As a wild week dominated by the U.S. presidential election draws to a close, I thought it would be helpful to use my column inches for something completely different—a diversion from the anxiety-ridden roller coaster of magic walls, uncounted ballots and legal challenges.
One of the questions I’m most often asked about running a digital subscription-based news publication is why we don’t offer customers the ability to pay for individual articles, otherwise known as the micropayments model. This isn’t exclusive to The Logic; every few months the topic will resurface on social media, only to be refuted by industry experts.
It’s a question that, from a customer or product perspective, is fair to ask. Not all readers can afford to purchase subscriptions to multiple publications, and if they want to read just one article, they would rather support the author of the work than try and break the paywall or leave entirely. So why wouldn’t we offer an “iTunes model for news?”
To explain, it helps to think of journalism’s business model as a two-sided marketplace, like a gig-economy delivery app. The customer determines what they’re willing to pay for the service, and the delivery driver determines at what fee-for-service it’s worth their while to take the job. The application—Uber or Airbnb, for example—facilitates the transaction between the end user and the service provider. Done right, the application offers a level of service, security and trust that satisfies both the customer and the vendor.
News organizations are no different. On the one side, we have our customers—loyal readers like yourself who help determine what the market is willing to pay for our journalism. On the other side we have reporters, who, through recruiting, hiring and retention, determine the price of producing that great work. The news organization, in its editing, operations and product, provides the platform through which both parties feel they are offered a level of consistent service, security and trust, which keeps both sides of the marketplace satisfied and the business model healthy.
As a two-sided marketplace, we need the model to make financial sense for all involved: the customer, the reporter and the publication.
Let’s assume that a micropayments user is willing to pay $0.25 per article. On average, based on my anecdotal experience, most articles at major publications don’t get more than 1,000 page views. That would mean every article would produce roughly $250. However, keep in mind that the user would have to want to pay for that article. Let’s be generous and assume that one in 10 users would be willing to drop 25 cents for the piece (the average conversion rate would be closer to five per cent). For every 1,000 page views, you’d be looking—at best—at $25 in revenue per article.
Assuming the publication takes at least a 25 per cent cut of that revenue for overhead costs (some publications take as much as 75 per cent), the reporter would be looking at a net pre-tax pay of $18.75 per commissioned story—hardly enough to justify their time.
Which leads us back to the two-sided marketplace. For The Logic to attract the best reporters in the industry, we need to offer fair wages, benefits and a product that reporters want to be a part of. That job security is vital, as it gives reporters the time and space they need to do their best work—but it comes at a cost. If the publication were to lock in those full-time employment agreements, but then turn around and offer readers an à la carte pay-per-use model, as the math above demonstrates we simply could not afford to keep our talented team.
It’s not that some haven’t tried to make micropayments work. A Dutch news aggregator called Blendle tried to enter the North American market, only to ditch the pay-per-article approach a few years later. Scroll is having some success with a pay-per-use model, but it hinges mostly on replacing lost ad revenue with pay-as-you-go pennies for publishers––and it isn’t able to cover the full costs of production. And here in Canada, the Winnipeg Free Press experimented with a 27-cents-per-article model that generated less than $100,000, barely enough to cover the salary of the executive who came up with the idea in the first place.
Perhaps most importantly, micropayments would adversely impact the type of journalism we produce by forcing a short-term mindset: what stories will drive conversions today, versus what stories must we tell regardless of whether they deliver any revenue? When you purchase an annual subscription, you are giving us the opportunity to make long-term investments in our reporters. It’s the very essence of independent reporting, and it’s what makes The Logic such a unique publication.
So that’s why we don’t offer our articles on a pay-per-use basis. A full subscription allows us—the platform in the middle of a two-sided marketplace—to attract and retain the best talent so that we can consistently bring you the best product, customer service and journalism each and every day.