If the major reason for the American daily newspaper industry's demise were its stories contained too many dangling participles, then the industry could more easily comprehend its situation than instead hearing that the reason was it had violated the Principle of Supply & Demand.

The understanding of economics, particularly media economics, has never been its strong suit, except if the topic is how many tons of newsprint to buy, how many points a major stock market dropped, or how cut expenses to match revenues. Most newspaper publishers, editors, or journalists tends to equate economics as solely the science of government financial policy, household spending, Wall Street speculation, and petroleum pricing. They don't understand or have forgotten that a major branch of it is the behavioral science of Microeconomics - the study of how individuals make decisions to allocate their time and activities.

The main paradigm of microeconomics is known as rational choice theory or rational action theory, which states that individuals choose the best action according to their preferences and what constraints of supply, demand, time, and access face them. In it now lays the demise of American daily newspapers as we know them.

How did the American daily newspaper industry violate the Principle of Supply & Demand by failing to adapt the industry's core product to a radical change in consumers' supply of news and information during the past 35 years? To understand how, both start and end at the roots of the newspaper industry.

Start in the European city of Strasbourg during 1605 when the world's first newspaper began publication. It used a technology developed there 164 years earlier by the metalworker Johannes Gutenberg, who had invented a device for producing innumerable copies of the same text. (Please keep that concept in mind, because it's now moldering the newspaper industry). The Supply & Demand equation for accessing daily changing information was then quite the opposite it is today: Consumers had little or no supply of daily news until the daily newspaper. So to produce newspapers, this adaption of Gutenberg's book printing technology spread quickly worldwide.

Some modern critics of newspapers say the industry is leaden and 'doesn't think outside the box.' They probably don't realize the historical irony that underlay their criticisms. The core of Gutenberg's technology was a box containing lead type whose impressions could print innumerable copies of the same thing. In that core is the inherent limitation that it produces the same edition for everyone. Although in the 19th Century steam and later electrical power speeded Gutenberg's technology and the introduction of offset lithography during the middle of the 20th Century eliminated its use of lead, the analog technology used to produce today's daily newspapers is still Gutenberg's. Indeed, today's analog printing technology still has the same limitation that it had in Gutenberg's days - it produces the same edition for everyone.

That technological limitation delineated the newspaper industry's editorial and advertising practices during the past four centuries. Because each edition had a finite number of pages and was printed by analog technology had to produce the same for everyone at once, newspaper editors had to select stories according to two criteria:

Some attribute their grave condition to advertisers suddenly switching huge portions of spending from print to online - an excuse that ignores more than 30 years of declines in those newspapers' printed editions' circulations and readerships. Some others attribute their deterioration to not having transplanted their content into online quickly enough -an excuse that ignores not only the dozen years they've spent transplanting it but how their online editions are now read even less frequently and less thoroughly than their printed editions.

Most of the print newspaper experts who diagnose these companies' condition still prescribe stale nostrums such as more consumer focus groups, subscription price incentives, more stylish typography, or shorter stories. Meanwhile, most of the experts who diagnose these companies' Web sites prescribe balms and accessories such as giving blogs to reporters, adding video, or having the readers themselves report the stories. American daily newspaper companies have long been too financially impatient to submit themselves to anything but ostensibly quick cures and they've even longer been too conceptually myopic to perceive the real reasons for their declines.

I'll declare the real reasons. There are but two and neither has anything to do with multimedia, 'convergence', blogs, 'Web 2.0', 'citizen journalism,' or any ancillary topics you may have heard presented at New Media conferences this millennium.

Nor is either of the real reasons advertisers' abandonment of printed newspapers. Their abandonment is a symptom, not the reason for the decline. Contrary to myopia of many newspaper executives, advertisers aren't newspapers' primary customers. Although advertising revenues may be sunshine for newspaper executives, the roots of their business are readers. A newspaper with readers will attract advertisers but a newspaper without readers will not. Readers ultimately support and sustain the newspaper business.

To understand the real reasons why the American daily newspaper industry is dying, first understand why more and more Americans are no longer reading daily papers and how their abandonment of newspapers has been wrought by changes in their own media economics. Also comprehend why the epicenter of the newspaper industry's problems in post-Industrial countries is America and exactly how grave the situation is there.

Serwer foresees “two other equally important seismic events”: the passing of the old guard at the family controlled media companies and the “dismantling of media giants.”

Both these factors could as easily fit into a discussion at my Who Owns the Media? blog. But they also are appropriate for this venue because they address the shape of the future media landscape.

While both of Serwer’s “events” are right on, neither is “seismic” nor events, in the sense that they are ongoing process, not a product of a single incident.

Sumner Redstone's Viacom and Rupert Murdoch's News Corporation are as likely to continue under the next generation of ownership much as Newhouse has gone on after the death of its patriarch, S. I. Newhouse or Time Inc. (now Time Warner) after the age of Henry Luce. Sure, there may be differences. But they are not likely to be “seismic.” On the other hand, a new cadre of moguls may in the making,: Can you say Larry Page, Sergey Brin, Jerry Yang, David Filo, Mark Zuckerberg?

Similarly, the disaggregation of “media giants” has been an ongoing phenomenon for many years, for reasons ranging from financial needs to the latest trends in strategy. As one example, there is the recent split between Viacom and CBS. Adam Thierer has kept a “diary” of other media company divestitures.

Nearly 30 years ago, in the first edition of my book Who Owns the Media?, I compiled a table of the dominant media companies, based on the breadth of their media holdings. At the time, the company with the largest holdings across the media industry was Times Mirror Co, best know as publisher of The Los Angeles Times. Since then it sold off its magazines (e.g., Popular Science, Outdoor Life) and its book publishing (e.g., Mathew Bender, New American Library) and eventually sold what remained to the Tribune Co., which itself is in the process of selling itself to a private investor and an employee investment fund.

Another on the other short list of companies that had major positions in more than one medium was the old CBS, which back in the early 1980s, besides its television stations and networks, owned a stable of magazines that included Woman’s Day and Road & Track, and book publisher imprints including Holt Rinehart & Winston. All of that was sold off in pieces before CBS, as part of a revised strategy to focus on its “core” television business, undid the “media conglomerate” strategy that was in vogue in the 1970s and sold itself to Viacom.

On the other hand, Microsoft’s CEO Steve Ballmer said Tuesday that he expects 25% of the company’s revenue within 10 years to be generated by advertising-supported products and services. Sounds very media-ish.

So, yes, the media industry will look different in 20 years, just as it has evolved over the past 20 or 30 years. But the key world is “evolve.” This is not seismic. The digital revolution may be an appropriate use of “revolution” in the context of the centuries dominated by print. But we’ve seen digital coming for at least 25 years. The mass market Internet goes back 13 years. And newspapers and broadcast stations are still profitable. There has been and still is time to adjust.

Lots of long term rumbling, but no earthquakes, Andy.

"What will the future of the newspapers be?"

Meanwhile, someone on the Online News publishing discussion lists notes:

The question is often asked: 'What will be the future of the newspapers? But, it seems that before we ask that question, we'll have to first figure out what, if anything, constitutes the absolute core minimum of what it takes to be called a 'newspaper.'

What iss troubling about those questions is these people are still trying to define their news organizations according to products that are becoming obsolete. The true question is 'What will news organizations do in the future?'

No news organization should be a 'newspaper"' in the future. Nor a 'news network'. Nor a 'news radio station'. Nor a 'TV station news department'. It's time that news organizations stopped defining themselves according to news formats that are becoming obsolete.

Yes, I realize that newspapers are now asking themselves 'What will newspapers do in the future?' That news radio stations are now asking themselves 'What will news radio stations do in the future?' That TV station news departments are now asking themselves 'What will television stations news departments do in the future?' And that TV news networks now are asking themselves 'What will television news networks do in the future?'

However, the basic fact is that each is a news organization. The problem is they're internally organized to produce products that are becoming obsolete.

Obsolete? Yes, the likilihood is that consumers in the future won't want to receive a daily news report printed on wood pulp or even the online analogue of wood pulp (despite some video and animation added). Nor will consumers want to receive audio or video sent to them in a schedule or program line-up that they can't control or re-arrange. The era of the 'newspaper' in the United States, Canada, and many other countries, is over. And the simultaneous era of tradition 'broadcasting' will likewise be over once broadband becomes part of the tuning mechanism of the average consumer's television.

Note that I didn't say that journalism is ending. News organizations and the service of journalism that they produce will still be wanted and needed after the obsolete products known as newspapers, news networks, news radio, and news programs are long gone. Each news organization will be producing services that utilize all those traditional forms (i.e., text, photography, graphics, audio, video, or animation) plus new forms have yet to discover. No news organizations will any longer produce just one, two, or three of those forms (such as just text and still photos or just audio and video) anymore.

People refer to these new journalistic services as 'multimedia' or 'convergence.' Well, the trick to 'convergence' isn't necessarily to produce 'multimedia.' It is for each news organization to learn which of its traditional practices (such as its journalistic focus, staffing, assignments, workflow, business practices, business models, etc.) to continue and which (such as printing news on wood pulp or transmitting news only at a set schedule) to discard, plus what entirely new practices to adopt. 'Convergence' is as much a choice of practices as it is producing 'multimedia.'

News organization that print news on wood pulp must stop defining themselves as 'newspapers' because that traditional definition intrinsically limits what they should do. Likewise, news organization that have always transmitted audio news clips on set schedules must stop defining themselves as 'news radio.' Etcetera.

The true question is 'What will news organizations do in the future?' Not what will 'newspapers' do?

For today, I want to highlight the data and analysis published last week by the media-centric private equity firm, Veronis, Suhlis & Stevenson (VSS) in its latest Communications Industry Forecast, covering through 2011. This has nuggets which, if accurate (this is a forecast) would bring to higher resolution the winners and losers in the media arena. For example, total spending on all communications grew substantially faster than GDP between 2001 and 2006. Furthermore, VSS predicts that communications industry spending will continue to grow faster than the overall economy through 2011, making it the third growing sector of the economy.

That’s some good news. On the other hand, the report finds that, for the first time since 1997, consumers spent less time with media in total last year than in the previous year. VSS believes this decrease, though small in percentage terms, is due to changing consumer behaviors and digital media efficiencies. “The drop in consumer media usage was driven by the continued migration of consumers to digital alternatives for news, information and entertainment, which require less time investment than their traditional media counterparts.” It continues: “Consumers typically watch broadcast or cable television at least 30 minutes per session while they spend as little as five to seven minutes viewing consumer-generated video clips online.”

VSS does not see this decrease as part of a long term trend, expecting consumer media usage to stabilize in 2007 and increase slightly through 2011. However, this would be driven by time spent with out-of-home media and videogames as the only major segments to achieve accelerating growth in this timeframe. Overall consumer time spent with media is forecast to increase at a compound rate of 0.5% from 2006 to 2011, down substantially to the 0.8% in the previous five-year period.

The real headline, however, is this prognostication: “In what would be a watershed moment in communications history, VSS predicts that Internet advertising – including pure-play websites and digital extensions of traditional media – will replace newspapers as the largest ad medium in 2011.”

I assume they mean that advertising in printed newspapers will be supplanted by advertising online—which includes the advertising that newspaper publishers generate from their online sites. Still it would be another stake in the heart of what once the biggest rooster in the barnyard.

But here’s another bombshell: “In addition to shifting their attention to alternative media, consumers are also migrating away from advertising-supported media, such as broadcast TV and newspapers, to consumer-supported platforms, such as cable TV and videogames.” Time spent with consumer-supported media grew at a compound rate of 19.8% from 2001 to 2006, while time spent with ad-supported media declined 6.3% in the period. This is not a measure of revenue but of consumer time spent. But with all the buzz about everyone moving to totally ad supported models (see Rebuilding Media’s latest foray into this space), this finding more than suggests that consumers are willing to part with their discretionary income for the right content or platform.

Another data point is found in a piece by Bobby White in The Wall Street Journal (sub. required). "Across the cable TV industry," writes White, "… independent channels are also turning away from TV to the Internet." Black Family History, The Lime Channel, The Employment and Career Channel, Horror Channel and HorseTV are among those that pulled the plug on their cable affiliation in favor a going Internet only.

“The shift illustrates how the Internet is offering a second chance to certain segments of old media. Web-based TV is now becoming a more viable business route, and Internet video is exploding. Running an online-only video channel, which doesn't require expensive cameras and broadcasting gear, is cheaper than operating a cable TV channel. While starting a new cable channel today takes an initial investment of $100 million to $200 million, a broadband channel needs just $5 million to $10 million to get going, says Boston-based research firm Broadband Directions.”

It’s a constant challenge when in the midst of change to separate trends from simple data points. One needs a series of data points over time that show direction. The Journal article may well be a data point that fits into the trends the VSS study provides. It seems though that enough data points are aggregating to confirm some direction with far reaching strategic implications for and broad array of players in the media industry.

In the column, Fine ponders which major American newspaper will be the first to stop publishing a print edition and publish online only. He speculates that it will be the San Francisco Chronicle, which has reportedly lost $330 million this decade, approximately $1 million per week. Fine wonders if how the Chronicle should consider stopping its presses and start delivering news only online.

On the surface, that sounds like a good idea. The Chronicle's print edition is losing money. It has a large potential online-only audience in San Francisco. And if the Chronicle stops using its presses, it will no longer have to bear the costs of purchasing, printing, and distributing paper edition, costs that probably total 50 to 60 percent of the Chronicle's expenses.

But before roaring off with this idea, check under its hood to make sure it has an engine. I don't know what percentage of the Chronicle's revenues its website produces, but my guess is 5 to 10 percent. The printed product generates the rest. So, if the Chronicle were to stop printing paper, it would reduce its expenses to only 40 to 50 percent of their prior level, but the will have also removed 90 to 95 percent of its em>Chronicle's revenues. So, it's rather obvious that the Chronicle would be in a much, much worse predicament than it is now if it were to stop its presses permanently and publish online only. A not-so-fine idea.

But what really troubles me about Fine's speculation—and for that matter most newspapers' attempts to shovel their printed content onto their websites— are two two unconscious and linked presumptions that I think underlie such ideas: (1) That there is nothing inherently wrong with the Chronicle's product (i.e., its package of journalism and advertisements) except (2) that it should be delivered online rather than on paper because more and more people are getting their information online.

A lot of publishers suffer from these presumptions. They see less and less people reading printed publications, more and more of those people reading things online, and believe that all they need to do is shovel their printed editions over to online (and add video and audio) to reverse their newspapers' declines in readership.

These presumptions ignore the fact that newspaper readerships have been declining for more than 30 years and that approximately half of those declines occured before the Internet was opened to the public or the public had any online access. Shouldn't that give publishers a hint that the major cause of their readerships' declines isn't the Internet or their content not being online?

And is adding video and audio to that content (so-called 'multimedia') going to reverse those declines? Consider that television station's news viewerships have been declining for more than 20 years and that radio station's news listenerships have been declining for even longer. Do you think that if radio or television stations add newspaper-like texts to their own websites that this will reverse the declines in their viewerships or listenerships? So, why do publishers think that newspapers adding video and audio to their own texts online will reverse newspapers' declines in readerships? Adding together two or more declining media do not an ascending new-media make.

The real problem, Mr. Newspaperman, isn't that your content isn't online or isn't online with multimedia. It's your content. Specifically, it's what you report, which stories you publish, and how you publish them to people, who, by the way, have very different individual interests. The problem is the content you're giving them, stupid; not the platform its on. But I digress.

Back to Fine's column. If the San Francisco Chronicle, despite losing money, cannot afford to stop its presses and go online only, what it is likely to do?. I think that daily newspaper presses will be outsourced before being stopped.

I think the Chronicle will try to do what another troubled newspaper is considering. Boston Herald owner and Publisher Patrick Purcell has been talking about outsourcing his newspaper's printing. Dow Jones & Company has a printing plant with spare capacity 80 miles outside of Boston, a plant that prints the regional edition of The Wall Street Journal. This plant in.Chicopee, Massachusetts, is far more efficient than the Herald's antiquated presses. Purcell is calculating whether eliminating his own presses, pressmen, ink, and paper costs would save him money against whatever markup on those costs that Dow Jones would charge him.

Two footnotes:

First, we frequently see much larger dollar amounts printed in the business sections of newspapers ('Murdoch Buys Dow Jones for $5 billion', etc.), making us somewhat inurred to smaller financial figures such as $330 million or $1 million per week. However, the San Francisco Chronicle's latest weekday circulation figure is 386,564, so if that newspaper has lost $330 million during the past six years, it's lost approximately $853.67 per reader during that time or $142.28 per reader per year! Now does its amount of loss impress you? It does me. The Chronicle would lose less money if it just bought each reader a fine meal each year at San Francisco's best restaurant instead of delivering a newspaper each day.

Second, earlier this week I posted on my own company's blog some reasons why I've not been blogging here or there lately. I apologize for my absence.

[Update: when I wrote this post a few days ago, I didn't (and I suspect Fine didn't either) that the Chronicle has already signed an agreement to outsource its production to a third-party printer. A tip of my hat to Alan Mutter's blog. The outsourcing deal will cost the jobs of 230 unionized press operators when the new plant opens in 2009. When this outsourcing contract was signed, I wonder how large a newspaper the Chronicle's executives thought they'd be producing in 2009?]

Although talk about disintermediation has subsided and the predictions of some self proclaimed visionaries have not been fulfilled, the reality is that this phenomenon has in fact been operating and is picking up steam.

It is most clear in many financial transactions. Pre Internet I recall paying about $150 on average to buy or sell a stock. I’d have to call a broker, who would call me back later with the results of the order. And he or she got a hefty commission. Today, services such as eTrade, Fidelity and many others facilitate electronic orders that pass through them to the exchanges. Commissions have fallen to as low as $5 a trade.

eBay is a disintermediation vehicle for many types of transaction. About eight years ago, cleaning out the basement of the house where I was raised, I came across a stash of Playboy magazines dating from the early 1960s and Life magazines from the same era. My first reaction was to check on their value with some used magazine and book stores around. They, of course, would have bought them below the market rate so they could retail them for a profit. But I stumbled across this new eBay thing, listed them and sold them myself at “retail,” bypassing the intermediary. Moreover, I was able to reach a national (at the time) audience, while the local retailer had to base its price on a smaller, local market.

With its original direct to consumer business model, Dell disintermediated computer retailers. Paradoxically, HP has helped rejuvenate that channel and Dell has just this week acknowledged that it will sell through retailers. As I keep reminding my marketing students, the word “some” is a big word. Some people may like going direct, but some people still like to call a broker, go to Blockbuster, buy from Wal-Mart. For now, disintermediation is not an absolute—it’s an alternative.

The process continues. Netflix started the disintermediation of video rental stores—and will itself be bypassed by downloaded videos unless it is successful in becoming “one of them.” Much software is downloaded, not packaged, hence stores like Egghead and CompUSA have died or had to retrench.

Which bring us to the media world. The first high profile threat was Napster, which was the ultimate in disintermediation by allowing individuals to trade music with each other. After some fumbling, the recorded music industry has reached a degree of accommodation with the technology through iTunes and its competitors. Bye-bye Virgin Music Superstores, Tower Records and a host of others.

Newspapers have seen a portion of their high margin classified ads disintermediated by Craigslist and Monster.com. Why pay those high per word rates when you can reach more people, in a searchable format, than in the shrinking newspaper. Advertisers have learned about disintermediation as well. While banner ads have a third party middleman, Google’s AdSense or AdWords is far more efficient: pay only when used.

The legacy television networks are scrambling to prevent disintermediation. Postings of network shows on YouTube and the like were a threat to the networks and their local affiliates and had to be stopped. To one degree or another ABC, Fox NBC and CBS have elected to disintermediate their own local affiliates by allowing viewers to access many network shows online directly from their own Web site. Meanwhile, NBC has engaged in deals to distrubute its programming via numerous Web sites, as has CBS.

Disintermediation is not necessarily a losing proposition for the media industry. It’s just a matter of learning how to use it to its advantage. For example, last week the season finale of the popular TV series Grey’s Anatomy featured a soundtrack
by singer Ingrid Michaelson. Never heard of her? Not surprising, as she does not have a recording contract. She was found on MySpace by a firm that specializes in locating undiscovered talent (of which there is much) and using their works on TV shows and commercials for far less than it cost to license the music of established artists from a record label.

Because she does not have a record company contract, when one of her songs gets downloaded from iTunes, she pockets $.63 of the $.99 charge, compared to the 10 to 15 cents a major label artist gets sent. That amounts to $37,800 from the 60,000 times her songs have been downloaded. Ms. Michaelson has a gig she would likely have never had before MySpace, income in excess of what she would likely have earned from her music before iTunes. And ABC bolsters its profitability by a few dollars.

That’s the kind of creativity the newspaper industry needs as well. Disintermediation will ebb and flow. But the net will be more flow than ebb.

Then I found out at Streaming Media East that The FeedRoom CEO Bart Feder has been going around saying the same thing. And he tells me Streaming Media honcho Dan Rayburn's been saying it, too. FeedRoom handles video in one form or another for all the companies mentioned above, and a bevy of others. FeedRoom's revenues from Enterprise clients has gone up 80% this year, compared to last, while their business from media clients is essentially flat, Feder said. And those companies are embracing many of the practices that some traditional media companies have been slow to adopt: encouraging consumer-generated content, trying viral video, reaching out directly to people over the heads of any mediators, creating communities of excited brand-loyal consumers, and using customers' input as marketing intelligence.

Feder also, in an interview, talked about "direct to constituent" video, meaning that companies reach out to their dealer networks, managers, consumers, the press, and so on, and target each of them separately, having either open or closed networks, with various levels of control. When someone at a panel Feder was on said companies were having trouble creating enough content, Feder suggested that every company should give its 250 smartest and most loyal employees video cameras, and get them each to produce one video. Voila, enough content to run one video a day for a year of business days. Cheap, too. (And, of course, more for The FeedRoom to run through its system, and charge for.)

Jeff Jarvis, who moderated a panel today, likes that there's no arguing at this conference about whether the way things are is right or wrong, that the way media is now is treated as a given. So does Steve Safran of LostRemote. (I was a fly on the wall -- well, a guy standing in the aisle - -when Safran was speaking to Jarvis.) Jarvis argued earlier th at media companies should encourage consumers to distribute their media, stop worrying about how to control it and instead start worrying how to get it into consumers' eyes and ears.

He pointed out in a conversation at the conference today that perhaps the reason corporate America is so happy to use media in all its flexible ways is that for them, it's a cost. Or, as I would put it, it's not what they make – it's just what they do, that they're happy to give away, or take a short-term "loss" on producing the media to get people to pay for whatever it is that they really do. And the better the cost-effectiveness, the better for them. They're certainly not worried about making people pay for subscriptions, or making ad revenue on whatever media they produce. And in that they have a luxury that the traditional media companies don't.

Am blogging more on the show over at MediaFlect.com. My personal media blog.

XM and Sirius
March 1, 2007; Page B7

The thought that a merger between XM and Sirius could create a monopoly is absurd ("Making Radio Waves," Review & Outlook, Feb. 21). They would offer only one of many content options for consumers. It's a moot point anyway. By the time the merger is completed, satellite radio will have won the battle with radio but lost the war. When I subscribed to XM three years ago, I immediately quit listening to traditional radio. Satellite radio is simply a superior choice. However, now that my 927 favorite songs reside on my iPod, I have little need for radio of any kind. Why scan the dial in hopes of finding a song that I like when my iPod contains only songs that I like?

Scott Stolz
Tarpon Springs, Fla.

Although there were profound implications for business strategy, we had our greatest impact in the telecoms sector, where the regulatory ramifications of the change from analog to digital were more immediate and the stakes higher. (Anyone here recall Computer Inquiry II? III?) The just mentioned e-Yellow Pages proved just how high the stakes were for classified. Can you say Monster? Craig’s List?

For the media folks, they were probably right in largely ignoring our message, at least in the early 1980s. A few newspaper companies, such as Knight Ridder with Viewtron, made a stab at exploring digital products. But all the technology and economic pieces were not yet in place. Timing may not be everything, but it is important.

Skipping ahead 20 years in one swoop and we can now see the shape of real convergence. Web sites of enterprises that heretofore have been called newspaper publishers are offering the same mix of text, video and audio as are being offered by sites from television stations, cable networks and, yes, radio broadcasters.

Look at USAToday and CNN. The Virginia-Pilot, a newspaper based in Norfolk, VA, has incorporated its HamptonRoads.TV into its site, with its own production capabilities, not just replaying clips from AP video feeds.

And now we even have radio, that last bastion of single sensory output, ramping up for video on its Web sites. “The nation’s commercial radio stations have seen the future, and it is in, of all things, video,” observed an article in yesterday’s New York Times.

“Audiences in Los Angeles, for example, will be able to tune in today to Power 106 for an annual Valentine’s Day event called “Trash Your Ex,” in which jilted listeners are invited to put mementos from past loves in a giant wood chipper — and to let it whir while the disc jockey, Big Boy, urges them on. And for the first time, audiences everywhere will be able to watch streamed video of the event, to be held in a parking lot in Pasadena, on the Web site power106.com.”

Radio, as with other legacy media formats, has had to deal with an erosion of its audience. Of course. The time you have spent reading this entry—multiplied by the millions of people clicking on millions of other Web sites and podcasts—takes time that otherwise may have been spent using traditional media.

To be sure, radio has perhaps suffered less than newspapers and television broadcasting because radio has long been a second medium, used in the background while we do other things. Still, with mp3 players and the like offering some of the same benefits as radio, the amount of time spent with radio has fallen by 14% over the past 10 years (see accompanying chart).

So here is where convergence really starts to get serious: With digital TV sets proliferating, more of what is available on that screen will come via the internet (or perhaps more generically over some TCP/IP-based transmission).Wireless devices, whether 3G or Wi-Fi or Wi-Max—the technologies are not important but the certainty of widely available wireless broadband is—we will increasingly have news and information as well an entertainment and transaction provided in a highly competitive landscape.

The winners and losers are far from being determined. But what is inevitable will be, first, greater fragmentation of the audience over a wide variety of players aiming for sometimes mass and sometimes niche markets. We will see advertisers faced with a greater dispersion of their budgets. And eventually we will have to see a new wave of consolidation to help create some economic rationalization of this scenario. It will continue to put stresses on the regulatory regime, which has been slow to respond to the implications of the changing technologies and media strategies.

I hope to be around to have another retrospective look in 20 years.

Richard Stengel, the Managing Editor of Time, wrote by way of explanation:

"The other day I listened to a reader named Tom, age 59, make a pitch for the American Voter as Time's Person of the Year. Tom wasn't sitting in my office but was home in Stamford, Conn., where he recorded his video and uploaded it to YouTube. In fact, Tom was answering my own video, which I'd posted on YouTube a couple of weeks earlier, asking for people to submit nominations for Person of the Year. Within a few days, it had tens of thousands of page views and dozens of video submissions and comments. The people who sent in nominations were from Australia and Paris and Duluth, and their suggestions included Sacha Baron Cohen, Donald Rumsfeld, Al Gore and many, many votes for the YouTube guys.

"This response was the living example of the idea of our 2006 Person of the Year: that individuals are changing the nature of the information age, that the creators and consumers of user-generated content are transforming art and politics and commerce, that they are the engaged citizens of a new digital democracy." (my emphasis here)

Heady stuff for those of us who blog, who read blogs, who have recognized that the significance of YouTube (perhaps about to become the generic term for any user-content video sites, the way TiVo is often used to mean any sort of personal video recorder) just more than just silly pet tricks. Another cause for urgency for change for traditional media.

° What will be the future role of news agents and newsstands? Although they don't play a sizeable role in distribution of American, Canadian, German, and Japanese newspaper (only about seven percent of circulation in those countries), local newsstands and news agent play a most significant role in most other major countries' newspaper ecology. Plus they play significant roles in magazine distribution in every country.

In most of the world's countries, newspapers and their hired wholesalers distributed daily copies to the news agents and newsstands, who then distribute them to you. when you subscribe to home delivery of a daily newspaper, you make your subscription with your neighborhood newsstand or news agent (not directly with the newspaper as is the situation here in the U.S.) The news agents or newsstand has the relationships with the subscribers; the newspapers themselves don't know who subscribes, just that the wholesalers reports how many copies were sold to the retail newsstand and news agents.

Some digerati simply expect newsstands and news agents to go out of business if newspapers and magazines someday switch entirely to online publication. But that would create a major disruption in countries such as the United Kingdom, where 47 percent of the daily newspapers' gross revenues came from newsstands and news agents. Must the newspapers forge direct subscription relationships with consumers? Will physical newsstands and kiosks cease to exist? (Do remember that browsing a physical newsstands if much easily than one online.) Or will they be replaced by physical versions of some sort of electronic kiosk?

° More immediately on that topic, we've today been helping a U.S. investment client ascertain what the U.K. Office of Fair Trade's provisional decision-making about news agent competition means for major newspaper and magazine distribution wholesalers such as W.H.Smith, Menzies, or Dawson News.

In the U.K. wholesalers grant news agents and newsstands exclusive rights to distribute certain titles in specific geographical areas (a rural town, a one block radius in London, etc.). Since 2004, the OFT has been investigating whether such exclusivity is anti-competitive and disserves consumers. It last year issued a provisional finding that these exclusivities weren't anti-competitive with newspapers but were with magazines. Several months ago, it however changed its findings to say the exclusivities are anti-competitive for newspapers, too. It's still investigating, and will issue new findings in the spring.

° Would the regional press be better served using virtual newsrooms? We know several reporters at various regional newspapers who've gotten into trouble by not being at their newsroom desks five days and 40-hours per week. They've defended themselves by pointing out that news doesn't occur in newsrooms. That's all too true. The successful newsroom was an empty one 25 years ago because all its reporters who expending shoe leather, but too many corporations now consider an emply desk or cubicle in a newsroom to mean that the reporter isn't doing her job.

Today's technologies allow reporters to work from anywhere. So, why should they be physically anchored to their newsroom for most of the work day? Newsrooms are a great place for reporters and editors to have story conferences, but with instant messaging, SMS, person-to-person webcasting and voicecasting, mobile devices, etc., the reporter should be able to work from his car, home, local coffee shop, or the news scene. Why chain them to an Atex or SII mainframe six or eight hours each day?

Many journalism schools teach how to report using multimedia and new technologies, but none teach editors how to use those technologies to replace the newsroom itself. It's time that was done.

° Open archives. How much are newspapers really making by charging for online access to stories that might be more than a week old? Do they earn more that way than the online advertising revenues from opening up their entire archives to consumers and search engines? Are publishers being foolishly doctrinaire by charging for archives?

° American business publications in print took a revenue bath last month. The Society of American Business Editors and Writers' Talking Biz News reports Magazine Publishers Association data showing large drops in advertising pages and revenues.

Though Barron's, The Economist and Inc magazines showed increases in ad revenue,
Forbes 4.2 percent, Smart Money 5.4 percent, Money 6.6 percent, em>Business 2.0 fell 7.4, BusinessWeek 8.9 percent, Kiplinger 19 percent, and Fortune 28.1 percent (after that magazine had already declined 12 percent in August). It's odd that business magazines would have less advertising once the summer vacation season ended.

° The Financial Times and the weekly New York Sun published 'think' articles about the future of the American newspaper industry, and both make the same point about profit margin versus product development.

The FT story contrasts the Los Angeles Times and the St. Petersburg Times. The former is owned by the publicly-traded Tribune Company and the latter owned by a not-for-profit trust. The FT's reporter suggests that Wall Street demanding too much profit ("trying to push profit margins beyond 20 per cent") comes at the expense of keeping newspapers viable.

The Sun's story looks at The Los Angeles Times and the now defunct Knight Ridder Inc., and is a bit more blunt:

It seems its [Knight Ridder] 32 daily newspapers had been able to record "only" a 20% return on investment in recent years.

Cut back on the quality of a newspaper in order to show an impressive short-term return for the market's sake, and the slide toward disaster has begun. Readers will notice and begin drifting away, and advertisers will soon follow. It won't be long before the vultures are circling.

° Last but not least, the online news pioneer Milverton Wallace, who'd organized the European NetMedia conference during the new-media industry's first decade, looks at the long-term changes underway, in an essay he's written for the Club of Amsterdam.

• Denial and isolation - The "This won't happen to me! I don't really have to worry" stage.
• Anger - The "Why me?" How dare you do this to me!" stage.
• Bargaining - The "Maybe I can evade this fate by co-opting or sidestepping it " stage.
• Depression - The "It's really happening and I can't stop it" stage.
• Acceptance - The "Let it happen; I don't want to struggle anymore" stage.

The news industry is dying. In which of Kübleresque stages is this industry. There have been some major changes this year.

But first, do I exaggerate the patient's condition? I don't think so. Nor do others. Furthermore, when I state that the news industry is dying, no, I don't want it to die. I am just stating the condition of the industry. There will always be a need for journalism, but the question is whether there will be an industry in which journalists can work.

Let's examine the patient. Its vital signs have been fading for decades. Circulations and readership of newspapers and news magazines has been evaporating. Listenership and viewership of broadcast news programs have likewise been are dissipating. These declines had been slow, about half a percent annually, but in the past few years have accelerated to a few percentages annually. The industry's heart still beats, and some industry leaders still to profess its vigor, but now even its core vital signs — its revenues (adjusted for inflation) and its profit margins — the pulse and blood pressure of the industry, have begun to wane.

Many industry executives claim that a transplant into the new-media will save the patient. However, an examination of data shows that their online editions are read by fewer people — and less often and less frequently — than the dying print or broadcast editions. Moreover, ten years into these efforts, the online editions are earning only one-twentieth to one-hundredth per user what the dying print edition earns per reader.

The news industry is in critical condition everywhere except countries that only now are forming their economic middle classes such as China and India; places only now rising to the levels North America and Western Europe reached 90 years ago (during the heyday of newspapers). The patient is dying everywhere else. The industry needs a radical course correction.

The eldest form of mass media will likely be the first to kick the bucket. 'Who Killed the Newspaper?' asked the cover of The Economist weekly news magazine on August 24th. , In a post-mortem a priori to newspapers' death, the magazine (which in a quaint British tradition styles itself a newspaper) The Economist cover story began with an editorial stating:

Newspapers have not yet started to shut down in large numbers, but it is only a matter of time. Over the next few decades half the rich world's general papers may fold.

And later in a 2,900-word special report about the newspaper industry, it noted:

What in the world does this have to do with Rebuilding Media? Internet video is breaking out big time. After years of Internet video being a postage-stamp sized novelty, it is “suddenly” mainstream. I vividly recall showing a streaming video with RealPlayer (there was no Windows Media Player then) to my inaugural cybermedia class at Temple University in 1996. One student’s hand shot up with a question: “That’s cool. But no one is going to watch videos that are so jerky [it was a dial-up line] and so small.” “Absolutely true,” I responded. “But the importance of this is not where it is today but where we can expect it to be in 10 years."

So here we are 10 years later. Most households that are online use broadband connections. Wireless networks are in place with broadband capability. And cell phones that include the capability to receive video are common. This year may be the year that online video is recognized as a real business, as the established media companies throw their figurative hats in the ring to join the start-ups and innovators.

What’s some of the evidence?

First the new-guy players:

    -- YouTube, one of the latest “new kids, rocketed from 3 million video streams per day to 25 million from Jan. 1 to Feb 28.

    -- Apple’s iTunes is reporting downloads at the rate of about 3 million per month. Some are free, some are paid for.

   -- NarrowStep, a company in the U.K. that provides technology and support for specialized Webcasts, says it is adding two to three new channels per week. Unlike the mostly amateur clips uploaded to YouTube and similar, NarrowStep  is being used to create “slivercast” channels that are intended to be businesses. One client, Sail.tv, says it attracted 70,000 viewers in its first month. (payment required for access)

   -- The Roo Group hosts or consults for 100 Internetcast TV sites which show 40 million videos a month. One client is YuksTV, which claims as many as many as 200,000 visitors in a month.

    -- One of the “old-timers” among the new players is Atomfilms, a home for budding film-makers.

   -- Then there is Google, big and wealthy but still a new player in video. Google provides access to everything from archived NBAAll-Star games for $3.95 to “Twilight Zone” classics for $1.99 to many free – and often worth as much— classic clips such as the 49 second "Benito scooping up after his dog.”

   -- Last year the site of Major League Baseball, MLB.com, generated $68 million in subscriptions from viewers of 2,400 baseball games.

The traditional media companies have gotten the message:

   -- The uber-Establishment Time-Warner’s CNN has been flogging Pipeline, a service that combines real time CNN feed with access to its video archive. It has the confidence to seek $25 annually—less than a subscription to Time.

   -- CBS offered the NCAA’s March Madness basketball games on an advertiser-supported basis and had 5 million takers. Much of the pay-for material on Google Video is both current (e.g., “Survivor”) and historical (e.g., “Brady Bunch”) from CBS.

   -- The prospects of a new revenue stream have driven Disney, which owns ABC, to agree with NBC Universal to provide “Scrubs”, which the former produces and the latter broadcasts, for sale on Apples iTunes. The significance of this is that it is the first time rival broadcasters have “joined together in a digital download deal.”

To be sure, these are just the tip of the iceberg (sometimes a cliché says it best). And naturally there are skeptics, though often one can see where their bread is buttered to understand:“‘I've never been a believer that we should create channels for all these niches like beach volleyball,’ said John Skipper, a senior vice president of ESPN. ‘They just don't pencil out. Because if you have 12,000 people, you can't afford to do it. And if you can't afford to do it, you can't make any money on it.’" But that’s like the publisher of People claiming that you can’t afford to publish a newsletter for 12,000 subscribers. No, not if you use the underlying economics of People.

The folks at Rocketboom.com, which claims “more daily subscribers for original syndicated multimedia content than nearly any other site, including Podcasts,” state it succinctly:

We differ from a regular TV program in many important ways. Instead of costing millions of dollars to produce, Rocketboom is created with a consumer-level video camera, a laptop, two lights and a map with no additional overhead or costs. Also, Rocketboom is distributed online, all around the world and on demand, and thus has a much larger potential audience than any TV broadcast. However, we spend $0 on promotion, relying entirely on word-of-mouth, and close to $0 on distribution because bandwidth costs and space are so inexpensive.

(Hmm, is this last phrase an argument for the carriers in the so-called “net neutrality” debate?)

The role and the business models of these and the many other players are all over the place. None of the new guys bulleted above actually create any content, while all of the old timers do. But the new players, including Google, YouTube and iTunes are providing the facility for all sorts of amateurs, professionals and amateurs-hoping -to-be- recognized- as-professionals to reach an audience.

“Slivercasting” is any way of describing the “long tail” concept introduced in a Wired article by that name in 2004: It refers to the large number of specialized offerings each of which appeals to a small number of people, but aggregate to a large market on the Internet. If each content provider was plotted on a graph along with best sellers, these specialized products trail off like a long tail that never reaches zero, as in the accompanying figure.

Of course, not all these ventures will survive economically, although as we have seen with the blogging phenomenon, in the long tail there inevitably will be some high quality content provided by individuals or entities motivated by other than direct revenue. Still, the implications for the effect of all this on our cumulative time available to spend on individual media programs, products and sites, as well the impact on the slicing of the advertising pie and consumer media budgets is likely to continue roiling and destabilizing the traditional media landscape.

There may be sudden phenomena in nature. But rarely in business. You just need to pay attention.

Convergence has been a misunderstood concept in the information industries almost from the first time it was uttered. (I don’t know exactly who or when was first, but I was working with Anthony Oettinger in the late 1970s when I first heard about convergence from him at the Program on Information Resources Policy at Harvard. If Tony wasn’t the first, he was near the starting line).

From the beginning, media, telecommunications and computer companies, among others, misinterpreted the significance of what was converging. It was not fundamentally about industries converging—though that is one outcome. It is not about technologies converging, for that would be redundant. Convergence is about the blurring of the boundaries of content as all goes digital. That is, in the historical analog world, a printed page is created through a very different process than a video image: the mechanics of capturing, processing, storing and transmitting are easily defined and differentiated. The economics are different. The regulatory regime can be clearly defined.

But in the digital world, a bit is a bit. A string of zeros and one. Whether it may eventually be displayed as a text or audio or an image bit, it is captured, stored, processed and transmitted much the same way. At that point, it is simply (or maybe not so simply) a function of economics for how it gets to the end user and who provides it. Some examples?

An easy one is the newspaper: take all those bits created in the newsroom and from various outsourced vendors like the Associated Press and create a plate and put ink on it, print a paper and truck it to the buyers. Or take all those bits and impose some flavor of mark-up language on them and store them for access remotely. Oh yeah, this second option can make audio reports and video streams available within the text “pages."

A newer more complex example stems from something like Google’s announced acquisition of DMARC Broadcasting, an apparently Old World business that, ho-hum, places ads on radio stations. But if advertisers can create their own listings and bid for placement in text using Google’s service, why not do the same with digital files that happen to become audio instead of text and show up inserted into digitally controlled station stations instead of Web wages? Whoda thunk?

And now we have “television” programs stored on servers to be sold to folks who will carry them around on their portable iPods and the like. There were 8 million video downloads from Apple’s iTunes service in the first months, and that was tallied from a skimpy inventory of titles and before an estimated 14 million video iPods were opened from under the Christmas tree. You’ve got to extrapolate: what does this do to the broadcast network and affiliate model if consumers decide they like and are willing to pay for their digital video on demand? If consumers can download their re-reruns, where does this leave local broadcast stations that make big bucks from repurposed hit shows like “Friends” and “Law & Order?”  What could be the impact on the DVD distribution Channel, which after all still requires a manufacturing process and energy-intensive shipping?

Soon you may read about Yahoo or Goggle acquiring a firm called SpotRunner, which does for TV ads what DMarc does for radio. From the convenience of a Web browser, it allows a local pizza restaurant owner to order a generic pizza shop TV ad to be inserted on television sets only in its neighborhood during prime time. And at a cost that may not be much different from buying space in the local weekly newspaper.

And it’s doable because it’s all digital. That’s convergence.

It can’t be much fun these days for the top managers of the traditional media companies. On the one hand they must deal with the normal responsibilities of running a large organization. For the public companies there is the overhang of Sarbanes-Oxley as well. In the “old days”—let’s say before 2002 or so—there were the usual strategic decisions: where to reinvest profits, whether to buy, acquire, merge, or seek organic growth. It was always a challenge to get it right more than wrong. But top management got big bucks for trying and often received personal gratification from playing the game.

Today, on the other hand, if their heads are not swimming in the unknown-unknowns facing them they are either naïve or disconnected. 'Cause convergence is when you don’t know where the next bit is coming from.