Analyst Speak: Why Jeremy Clarkson could be micropayments' biggest winner

19 November 2009

The explosion in the volume of media content has coincided with a vicious reduction in ad spend. It’s a classic case of increasing supply and falling demand leading to lower prices. In particular, the newspaper funding model has taken a hammering from falling ad revenues.

Charging for an online subscription is increasingly touted as the solution, but this is likely to hit ad revenue as readers simply go elsewhere for free content. Famously The Wall Street Journal, with its premium content and affluent audience, has started to charge for content, but doubts remain whether this is an option for mainstream publications.

Continental Research interviewed 500 readers of online newspapers and magazines to investigate this issue. While 63% said they wouldn’t pay to read their favourite articles online, micropayments, rather than subscriptions, were the most popular payment mechanism: 21% were prepared to pay a small individual fee to read each article, with 11% opting for a larger amount to get access to the whole publication. Only 5% would be prepared to pay a larger monthly/yearly subscription.

Arguably, charging a subscription is just adapting an offline pricing model to the web. People used to be defined by the newspaper they read, but online readers can jump around to find what interests them. Consumers are used to choosing exactly what they want: when we go to the supermarket, we don’t buy a collection of groceries put together by someone else, we pay only for what we take home with us.

But how much should a micropayment be? We looked into how much people would be prepared to pay to read their favourite online columnists and found 35% would definitely or probably pay 2p per article. This dropped to 22% prepared to pay 5p, and 13% and 7% prepared to pay 10p and 20p respectively. The amounts may sound small, but it’s better to get a lot of people paying a little than virtually no one paying a lot. For the mobile industry lots of very small payments for text messages have been lucrative. Also, small payments reduce the incentive to get content illegally.

If micropayments take off, then those who can write copy that people will pay for will be in demand. Of those expressing a preference, 12% cited Jeremy Clarkson as their favourite columnist to read online. So at least someone could profit from micropayments.

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