Monday, November 4th, 2013

The Order of Payment And Consumption Drives Content

Economics: incentives incentives incentives. I don’t know if I quite buy it, but it’s still a good lens for understanding why the market contains what it does.

I was reminded of those incentives when reading The Jenna Marbles Paradox: Why Are YouTube Videos So Terrible? The basic premise of the article is that the most popular YouTube channels are low production and generally low quality, that YouTube is not moving towards professionalized quality media, but that maybe with subscription services or other techniques we actually could get quality online media.

There’s other examples to put into the mix: commercial TV drama seems to be getting a lot better. Commercial TV news is terrible. Other commercial news is all over the place, and is in financial flux. There’s good movies, but there’s also a strange number of really bad but expensive movies (with budgets that would seem to have enough room to pay for decent writing). Public Radio frequently feigns disaster, but is actually doing pretty well financially and provides lots of quality news. There’s a few quality magazines, but there’s a large swathe of broad-interest magazines with incredibly terrible content, bordering on anti-informative. And blogs don’t get any respect, despite still being the kicking off point for a lot of online discussion. Online there seems to be a constant draw towards shorter and lower-investment content.

The order in which you pay for things changes the incentives in media creation quite a bit. Some examples:

  1. Movies: you pay for movies up-front, so even a movie that people don’t enjoy can do well if people think they will enjoy it.

  2. Public Radio: you pay for Public Radio entirely after you receive the media. Like any media Public Radio has to attract people, but it’s more important to leave the audience feeling satisfied when they are done listening — and better to forgo a listener than lead them to listen to something they won’t enjoy.

  3. TV ads: TV ad revenue comes from keeping you hanging on. They have to draw you up to and through the ads. It should be continually enticing.

  4. Online ads: online ad revenue is more accidental: they need your eyes on the screen, and ultimately to get a click-through you need to actually be done with the content itself.

  5. Online attention: in TV they want to pull you through the commercial break, but online the effort is to pull you to the next piece of content. Unlike a TV channel, online there’s a sort of attention market where people will freely pass their audience on to other outlets. (From the perspective of 4 there’s actually a benefit to encouraging people to move on from your content.)

  6. TV subscription: TV subscription revenue (cable, premium channels) accumulates during the experience: over the course of weeks and months by people who choose to stay subscribed. But TV subscriptions are generally bundled, creating an incentive to simply stay in the bundle rather than to give the consumer direct value (though premium channels like HBO are unbundled, to noticeable effect).

  7. Music: music used to be paid for up-front when you bought the album, except the hits which were paid for on the radio with ads. Now I don’t even know how it’s paid for.

These different models help me make sense of why these different mediums produce different results — and of course media producers adapt to the incentives, but consumers also adapt.

For instance, the trend towards ever-shorter content online. We see this in the rise of meme photos, the GIF animation (YouTube is too high of a commitment!), or apps like Vine, or further back in Twitter itself and many other social networks. (My personal preference for Google+ is mostly my own reaction to this trend.) In some ways this can be seen as an appeal to our more base desires: quick fulfillment, the primitive and reflexively positive emotional response to things like cute cat photos, the ability to fully consume a piece of media with the least investment. But I also think it’s a response to the media that the online ad model has incentivized: online ads reward content creators for eyes, and don’t care much if the eyes were earned or manipulated onto the site. Perhaps the manipulated viewer is even more valued. And so as consumers we protect ourselves from investing time in bad media by investing the least time and attention possible. Rational responses become habits, so I don’t know how easy it would be to steer ourselves in a different direction, but I also don’t think the short attention span of the internet consumer has revealed a Truth About Humanity.

I struggle to be my best self. We all do, which is why I don’t want to blame the Stupid Masses for any of this. I see in the economy of media the product of individual attempts to be our best selves multiplied out a billion times. And in most of the complaints about the state of the media I see an underlying critique that it’s not helping us be who we should be. But I am wary of moralizing too much, that we should target the media we think should exist, or should be more popular. Art informs and improves us just as exposition does, but you can’t know where art will emerge, or even what it is. For instance, this face has become part of my own visual language, my own internal monologues:

it’s a bit of unexpected art that has emerged from the internet.

So I want a market. I don’t want to presuppose what good media is, but I still want a well-functioning market, and in many mediums the market seems sadly dysfunctional.

A More Ideal Market?

The best market to me would be one where you pay after or during the media experience. That disincentives titillation, encourages material that is good on reflection. It leaves open the possibility of surprising the audience, but doesn’t let you cheat the audience.

Public Radio is maybe the best example, but not the best example you could hope for. Public TV doesn’t seem to be able to use that voluntary payment model to the same effect, maybe because voluntary payments only work for cheap mediums; or probably for other reasons too, like kids don’t have the income to donate in response to enjoying Sesame Street.

Online I’d rather see a kind of micropayment framework. But it’s complicated. In-app payments as we currently see them in mobile apps are everything I don’t want from micropayments, they are manipulative and often degrade the thing you are paying for. They feel more like the Home Shopping Network: viable only because there is a small group of people who cannot put rational limits on their spending. These details matter a great deal — each detail affects the incentives and directs the very kind of media we will see.

Here’s my initial sense of what a good system might look like:

  1. All payments should be “voluntary”  — which could mean all payments have an opt-out option, i.e., easy refunds.

  2. We shouldn’t require explicit opt-in for each form of media; the default should be to pay something when you consume some piece of media. Otherwise it’s just public media, and public media doesn’t work for lots of kinds of content, and relies on consumers associating their identity with the media outlet, in a way that doesn’t scale up to the diversity of outlets on the internet. There are many sites that I visit infrequently (sometimes only once) that have quality content but which I don’t identify with and wouldn’t subscribe to nor feel inclined to pledge towards.

  3. It’s okay to require the possibility of payment, rejecting users who don’t show any willingness to pay, or to adjust content like adding more ads if you don’t demonstrate a willingness to pay.

  4. Payments shouldn’t be in exchange for removing ads. Asking for ad removal is a weird kind of ultimatum, because the media outlet has to alienate advertisers for an unknown payment. Paying for no ads is a way of telling your advertisers that you’ve actively selected a group of freeloaders to view their ads. And most people are okay with reasonable ads. That said, users should feel free to deny payment if the ads are too obtrusive.

  5. Pricing is challenging, but worth figuring out. Does the content provider indicate the suggested price? How does a consumer make (and indicate) the decision that content was valuable, but not that valuable? Building in price discrimination is a positive feature, I’d claim it’s even essential. I have no idea how to do it.

The last item is the reason why some form of federation seems necessary, simply to allow for different approaches to pricing. For instance I could imagine a micropayment provider targeted towards teens, and it’s never going to give content providers a lot of per-view income, because teens are poor and because kids just don’t pay their own way because they are kids. But an honest attempt to charge each person according to the value they receive is the essence of price discrimination (sometimes it is explained in terms of what the consumer is willing to pay, but I like to think about it in terms of value, as $1 has a different value to me than to someone else).

For music I could imagine individuals having their own ASCAP licenses, with services reporting in on actual listening behavior. Well, not literally ASCAP because they don’t seem trustworthy, but they embody the basic concept of money distribution according to actual consumption, even if they may not implement it well.

Right now Flattr is the most mature microdonation platform. Or maybe it’s the last one standing—I’m not sure how to talk about a category that has been all aspiration and little success for so many years. But Flattr is not really a way of paying for content, only for giving tips. The very existence of a Flattr catalog feels like defeat.

The potential for a good payment system is bigger than just keeping people on the web, or keeping people from going bankrupt; the payments shape the product, for good and bad, and maybe we can yet shape them for good.

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This is the personal site of Ian Bicking. It should (but I fear cannot) go without saying that the opinions expressed here are my own.