04 September 2008

Cory Doctorow: Macropayments

from Locus Magazine, September 2008

Two columns back, in "Think Like a Dandelion," I talked about the reproductive strategies employed in species where reproduction is cheap, like dandelions. Unlike humans, dandelions don’t worry about the disposition of each of their children — they only want to be sure that every opportunity for success is fulfilled, that every crack in every sidewalk has a dandelion growing out of it. It’s a damned successful strategy, for dandelions at least. You’d be hard pressed to find a lawn, no matter how carefully tended and how thoroughly poisoned, that doesn’t have a dandelion or two sprouting on it.

To concretize the metaphor: I don’t care about making sure that everyone who gets a copy of my books pays me for them — what I care about is ensuring that the everyone who would pay me decent money for a book has the opportunity to do so. I don’t want to hold 13-year-olds by the ankles and shake them until their allowance falls out of their pockets, but I do want to be sure that when their parents are thinking about a gift for them, the first thing that springs to mind is my latest $20-$25 hardcover.

This is a marked departure from the traditional wisdom of selling creative works online, which is generally about "micropayments," a hoary science-fictional notion that captured the imaginations of dotcom marketers in the 1990s: the idea is that one can sell goods to even the flintiest of customers just by dropping the cost low enough — charging a tenth of a cent to read a single blog-post or to look at three photos. In micros’ heyday, the theory was that once new computer-driven efficiency made credit-card processing cheap enough, it would be possible to pull this off, either by aggregating the charges before processing them or by inventing new payment-processing systems that could efficiently run tiny charges in realtime without keeling over under the weight of the transaction charges. Once that system is in place, we just need to fiddle around with pricing and sizing until we find the magic sweet-spot where people an be coaxed into parting with enough dough to make a difference to the seller without the dough being enough to actually register as an expense on their internal balance sheet.

Micros have not had much success in the wild. Sure, there are the tiny pay-per-click markets of Google’s AdWords program, but the real action in AdWords is in the popular terms ("asbestos," or "travel" or even "sex") where the auction market for AdWords drives the cost per click up into the macropayment realm — for example, ambulance chasers have been known to bid up the price-per-click on "asbestos" to $100. In general, the cost of figuring out whether you want to pay a sum (what Clay Shirky calls the "mental transaction cost") remains high, no matter how small the monetary cost and no matter how efficient the system is. The web’s strength is in how adventurous it encourages us to be in what we click on — that’s how we get exposed to such a breadth of material online. Adding even a tiny cost to a link brings the cost of being adventurous from zero to non-zero, a step-change that requires enough thought that the overwhelming majority shrug and find a cheaper link to follow. The web isn’t short of links.

What’s more, collecting payments directly from your audience confers a cost on creators as well, one that’s a little harder to pin down, but goes a little something like this:

When you take money directly from someone, they become your customer, a relationship that’s fundamentally different from the "writer-reader" relationship that you get when the reader is the publisher’s customer. In the traditional relationship, a publisher serves as a commercial intermediary between the writer and the reader in the same way that a newspaper’s circulation and advertising department serve as intermediaries between advertisers/readers and reporters. It’s not that reporters get to ignore the needs of circulation and advertising — but they’re not beholden advertisers and subscribers; their first duty is to make the best news they can, not to please advertisers or subscribers.

Likewise, a writer’s first job is to write the best book she can (and likewise, it’s not that she can ignore the commercial demands of the market, but they should not be her first job). The publisher’s first job is to care about the market. The publisher is in charge of presenting the book in a way that accurately represents its contents, so if a reader takes it home and is disappointed with what he gets out of it, his beef is with the publisher, who has failed to adequately convey the nature of the material between the covers. The writer didn’t write the wrong book — the publisher sold it wrong.

This all changes once the reader is the writer’s customer: suddenly, the reader starts to treat the writer as the publisher (and rightly so, if the writer is taking money directly from the reader) and to make demands about the kind of books she writes. At best, this is faintly helpful but kind of painful. At worst, it’s a torrent of contradictory, entitled "advice" that often amounts to, "Can’t you just write more like the last one?"

The problem gets even worse when the reader is buying a digital book — a download. In this case, it’s hard to argue that the bits have any intrinsic value. If the reader doesn’t like the bits he bought from you, all he’s got to show for it is some non-empty sectors on a hard-drive — he lacks even the basic consolation of owning a physical object that represents an incremental manufacturing and shipping cost. You "sold" the reader some electrical impulses delivered over the network, and if it wasn’t what the reader was looking for, you’re going to have a hard time arguing that those zeros and ones are themselves useful or valuable apart from the aesthetic response they evoked.

In an ideal world, people without a lot of discretionary income are given the electronic edition (which costs [nearly] nothing to distribute) for free. They act like the breezes that loft the dandelion seeds — they go around, telling people about the book and its merits. In this regard, they’re better than random breezes, for they undertake a directed distribution of the book, seeking to bring it to the attention of people who are likely to have a positive response to it.

Once the book lands in the hands of someone who does have discretionary income, that person is given a multitude of opportunities to engage in a commercial transaction with the writer and her publisher. These range from buying the book (which has many positive externalities, such as improving the book’s sales record and hence increasing the writer’s next advance and other stores’ orders of her books) to buying limited editions, memorabilia, tickets to a lecture or reading, etc. The sort of consummations each writer chooses are idiosyncratic and specific to that writer’s work and audience — but where there is a spectrum of macropayments ranging from $5 to $25,000, there is a range of possibilities of enrichment to the author. For example, the last Nine Inch Nails release, Ghosts I-IV, was distributed in a variety of packages starting with free downloads, paid downloads at $0.99 each, a $10 CD, a $75 deluxe edition and a $300 "ultra deluxe" edition. The $300 unit sold out its 2,500 copy production run in a few days, grossing approximately $750,000 for the band.

For writers, it’s easy to see how a paperback, hardcover, deluxe leather hardcover, signed deluxe hardcover, etc., can fill some of these price-points, all the way up to the traditional writerly gigs of "writer in residence" or "arts grant recipient." Ideally, the majority of these products are produced by publishers (who bear the risks of overproduction and deal with fulfillment logistics) or can be produced in small runs or on-demand (signatures, for example). Note that where the writer is directly selling to her audience, she runs the risk of getting into one of those sticky vendor-customer relationships, so these sales should be limited to those where the profit justifies the risk — for example, it might be better to give away public appearances (rather than charging a measly $50 for them) in order to increase the possibility of landing a four- or five-figure corporate in-house gig. If someone is going to treat you like a vendor, you should at least be handsomely rewarded.

Taking someone’s money is expensive. It incurs transaction and bookkeeping costs and it incurs emotional and social costs. Micropayments have historically focused on eliminating the cash overheads while ignoring the intangible costs. For a writer whose career might span decades and involve hundreds of thousands of readers, these costs cannot be ignored.

Cory Doctorow's website is Craphound.com, and he is co-editor of Boing Boing: A Directory of Wonderful Things.

Cory Doctorow is one of a dozen Locus columnists and reviewers. Every issue, we review dozens of books and magazines, most before they appear in print. A subscription will get you all those as well as the rest of the magazine -- news, People & Publishing, commentary, reports on events, and a list of all books and magazines published that month.

Previous Cory Doctorow columns posted on Locus Online:

Comments are welcome, but are moderated.


At Friday, September 05, 2008 6:00:00 PM, Blogger Skip said...

I was very surprised when I first ran into your 'No Tip Jar' policy on Craphound.com. But I've found that I like it. I have bought multiple copies of your last 2 books after downloading and reading them on my Treo.
All of those copies were given as gifts and were greatly appreciated.

At Friday, September 05, 2008 10:21:00 PM, Blogger Chris said...

Your obsevations on the difference psychologically between free and not free are right on. Dan Ariely has studied this extensively. I expect that by giving away some, more comes back to you. If what you are giving away is any good. (maybe this explains the RIAA's behavior).

At Sunday, September 07, 2008 12:42:00 PM, Blogger bowerbird said...

cory, you've confused a "tip"
-- given voluntarily, _after_
the product was rendered --
with a "purchase" where the
money _must_ be paid first
before a product is provided.

micropayments will be good,
precisely because they will
enable us to shift completely
to "a gift economy", where
artists can make their work
available as a free _gift_,
and fans return the favor
with a gift of small cash,
with no kind of expectation.


At Monday, September 08, 2008 10:19:00 AM, Blogger CoAl said...

given that micropayments economics are not so easy, a one cent tip will never hurt, or will it?

apart that, amazing post

At Friday, November 07, 2008 8:54:00 PM, Anonymous Anonymous said...

bowerbird: I disagree. It all comes back to the [mental] transaction cost. I'm not going to drop a nickel, nor a fraction of a penny, everywhere. I'll drop $10 or $20 on my most favored "producers". In the aggregate, it all evens out for producers. But it doesn't require that each individual give equally--according to his apportioned preference--and in minute amounts to achieve that global effect.

The upside is that in such a system technology doesn't need to improve the efficiency; biology and the emergent behavior of society mysteriously implements a pretty darned efficient system.

At Tuesday, January 27, 2009 12:44:00 PM, Anonymous Rebecca Cannon said...

I think the only problem with Micropayments is their transience. If the payment is once, and recorded in a db forever, so you never pay for the item again, what's the problem?

Also they've partially failed because Paypal hasn't set them up properly yet, they only work for payments within one country. I blame economic trangressions for this.

I'm building NonZeroSum.net as a way to make it easier for people to make micropayments for artists.


Yes, blatent advertising, but the idea is that we make it easier for you to receive micropayments by taking on all the crap you're whinging about above.

At Friday, April 10, 2009 9:04:00 AM, Anonymous Egészség Infó said...

It's hard to earn money online. But I keep trying


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