Micropayments are frequently raised as a potential funding mechanism for digital content.  There are a number of important issues that any micropayment experimentation will have to address.

• If micro-payments are levied based on collective consumption (e.g., voluntary collective licensing), rather than individual consumption, how do we differentiate value/prices?  Do we pay the same (even time-adjusted) price for viewing “dog on a skateboard” as we would for the movie Avatar?  I might spend my time on each, but I certainly wouldn’t pay as much for the former as the latter.   But if we do have differentiated, voluntarily set/accepted prices, then….

• The transaction costs of micropayments (particularly the difficulty of payment relative to the total value of each transaction) may be so high that transaction costs, rather than product prices, are the primary barrier to consumption.  Can transaction costs be lowered for a large number of transactions without?  If not…

• I think it’s instructive to observe that people tend to choose bundled options over a la carte when transaction costs are high for a lot of consumption (or when consumption levels vary widely).

It seems to me that a la carte offerings (on demand services, etc) can play a role, though I’m not sure how micro the payments can get.  If consumers do continue to prefer bundled content options, then managed services may be solution. Managed services could compensate content providers (much like cable compensates content providers), and it could open up the market to a host of online programming competitors.

Importantly, pirates wouldn’t have access to managed services. That provides a crucial point of differentiation.  Content providers can’t beat theft on price (pirates give content away for free) or quality (pirates are distributing exact copies), but distribution access/quality is a metric on which content providers can differentiate.