayments is this constantly ticking meter – if we cannot make the meter go away, we must at least make it tick very softly.

    (Blendle does take one smart step in the direction of the participative nature of FairPay, by making it easy to demand an instant refund if not satisfied with an article.)

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    Additional posts relevant to journalism include:
    ...and much more on the More Details page.

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    For a full introduction to FairPay see the Overview and the sidebar on How FairPay Works (just to the right, if reading this at FairPayZone.com). There is also a guide to More Details (including links to a video).

    Even better, read my highly praised new book: FairPay: Adaptively Win-Win Customer Relationships.

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