(Comics on the Internet) Ever since the general public first began moving to the internet in big numbers, the biggest complaint heard from the business community has been that you couldn't make money from it. Actually, that's not true at all -- at first, the corporate class was excited by what they saw as the moneymaking potential of the web, which resulted in the Internet Boom of the late 1990s. Schemes were hatched, start-ups were founded, venture capital was abused, and when the promised gold rush failed to appear, the end result was the Internet Bust. Ever since the internet bubble burst, the biggest complaint heard from the business community has been that you couldn't make money from it.
For those outside the corporate sphere, however, the internet is seen as a potential tool of liberation, a means by which the small-business owner and the do-it-yourselfer could compete on the same playing field as the big boys. This dream has always been a little more realistic, and the number of success-story examples is correspondingly greater; from the folks who've turned eBay into a livelihood, to such local businesses gone global as Portland, Oregon's Powell's Books, the prospect of commerce on a large scale has never seemed more accessable to the small-time operator.
Such examples, however, tend to come from those who use the internet as a sales tool to sell tangible goods. For those who want to sell intellectual property, by contrast -- art, music, films, text, even comics -- the story is much different; the preponderence of online bootlegging has from the beginning provided the sort of competition that copyright holders dread the most. If you're, say, a popular music act, your biggest competition in selling your music online is your own music, traded through peer-to-peer networks of various varieties. Furthermore, while selling intellectual property as zeroes and ones removes manufacturing costs, shipping charges and the bite taken by middlemen from the equation, there still remains one obstacle left to be overcome: the inability to lower the price-bar below what credit-card companies find acceptable. The cost of a digital financial transaction is acceptable if you're charging ten dollars, but for a ten-cent deal the fee charged by Mastercard or Visa is far larger than the transaction itself.
Micropayments have long been seen as the answer, and forward-thinking people have been predicting them for years now. In 1998, writer and engineer Dr. Jakob Nielsen wrote a treatise entitled "The Case For Micropayments", in which he denigrated another financial model, subscription fees, in favor of a system in which users could pay anywhere from a penny to a quarter to access quality content:
"I predict that most sites that are not financed through traditional product sales will move to micropayments in less than two years. Users should be willing to pay, say, one cent per Web page in return for getting quality content and an optimal user experience with less intrusive ads. Once users pay for the pages, then they get to be the site's customers, and the site will design to satisfy the users' needs and not the advertisers' needs."
Two years later, of course, micropayments seemed as much a pipe dream as ever, leading writer Clay Shirky to make "The Case Against Micropayments", dismissing the concept with a simple statement: users hate them. As Shirky explained:
"Beneath a certain price, goods or services become harder to value, not easier, because the X for Y comparison becomes more confusing, not less. Users have no trouble deciding whether a $1 newspaper is worthwhile -- did it interest you, did it keep you from getting bored, did reading it let you sound up to date -- but how could you decide whether each part of the newspaper is worth a penny?
"Was each of 100 individual stories in the newspaper worth a penny, even though you didn't read all of them? Was each of the 25 stories you read worth 4 cents apiece? If you read a story halfway through, was it worth half what a full story was worth? And so on.
"When you disaggregate a newspaper, it becomes harder to value, not easier. By accepting that different people will find different things interesting, and by rolling all of those things together, a newspaper achieves what micropayments cannot: clarity in pricing."
If Shirky's argument sounds a tad dubious, one should note that it has long had the advantage of appearing to rest comfortably on the winning side. Since credit-card companies refuse to go for the micropayment concept, and material traded on peer-to-peer networks threaten to compete with digital properties if they do wind up for sale online, God has certainly appeared to be on the side of the nay-sayers.
Until now. On June 30th of this year, cartoonist Scott McCloud debuted what may well be the first genuine product sold via micropayment -- his online graphic novel The Right Number, available for 25¢ courtesy of a company known as BitPass. The news made headlines around the world, from The New York Times to the BBC to The Sydney Morning Herald, and several thousand people have already given it a try. This, in turn, has given Shirky reason to take another whack at the subject. His skepticism hasn't budged an inch. In addition to the arguments he made years ago, he offers up another reason to believe the concept will fail -- the competition against similar wares offered for free:
"For a creator more interested in attention than income, free makes sense. In a regime where most of the participants are charging, freeing your content gives you a competitive advantage. And, as the drunks say, you can't fall off the floor. Anyone offering content free gains an advantage that can't be beaten, only matched, because the competitive answer to free -- 'I'll pay you to read my weblog!' -- is unsupportable over the long haul.
"Free content is thus what biologists call an evolutionarily stable strategy. It is a strategy that works well when no one else is using it -- it's good to be the only person offering free content. It's also a strategy that continues to work if everyone is using it, because in such an environment, anyone who begins charging for their work will be at a disadvantage. In a world of free content, even the moderate hassle of micropayments greatly damages user preference, and increases their willingness to accept free material as a substitute."
There have been multiple responses to this essay; weblogger Kip Manley has chipped in, while the folks at Slashdot are busy arguing the topic in earnest. I'd like to focus, however, on the responses from two people with significant stakes in the sale of online digital content -- Modern Tales founder Joey Manley, and McCloud himself.
Let's start with Manley. His response, an essay entitled "Information Wants to be Valued" has much to offer, but I'm afraid in his zeal, Manley goes too far in making his case. He begins by offering a nod to his own dog in the fight:
"Shirky also argues that creators of content don't want to make money. Apparantly they enjoy working the night shift at Starbucks or the front reception desk at the hotel. If that's true, then I'm an utter fool. I'll proceed under the assumption that I'm not an utter fool. But the reader is permitted, of course, to keep the possibility of my foolishness under consideration."
So far, so good. Alas, Manley then presents his response with five questions for the reader that I would argue amount to indefensible overstatements. Let's go through them one at a time:
"Would you rather have an entertainment industry on the web that consists solely of porn, big-name rock concerts, and 'zany' but empty material like 'Gerbil in a Microwave' or 'Homestar Runner' -- or an entertainment industry on the web that allows material like 'Makeshift Miracle,' 'The Spiders,' 'American Born Chinese' and 'Narbonic' to thrive alongside the stuff with more mass appeal? Personally, I like Strong Bad and Joe Cartoon as much as the next guy -- but would be very, very unhappy if that was the only kind of material that was available to me."
Manley all but states here that it's impossible for a sophisticated strip of any real depth to operate under the free model. What would Justine Shaw say to this?
"Would you rather have entertainment on the web that depends on not offending or challenging even a single consumer, in the hopes of attracting a corporate sponsor, or entertainment on the web that can speak directly to an artist and her audience's heart of hearts, because that audience supports that artist out of its own pocketbook, in reliable and predictable ways?"
Webcomics won't make money for a cartoonist unless they're either attached to a meter or bland as chicken broth? What would Chris Onstad say to this?
"As creators, would you rather be selling the brains and eyeballs of your audience to corporate America, or would you rather be selling your work directly to your audience?"
So banner ads and co-branding deals are the exclusive tool of The Man? What would Scott Kurtz say to this?
"As consumers, do you like the idea of having the mass audience make decisions about which artists are successfully able to, for example, quit their jobs and devote themselves to creating more content -- or would you rather be able to directly support artists looking to reach this goal? If the latter, do you really believe that any significant number of artists will see reliable returns on donations, or do you think it's more realistic to believe that charging for content will tend to cause a more regular and predictable income stream (after all, they're thinking about quitting their day jobs, you know, we wouldn't want to leave them high and dry one month)?"
Even the business model that Manley himself uses is dependent on the goodwill of the mass audience. AdventureStrips.com, anyone?
"Would you rather have the web be a 'proving ground' for amateurs who, upon becoming popular, graduate to the established, paying outlets of old media, or a legitimate medium for sophisticated and professional art and entertainment in and of itself, with solid mechanisms of tangible, predictable, and meaningful reward for artists?"
Either/or? Can't someone do both? What would Scott McCloud say to this?
Manley clearly knows that the situation is far more fluid than the above statements would seem to indicate, as evidenced by his next paragraph:
"It's not that advertising and donations are as evil as all that. They're perfectly fine models, for the content creators who wish to use them, and whose content, and audiences, fit those models. It's that a world with only advertising and donations, as acceptable models, is a world where success is circumscribed more harshly by popular appeal, and by the nature and, um, content of the content, than a world where there are different kinds of business models for different kinds of artists (and different kinds of audiences). Content creators looking to user-pay systems as 'magic bullets' (as Shirky accuses) are less common, I think, than content creators looking for multiple business models, and multiple revenue streams, to be developed, so that a wide variety of creative works -- from wildly popular poop humor to mildly popular realistic graphic novels -- can thrive on their own terms."
Agreed; so why all the bogus dichotomies? Webcartoonists are giving away significant and meaningful stories for free online (one nearly won an Eisner or two for hers a few months back). Webcartoonists are creating challenging, even offensive works without thought to what potential corporate clients will think of the result (Tatsuya Ishida even keeps a running count of the number of syndicates who've rejected his excellent strip Sinfest, and yet he hasn't toned down the content in the least). The lack of micropayments hasn't stopped several web-cartoonists from successfully devising ways to live off of their creations (more on that in a moment). As I'll argue below, there is in fact a strong case to be made that Shirky's completely full of shit. Given this, making sweeping statements that reduce a complex and fluid situation into simple binary conflicts does Manley's case no good at all -- and speaking of simple binary conflicts, he then adds a postscript which uses the example of corporations providing free beer to public events to achieve new heights in the creation of straw-man arguments:
"Generally, when Free Beer is being provided by a commercial source (note, again, I am talking about commercial sources -- not because I wish to dismiss amateur sources, but because commercial sources are where the 'problem' is), there's an agenda behind it. For example, the bar offers Free Beer to the ladies so that drunken loutish men can come and pay money for Nonfree Beer. Commercial websites offer Free Beer Content so that they can hit you up with popups, or even with non-obstrusive banners that wish to push products on you. Yet the commercial sources of Free Beer Content are often the very ones who try to pretend that asking people to pay for content (a mechanism which clearly rewards the independent, non-corporate creator more quickly than advertising would) is Evil."
I have no idea what the hell that last sentence is supposed to mean (examples please, Joey), but as for the rest of it: Joey Manley, meet Chris Onstad. I realize the two of you already know each other -- you print a weekly color version of his strip, after all -- but did you know that Chris makes his living off of "free beer"? His strip, Achewood, has been running for several years, now; it was adopted by several prominent webloggers early on, which gave it an enviable visability. Onstad, in turn, cleverly used this visability to sell everything from strip-compilation books to shirts, stickers, even a cookbook. As a result, Onstad was able to give up his dayjob, and now by his own account lives entirely off the proceeds of the tiny cottage industry he's created -- all promoted by the "free beer" he still offers, the strip he posts to his website every weekday. The Man, that eeeeeeevil rat bastard, isn't the only one using free online content to sell stuff. Proles are doin' it for themselves.
There's a deeper contradiction at the heart of Manley's argument, however. Throughout the essay, he holds up a business model looking an awful lot like Modern Tales as the answer to web-cartoonists' search for economic independence. The problem is that this isn't exactly an accurate picture -- I've spoken to several of the cartoonists using Manley's online services over the past year or so, and while I didn't hear any complaints (and all have happily noted that they are in fact supplementing their income from checks Manley has cut them), neither has anyone stepped forward to claim that they're actually living off the proceeds, either. There are artists earning enough to support themselves solely from revenues generated by their online strips, but they're exactly the sort of revenues Manley warns against -- aside from Chris Onstad, there's Scott Kurtz, who uses a creative mix of ad banners, merchandise sales and a spin-off print comic published by Image Comics (I should note that Kurtz claimed that PVP was sufficiently profitable even before the deal with Image). I understand that the guys behind the web-strip Penny Arcade are living off of similar arrangements.
This is not to malign Joey Manley's business model; you could just as easily point out that only a handful of the cartoonists published by small-press companies like Fantagraphics and Slave Labor are earning enough from such products to pay the rent on a regular basis as well, and yet I'd hardly call them failures. While it may not be providing a middle-class income to its participants yet, the Modern Tales business model is nonetheless successful enough to attract a regular clientele, which in turn is providing regular checks to those creating the comics that it digitally publishes. Under these modest terms, I have no problem arguing that Manley's company is successful, and as such stands in obvious refutation to the arguments provided by naysayers like Clay Shirky. Nonetheless, Manley simply doesn't provide a very good case for it. Modern Tales and its satellite of related pay sites aren't at the point where they can be held up as the path to financial independence just yet, and Manley overstates his case by implying otherwise.
Scott McCloud, by contrast, provides a much more level-headed and farsighted refutation to Shirky's literary assault. McCloud's essay, "Misunderstanding Micropayments", more accurately grapples with the arguments Clay Shirky provides, and offers reasonable and plausible responses to each one.
To the extent that McCloud is standing on shaky ground, it has more to do with The Curse of the Early Adopter than anything else -- Shirky is arguing from the vantage point of the present reality, whereas all McCloud has onhand is a potential future. To his credit, McCloud tackles the downside of the present realities head-on, and rather than trying to paint them into some pseudo-proletarian "us or them" scenario acknowledges at the outset that many of them are simply going to have to be endured as gracefully as possible. Take, for example, the competition with free material:
"Shirky's 'epochal change' is real enough. Free content is here to stay, file-sharing is here to stay, and any attempt to completely wipe out either is doomed to failure (as it should be). But that in no way precludes the co-existence of markets based on the desires of willing sellers and willing buyers. To proclaim without a hint of doubt that such a market will never exist for low cost digital content contradicts everything we know about the Web's inexhaustible capacity for variety and adaptation."
In fact, the market McCloud envisions already exists today; it just isn't very big. He offers up Apple's iTunes Music Store as an example. While the purchase of 10 million songs in four months is certainly an eye-opener, however, the model is not without its problems -- and not just that The Beatles may well sue it out of existence. In order to get the approval necessary to offer albums from major-label acts, Apple had to ensure that an acceptable digital rights management scheme would be in place, which would restrict end-users' ability to replicate the files they purchase. This might go over well with Apple's customer base, who are more than happy to drink any Kool-Aid that Steve Jobs gives them, but the wider market is another matter entirely -- the labels' own attempts at such schemes are the laughingstock of the internet, and when (and if) Apple widens iTune's range to include Windows and Linux users, it may very well find that the growth curve will drop sharply. Formats like MP3 come with no such strings, after all, and while modest fees won't necessarily sink a well-crafted start-up, trying to jam unpopular formats down the throat of the consumer is another matter altogether.
(A more applicable example might be a site which operates on a more Modern Tales-like model, EMusic. Founded in 1998, EMusic offers a straightforward subscription package, under which users can download as much music as they wish -- all of it in MP3 format. Because the chosen format does not include crippleware, the major labels won't touch it, but there are an astonishing number of minor labels and independent musicians that have, and the result is not at all unlike a rather cool used-record store. The selection is quirky; there are no Madonna albums, but the entire back catalogs of Creedence Clearwater Revival, Pizzicato Five and The Pixies are there, as well as much of the available output from acts as diverse as Negativland and George Carlin. It's actually the only digital paysite I've ever signed up for myself, and in the three months that I subscribed to it (before the Audio Archives and the weblog, when I actually had time for such things), I downloaded some fifty CD-ROMs of music -- roughly five hundred albums, at a relative cost of 9¢ apiece, and easily the best deal I've ever found online. I'm assuming that the company uses less avaricious downloaders to subsidize the apetites of greedy bastards like myself, since royalties are paid for every song downloaded and they haven't gone out of business yet; I recall reading recently that EMusic had at least 30,000 paying customers last year, and at a minimum of $45 per subscription contract, it's not difficult to imagine the company turning a small profit at the end of the day. Moreover, it's even had a few noteworthy success stories, including a popular MP3-only album, Long Tall Weekend, by quirky pop band They Might Be Giants.)
(Update, 10-10-03: EMusic has been sold, and the new owners have put an end to the "all you can download" deal. Forget I said anything.)
In any event, because he doesn't feel constrained to defend his vision of the e-commerce future as either the only practical or morally acceptable one, McCloud is able to sidestep the pitfalls into which Joey Manley fell, and instead deal with the practicalities of the market while still defending his turf. Here's the knockout blow:
"Nothing will ever wipe out file-sharing completely; not DRM, not lawsuits against 12 year-olds, and certainly not micropayments. When my readers paid 25¢ to read my webcomic, I encouraged them to download the file. I knew full well that once that happened, some readers could choose to share the comic with their friends. I hope they'll encourage their friends to buy it instead, and so far the results of this little social experiment have been very encouraging, but it's still early in the game.
"File-sharing other people's IP may be a kind of "theft," but it's a kind the world has never seen before; one that has a strangely philanthropic component. It takes time and computational resources to offer those songs to others for free; an effort rationalized by high retail prices, disdain for record companies and the belief that musicians see very little of our dollars.
"Micros won't eliminate file-sharing (any more than they'll eliminate other forms of free content) but they could reduce the incentive. After all, if musicians did start selling their songs for small change directly to their listeners, why would those listeners still devote time and computational resources to stealing business from their favorite bands—just for the privilege of giving free content to total strangers?"
While Shirky claims that micropayments are doomed to fail -- indeed, that virtually all digital-content sales are likewise doomed -- at no point does McCloud ever state that, on the contrary, micropayments will one day rule the entertainment industry. He doesn't have to. If even a small percentage of the online population accepts the notion of micropayments, subscription services and like-minded financial models, enough of a market exists to provide a means for artists like McCloud (and entrepeneurs like Manley) to earn a living selling zeroes and ones. The beauty of such models, after all, is that they don't require the size of audience that, say, the new Radiohead album requires; if McCloud sells just 12,000 copies of The Right Number, he grosses $3000, most of which he gets to keep as net profit. This isn't enough to compensate for a Frank Miller-sized paycheck, but it is enough to make the effort worthwhile for a cartoonist who produces new works on a continuing basis. That's really all McCloud needs to win the argument.
Micropayments aren't there yet. As I mentioned last Thursday, BitPass' clientele simply hasn't grown enough to be ubiquitous in the way that, say Paypal has, and therefore the prospect of buying a Bitpass account for three dollars gives McCloud's comic a functional price of, well, three dollars for many would-be customers, rather than the advertised 25¢. As I noted above, however, this is less a design flaw on the part of BitPass than a simple case of the Curse of the Early Adopter. If BitPass continues to grow, there's no reason to believe that it can't attain the same status as e-currency currently afforded to the aforementioned PayPal. The situation may not be as simple as either Joey Manley or Clay Shirky would have you believe, but that doesn't mean that there isn't enough potential available for an optimist like Scott McCloud to set up shop and wait for the customers to arrive.
(Note: this essay has been copy-edited for punctuation, spelling and grammatical structure following its initial posting.)
