Four years ago, I wrote a piece called Fame vs Fortune: Micropayments and Free Content. The piece was sparked by the founding of a company called BitPass and its adoption by the comic artist Scott McCloud (author of the seminal Understanding Comics, among other things.) McCloud created a graphic work called “The Right Number”, which you had to buy using BitPass.
It didn’t work. BitPass went out of business
in January of this year. I didn’t write about it at the time because its failure was a foregone conclusion. This isn’t just retrospective certainty, either; here’s what I said about BitPass
BitPass will fail, as FirstVirtual, Cybercoin, Millicent, Digicash, Internet Dollar, Pay2See, and many others have in the decade since Digital Silk Road, the paper that helped launch interest in micropayments. These systems didn’t fail because of poor implementation; they failed because the trend towards freely offered content is an epochal change, to which micropayments are a pointless response.
I’d love to take credit for having made a brave prediction there, but in fact Nick Szabo wrote a dispositive critique of micropayments back in 1996. The BitPass model never made a lick of sense, so predicting its demise was mere throat-clearing on the way to the bigger argument. The conclusion I drew in 2003 (and which I still believe) was that the vanishingly low cost of making unlimited perfect copies would put creators in the position of having to decide between going for audience size (fame) or restricting and charging for access (fortune), and that the desire for fame, no longer tempered by reproduction costs, would generally win out.
Creators are not publishers, and putting the power to publish directly into their hands does not make them publishers. It makes them artists with printing presses. This matters because creative people crave attention in a way publishers do not. […] with the power to publish directly in their hands, many creative people face a dilemma they’ve never had before: fame vs fortune.
Scott McCloud, who was also an advisor to BitPass, took strong issue with this idea in Misunderstanding Micropayments, a reply to the Fame vs. Fortune argument:
In many cases, it’s no longer a choice between getting it for a price or getting it for free. It’s the choice between getting it for price or not getting it at all. Fortunately, the price doesn’t have to be high.
McCloud was arguing that the creator’s natural monopoly — only Scott McCloud can produce another Scott McCloud work — would provide the artist the leverage needed to insist on micropayments (true), and that this leverage would create throngs of two-bit users (false).
What’s really interesting is that, after the failure of BitPass, McCloud has now released The Right Number absolutely free of charge. Nothing. Nada. Kein Preis. After the micropayment barrier had proved too high for his potential audience (as predicted), McCloud had to choose between keeping his work obscure, in order to preserve the possibility of charging for it, or going for attention. His actual choice in 2007, upends his argument of four years ago: he went for the fame, at the expense of the fortune. (This recapitulates Tim O’Reilly’s formulation: “Obscurity is a far greater threat to authors and creative artists than piracy.” [ thanks, Cory, for the pointer ])
Everyone who imagines a working micropayment system either misunderstands user preferences, or imagines preventing users from expressing those preferences. The working micropayments systems that people hold up as existence proofs — ringtones, iTunes — are businesses that have escaped from market dynamics through a monopoly or cartel (music labels, carriers, etc.) Indeed, the very appeal of micropayments to content producers (the only people who like them — they offer no feature a user has ever requested) is to re-establish the leverage of the creator over the users. This isn’t going to happen, because the leverage wasn’t based on the valuing of content, but of packaging and distribution.
I’ll let my 2003 self finish the argument:
People want to believe in things like micropayments because without a magic bullet to believe in, they would be left with the uncomfortable conclusion that what seems to be happening — free content is growing in both amount and quality — is what’s actually happening.
The economics of content creation are in fact fairly simple. The two critical questions are “Does the support come from the reader, or from an advertiser, patron, or the creator?” and “Is the support mandatory or voluntary?”
The internet adds no new possibilities. Instead, it simply shifts both answers strongly to the right. It makes all user-supported schemes harder, and all subsidized schemes easier. It likewise makes collecting fees harder, and soliciting donations easier. And these effects are multiplicative. The internet makes collecting mandatory user fees much harder, and makes voluntarily subsidy much easier.
The only interesting footnote, in 2007, is that these forces have now reversed even McCloud’s behavior.