What could the Globe fetch? Well, certainly nothing within a rifle shot of the $1.1 billion it paid 16 years ago. David Carr, himself of the Times, asked six experts who specialize in valuing media properties. You could get the short answer in his column.

But even more fascinating is the almost stream-of-conscious responses of the six that he posts verbatim on the Media Decoder blog at the Times site.

The values—all guesses of course-- range from $250 million to a negative $25 million. Yes—The Times Co. might need to offer a buyer (if it could be called that) cash to take off their books the stream of losses projected for the paper into the immediate future, the union contracts and the 400 guaranteed-for-life jobs.

Bottom line? The price of the newspaper company may be less than what it charges ($1.00) to buy a copy of the newspaper.

Who woulda thunk?

So I thought I’d call their—and your—attention to the lead editorial in today’s paper. Titled “Ink-Stained Politicians,” it is critical of congressional initiatives to “rescue” the newspaper industry. One of the leaders of this movement is my own senator, John Kerry. As are many of us, he is concerned about the future of the hometown Boston Globe. (The stakes may be particularly high, though, for the senator. In his re-election bid last year the Globe gushed: "The case for reelecting John Kerry would be strong under any circumstances . . . [but] the country needs his voice more than ever.")

So it was Sen. Kerry’s subcommittee that held a hearing on May 6 titled "The Future of Journalism." It was a morose affair, with publishers enumerating the fate of failing and fallen comrades. Then the senators turned to the culprits, Huffington Post and Google.

The hook for the hearings was what role Congress could conjure to help out what Kerry buys into as “the fourth branch of government.” One proposal, from Maryland Senator Benjamin Cardin, would allow newspapers to convert to nonprofit status (hmm-it seems like the point is that they are already nonprofits. What they should say is not-for-profits). Their operating revenues would be tax exempt. In return, they would be precluded from endorsing political candidates, though, as the Journal points out, that wouldn’t prevent them from taking sides more subtlety.

The other idea being floated was some sort of an antitrust exemption that, as described by Dallas Morning News publisher James Moroney, would allow the newspaper industry to conspire to find ways for making money from putting the work of its journalists online. Of course, I thought that was what the industry has been doing with such projects as Newspaper Next and The Newspaper Project. But I suppose a major league baseball-like exemption would allow publishers to band together for steps that would prevent the Huffington Posts and Googles from making money off their backs.

The Journal’s position is one that I have trumpeted, as have my colleagues here Dorian Benkoil and Vin Crosbie. That is to let the forces of technologies, consumer behavior and the marketplace play themselves out, at least for awhile longer, before panicking. I have argued (as have others) that there will be changes, for sure. But that there will also evolve multiple business models. There will be winners and losers. Services lost-- for example some local coverage if some cities or towns lose their daily printed papers—are highly likely to be regained as new players jump in to fill a vacuum.

We see hints of that with an array of Web sites that focus on local and even hyperlocal news. Some, like EveryBlock, for the moment are compendia of links to local government sites, some blogs and even local news from other sources. But that doesn't mean that is their end point. It is their opening gambit. Should they gain traction some will start adding original content (or they may find the to gain traction they will need original reporting). A few, such as Buffalo Rising and Patch, already do have reporters covering the local scene. Very few now. But given time, and a market, more later.

Dallas’s Moroney speaks for many in the legacy media who are urging Congress to legislate a "consent for content" requirement to get the Googles and Huffington Posts of the online world to pay "fair compensation" for content they pick up and then sell advertising on. The Journal comments “So, although most newspapers are giving away their content free online, the feds should guarantee them a stipend from anyone who gets someone to pay for it. There's a winning business model.”

In any event, it would seem to be a matter for negotiation rather than legislation.

The Journal continues: “The larger story here is that newspapers are enduring the familiar process of economic "creative destruction," in this case brought on by the Internet. Advertisers are fleeing to search engines, while barriers to entry in publishing have crashed. Despite the pain this causes to certain companies, this is not much different than any other industry buffeted by new technology or business strategies.”

Creative destruction is right. In the early 1990s, the 200 year old Encyclopaedia Britannica was a $650 million company. Five years later in was bringing in one third that. It’s business model based on a high priced part time sales force selling “guilt” as much as $2000 sets of books was undermined by Microsoft’s Encarta, given away for free on a CD with a new computer and based on an old Funk & Wagnall supermarket-distributed encyclopedia. The World Book suffered similarly. Both have had to retreat and reformulate to survive in the world of DVDs and online delivery. Where was Congress then?

The Journal’s editorial concludes with an argument almost stolen (dare I charge?) from a recent post of mine, save the last line:

“Some new business model will emerge for journalism, if not for all newspapers, and in the meantime the business of reporting the news isn't vanishing. It is taking new forms and adapting, with newspapers growing their audiences online even as the sources of their revenue shift. The industry is currently debating how to charge customers for content, and no doubt many experiments will be tried. No matter who emerges victorious, the journalism business will be stronger and more credible if it avoids the government's embrace.”

To its credit, the Obama Administration is keeping its distance. Press Secretary Robert Gibbs, responding to a question, commented that while it's sad for cities to lose their daily papers, any public assistance "might be a tricky area to get into.…I don't know what, in all honesty, government can do about it."

The sooner the suits in Washington and the executive suites in Dallas understand that, the better off it will be for the future of journalism.

If you’ve been on vacation in Bali and didn’t want to pay the $15 a day resort Internet fee, the shut down of the 45,000 circulation News will make this the first city to lose its newspaper. The plan, according to owner Advance Publications, is to completely shut down the operation, lay off all empoylees, then start fresh with two new companies that will need far fewer staff. One, a Web venture called AnnArbor.com, will have some original reporting but rely substantially on reader input and community forums. A second company is described as a printing company that will publish a twice weekly newspaper fo some sort. Advance is also cutting back its daily newspapers in Flint, Saginaw, and Bay City to a thrice weekly schedule.

Types of organizations eligible for non-profit status under IRS 501(c)

My take, I wrote Peter, is that I suspect new players will see it as an opportunity to pick up the slack. They will enter with a different expense base. Maybe no single one will totally replace today's version of the newspaper, but in aggregate they will cover whatever territory for which there is a demand, e.g., an entertainment paper-- probably ad supported. More local stuff online. More stuff you can view on iPhone-like devices or Kindle-like. We’re in a period of fits and starts, but if there is a market there will be big guys or entrepreneurs who will fill the gaps. At the premium end there is the example of the for-profit (they hope) GlobalPost.com. The low end may be the for-profit (they hope) citizen journalist new AnnArbor.com.

But what about the not-for-profit model, a proposal popularized by an op-ed piece in The New York Times last month? An academic study being prepared for publication in the Journal of Media Economics this summer (I’ll post more details in July) looks at the fortunes of nonprofits in the magazine business. It notes that “nonprofit” can take many forms, both legally and as operational models. Many not for profits rely heavily on advertising revenue, just as their for-profit cousins. The study observes that they can be just as susceptible to economic downturns as for profit publications.

Indeed, at a small conference I attended earlier this month, I pointedly asked Rick Edmonds of the Poynter Institute whether the general downward pressures facing the newspaper industry had affected the St. Petersburg Times. That paper is something of the poster child for the non-profit model. The paper is controlled by a foundation set up by the late Nelson Poynter. If the paper has a surplus – the nonprofit term for profit—it declares a dividend. This is turn is the primary source of support for the many good program of the Poynter Institute. Edmunds had to admit that the Times is indeed taking a hit from the same forces felt by all newspapers. It has made staff cuts in its newsroom to help keep up profit. Even so, dividends are down. The Poynter Institute has a comfortable cash reserve for now. But the larger point is that the Times as well as the Institute are not immune to the forces and trends in the industry or the economy.

Philanthropic organizations—even the wealthiest—cannot defy gravity. Harvard, the richest of universities, is having to make major cutback because its endowment—line the financial markets—shrunk 22% ($8 billion) between July and October 2008 alone.

So let’s suppose that a newspaper does indeed have a billion dollar endowment behind it. To generate income it must invest that money somewhere. The more aggressively it’s invested, the more money for the newsroom. If invested in Treasury notes, the endowment is safer—but it may be short changing its mission—essentially leaving money on the table that could be used for journalism. So it takes a moderate course of investment. And suppose that lets the endowment generate a 5% return devoted to newspaper operations. That would be $50 million initially, a nice subsidy to keep up salaries, news bureaus, staffing. But what happens, as it has this past year, if the invested funds lose 20% of their value—well under the markets overall financial loses in the past year, thanks to our hypothetical endowment's conservative portfolio.

Now, with an $800 million portfolio, if it still drew 5%, it could only add $40 million to its income. What’s a publisher to do? Just as advertising and circulation revenue are falling, so is the endowment income that could otherwise prop up its finances. True, it may be better off than its fully for- profit brethren. But it will inevitably need to make cuts: in personnel, in travel, in salaries—the same types of cuts we hear about weekly.

So not-for-profit is not the solution, endowments are not the solution. What is?

As I wrote to Peter, there is not a solution. We have left behind an either/or world for one of many options. There is opportunity for non-profits, such as the well established Pulitzer Center on Crisis Reporting or the new Pro Publica. The entrepreneurial for-profit sector is represented by a new model with GlobalPost. The Detroit newspapers are leading the way (or were pushed) for daily newspapers in hybrid online and print. Advance Publications is trying out another for profit model in Ann Arbor.

The result will be an evolving stew of print, online, mobile, video and audio news sources—international, national, local and hyperlocal. For profit and not for profit. From existing well known media companies, from nonmedia players, from entrepreneurial start-ups. Those that will be successful and those that will prove unsuccessful.

When I teach about marketing, the most important word I emphasize is the word “some.” I tell them not to think in terms of “People want more news” or “People are willing (or unwilling) to pay for…” Market segmentation is about “some." “Some people” want. “Some people” will pay. Some. The digital technologies here and still emerging make it far more efficient to provide news, entertainment, whatever, to each of us in more forms than at any time in history.

On the one hand, he does not see a scenario where most daily newspapers can survive by squeezing a few dollars a month in the form of micropayment from readers. Having tried the user-pays-something route at Slate, he holds this to be a nonstarter.

But he does see the survivors—several of the major news organizations, plus a few “local papers that execute their transfer to the Web so brilliantly that they will earn a national readership” or some “Web site [that] might mutate into a real Web newspaper” – as actually providing more choice for most readers than existed in the past when there were thousands of print newspapers. Furthermore, “Competition is growing as well among Web sites that think there is money to be made performing the local paper’s local functions. One or two of these will turn out to be right.”

The result, observes Kinsley, is that the “American newspaper industry will be more competitive than it was when there were hundreds.” This is a song a few of us have been singing for years. Soon we might have a chorus.

But much of that is abstract for those not actually losing jobs. So here’s a blast that brings the harsh reality home: Out of Town News, the venerable international news outlet in the epicenter of Harvard Square, in the epicenter of one of the more literate nooks of the world, is closing.

Out of Town News used to be a bustling hub, situated just outside Harvard Yard, across from the Harvard Coop bookstore, at the literal crossroads of Massachusetts Ave, JFK Street and Brattle Street. It was at the entrance (or exit) to the Red Line of the subway system.

As the Boston Globe reported:

John Kenneth Galbraith bought a copy of Le Monde there every day. Julia Child searched for obscure Italian and German cooking magazines, and Robert Frost once stopped by - it actually was a snowy evening - to get directions to a reading.

I used to stop by often. Outside there were stacks of the Globe and Herald, The New York Times, New York Post and the Daily News, Wall Street Journal and Washington Post. Inside were shelves laden with newspapers from Los Angeles, Philadelphia, Denver, Athens, Tel Aviv, London, Paris, Frankfurt, Tokyo: Indeed, 200 cities. Its name was truth in advertising. There were also hundreds of magazine titles, inside and outside. Customers could stand there and browse—or even read—without fear of being asked to move along.

But times change. I haven’t bought anything from Out of Town News in maybe 10 years. And apparently many others haven’t. Galbraith and Child are gone—replaced by a new generation that can read today’s Le Monde online—instead of paying $4 for a two day old issue.

Out of Town News was started by Sheldon Cohen in 1955. Previously he hawked newspapers with his father at the subway station. I met Cohen in the early 1980s. At the time I was working at a policy research program at Harvard, trying to scope out the implications of the inevitable transition to digital for the information industry. For a guy with ink under his nails, he was precociously curious not only about what threats that might have for the print business but what opportunities it might hold for him.

Though later I would see him now and then in the Square, I don’t know for sure where those few discussions lead him. But with great timing—maybe luck, maybe insight—he sold his business to Hudson News in 1994—yes, the year that the Internet went commercial and the Netscape browser was released. Hudson News is the purveyor of print media and over priced gum at newsstands in many airports. According to the Globe, Cohen, now 77, wept when he was told that the kiosk would be closed.

Institutions need to sunset when they have outlived their usefulness. There is probably a majority of two or three generations of Harvard students who have walked through Harvard Square for four years and never stopped into Out of Town News or even thought much about it. I wonder what will be the media institutions that disappear for them to shed a tear over when they look back.

[Added March 30, 2009: Reports of the death of Out-of-Town News were a bit premature. See this brief update.]

I do think the American public ultimately gets it right, but that often it’s frighteningly slow to do so (think how long it took for a majority to decide the Iraq war is horribly mismanaged). But I heard an intelligent skepticism from voters this time, examining arguments, asking whether the things being said in political ads were right, wondering whether one candidate’s policies are better for the economy. I also saw a lot of discussion and uptake throughout the Web shooting down personal attacks (William Ayers, Muslim terrorism, etc.). I note that the attempts to Swift Boat the now president elect didn't take hold.

It was a real, intelligent level of discourse that makes me happy to hear. Sure, the economy is in crisis, and the mainstream media is telling us what’s wrong in Iraq and elsewhere. But the more intricate unweaving is going on online, not only in blog discourse but in the ability, for example, of many people who wouldn’t have seen Palin or Biden or McCain or Obama speeches and interviews to see them, rewind, look at them at their leisure, to observe charts and graphs comparing policies and opinions, expert and not, to watch The Daily Show and Colbert Report at our leisure and decide what to or not to laugh about or examine further. To, crucially, watch the Katie Couric, Sarah Palin interview segments and compare them with the Tina Fey impressions. We didn’t have to rely on reports of what Palin said, but instead after hearing about it (perhaps in the mainstream) could go see it and decide for ourselves as never before.

Neil Postman might have thought we were prone to nothing but amusing ourselves to death with our media, but maybe the kind of media we have now (and that the new White House might help us employ) is helping us to think about whether we want change and what that change really means.

Of course, that doesn’t mean anyone’s making money on it, a point Burbank also raised.

Oddly, though, he said there has been “little impact” of citizen journalism, no breakout viral video clips from a cellphone, despite the many opportunities of Joe Biden speaking many places every day. (I might counter that there’s a lot of influential blog and Twitter discussion, and that any Swift Boating might occur online, especially via email. Video is not the only place to look for influence. Not to mention Obama’s in-game ads.)

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:

The Sporting News has a rich history, starting publication in 1886. I remember my father subscribing in the 1960s. It was thick with box scores and stats for every team and every major sport. In 1977, when the Times Mirror Co bought the publisher for all of $18 million it had a circulation of about 356,000. By the time it was sold to Vulcan Ventures in 2000 for $100 million it had a circulation of over 500,000, but it was being threatened by the successful launch of ESPN Magazine, which had 850,00 circulation within two years of its 1998 launch.

The Sporting News was sold again in 2006, to American City Business Journals. Today the circulation is about 700,000, but at an annual price of only $14.97 for a new subscription—compared to about $61.00 in constant dollars in 1978.

Like many print publications, The Sporting News has been substantially affected by online content. Daily sports news has been particularly hard hit. The Internet is made for getting late night scores, accessing the scads of stats that even casual fans crave, following teams in far-off cities—and all for little or, most often, no consumer cost.

Like most other print publications, it has had an online presence. The Sporting News Today is something else though. It is a magazine formatted for the screen. But it is not like a Web site. It involves no scrolling. It is pdf-like, though it is not read with Adobe Reader. It is not the print edition read online, as with Zinio. To me each screen looked like a double page spread in a magazine—but with no need for a gutter. I sort of felt that I had spread opened the tabloid-sized magazine. You will note that each of the “double pages” has one page number.

By offering to send subscribers an email each day, readers so do not have to bookmark anything. Just click the link.

The content is vintage Sporting News: Right now heavy on baseball, but lots on football—professional and college. There is hockey, basketball, NASCAR, tennis. Even Little League World Series coverage is promised. And, with a nod to WEB 2.0, it will offer readers the opportunity to provide their own input: “You’ll get a byline, file to an editor.” (Actually, a clever spin on “Letters to the Editor.”)

No surprise, the business model for the Sporting News Today is, for the moment at least, advertising, though it was rather light for a first edition. The inaugural issue had a full page from SpeedTV.com, three half page house ads for Sporting News affiliates and a full page promotion for the revamped Sporting News magazine, which will become a bi-weekly. (Management expects to lose 100,000 circulation from current levels to the free online publication).

I’m not a design expert—I’ll leave that to my colleagues at Innovation Media Consulting Group. But the Sporting News Today will feel comfortable to readers who like the look of print and are put off by clicking here and there for do their online reading. The layout feels modern but grounded in print. How that plays may be generational—or not.

As a final note, it may be worth pointing out that while traditional print publications are downsizing, The Sporting News Today is hiring. Indeed, I got turned on to its impending launch by Charles Apple, it’s new art director, who was hired away from the Virginia Pilot newspaper. (Has anyone seen numbers on how many print journalists have been hired by online-only ventures other than self-funded blogs?)

There has been speculation in recent years on when we will get the first announcement that a daily newspaper will shut down its presses completely and switch to digital-only. There are still some big hurdles, like portability. But should services such as Amazon’s Kindle take off, allowing readers to take their digital publications on the go, then the Sporting News Today model may have legs and encourage a general interest newspaper to give it a whirl.

But even if CN’s valuation is lower than FishbowlNY is saying (they should, I think, subtract the earn-out to get a base value for the deal, which may be lower than $30 million) there are many reasons for it be high. One, as HighBeam and Newser.com CEO Patrick Spain noted to me on the phone yesterday, is the value of the core ContentNext audience -- media executives, decision makers with budgetary control. It also has a budding and growing group of conferences for which attendees pay hundreds of dollars admission to see even higher-profile execs speak (Murdoch, Cavuto...), a strong list of email recipients, high-profile business and financial advertisers it has cultivated and maintained for years, successful media properties in the U.S., U.K. and India (India!), a growing research component, and ContentNext Dex, a listing of media-tech stocks it has created and which serves as a technological bit of value. The participation of high-profile investor Alan Patricof, former WSJ.com GM Nathan Richardson as CEO, and, of course, editorial co-chief Staci Kramer, as well as a cadre of strong, international journalists who’ve stuck with the company for years, and a growing and successful sales team all adds up to value as well. The Guardian group, I’d say, bought the management as much as the company’s book assets, and I’d wager that the earn-out is larger than mb’s. Add, too, the U.K.-based Guardian group’s professed desire to go more international, the synergies with its other properties, the fact that it is a trust able to think and act more long-term than a typical public company, and there’s a lot of value to be wrung from its purchase of ContentNext beyond a typical times-revenue or even more cumbersome financial calculations, such as WACC. (I doubt there’s much if any debt on the CN’s books, and also doubt that capital structure played much of a role in the decision to buy it.)

I love mediabistro, where I’m proud to have serves as editorial director before the sale, and ContentNext, where I’ve helped in a couple different ways, and for the record my analysis here of both properties is from publicly available reports and discloses no private details. Mediabistro’s audience of media professionals is and was, like CN’s, worth a lot more than an average consumer audience. Rafat duly noted in his interview with Kara Swisher after his company’s sale that it does cost quite a penny to produce their brand of journalism: “We’re a news media business on the Internet, but we’re not a consumer Internet company. We will never be.”

While it’s impressive that he got $30 million for the company so soon after Patricof invested, and in the midst of looking for a second round of funding, one eyebrow raiser from the Swisher interview is the speed with which the deal took place: “It all came to be in three weeks,” Rafat says, something he repeats on ScribeMedia.org, which is, full disclosure, a partner in Naked Media.

Still, there is some news on the subject. I have written several times now about how the Journal has been devoting its front page to hot-off-the-press headlines that are essentially the same as what every other daily publishes: “Obama wins primary,” “Cyclone levels Sri Lanka.” This is a form of run-of-the-mill reporting to which the Journal brings little value added and, with earlier deadlines than most local dailies, perhaps less value.

But now comes some hard data—that’s what I like more than impressions—that does indeed confirm a substantial shift in the Journal’s editorial coverage since the change in ownership. The Project for Excellence in Journalism undertook a content analysis of the front page stories in the Journal for the four months before the December 12, 2007 date that News Corp. acquired control of Dow Jones, the parent of the WSJ and the three months following. Its finding was unambiguous:

In the first three months of Murdoch’s stewardship, the Journal’s front page has clearly shifted focus, de-emphasizing business coverage that was the franchise, while placing much more emphasis on domestic politics and devoting more attention to international issues.

The before and after change is most dramatic in several areas, as seen in PEJ’s chart I’ve cribbed here. Political news is up four fold, reflecting the intense coverage of the primaries that in the past election cycles would have received less space (if only because until recently the Journal rarely devoted more than a single front page column to any story). The full report at the Project’s Web site also compares the “new” Journal’s editorial mix with that of The New York Times, which Murdoch is keen compete with. There are still substantial differences, with the Journal devoting more of its front page to foreign topics, business and economics, less to politics.

Jack Shafer, writing at Slate’s Press Box last month, made note of the PEJ data, but chose to focus on his more generalized impression that the Journal may indeed be better under Murdoch because “it was swinging hard again in its traditional wheelhouse to produce great enterprise journalism.” He proceeds in identifying some examples, all, indeed quality reporting in which the Journal has long excelled.

This may be wishful thinking on Jack's part. I hope not. He has certainly identified some fine-- and traditional -- Journal pieces. But I'm speculating that perhaps they stand out because, as Jack notes, the primary season is over, and there had been no devastating earthquakes or cyclones for a few weeks, and the presidential campaign was in pre-convention simmer. Indeed, in the midst of these fine articles was the front page on June 4, as Obama wrapped up the Democrat's nomination. It struck me immediately as I picked up the Journal and The Boston Globe from the driveway that the Journal article was readily interchangeable with the Globe (and other dailies) articles. In my analysis, every day the Journal wastes newsprint with such headlines, photos and copy is a day lost to do the type of journalism Jack is rightly trumpeting.

I’ve mentioned before that I have great respect for Murdoch as a savvy businessman and as a risk taker who has made real contributions to the competitive landscape of the media.. My current critique is that the hot news approach is not a strategic direction that plays on the Journal’s long time strengths. To the contrary, it takes the paper on a path that daily newspapers should be trying to leave behind.

Ok. ‘Nuff said. I’ll leave this behind. If only Lou would move on from his obsession.

There is, in short, much uncertainty surrounding where the business models for media are and should be headed.

One area that legacy media can control and should know something about is content. Newspapers, broadcasters, publishers of all stripes, have absolute control over their content. Newspaper publishers constantly need to ask themselves “What do consumers want when they subscribe or take $.50 (or $1.00) out of their purses/pockets to buy the publication. Broadcasters certainly ask, ‘Why should viewers tune us in?”

But I’m constantly amazed at their lack of insight and therefore the choices they make. And here I’m referring in particular to the broadly defined “news” segment of the media. Research shows that there has been a range of motivations that are involved in getting individuals to buy a newspaper or tune in a news program—or click to a Web site bookmark. One of the top motivating factors is the interest in learning what we do not know. What happened in the world while I slept? Who won the game last night? What is the weather forecast for tomorrow? What did my stocks close at? What does some “expert” think about a new movie or show? Surprise me!

What we don’t need the news media for is to be told what we already know. The Internet has, of course, made it possible for more people to know more of the answers to the above types of questions before they are available in print or even on a regularly scheduled broadcast. Still, there are many things we know even without the Internet. For example, most of use know if it is hot outside. Or wet or windy or cold. We look out the window or open the door. Anyone who drives a car knows the price of gasoline. Anyone who flies knows the airports are crowded and lines at Thanksgiving are long.

So where am I going with this rant? I’m astounded—and hopefully some of you are as well—at how the editors of news media shoot themselves in the foot everyday with the non-compelling nature of their many of their content decisions. For example, most days I turn on “American Morning” on CNN, even before the computer is fired up. And what do I hear, at length, each day lately? A business reporter, Ali Velchi, telling us the price of gasoline. “Pain at the pump” is the not so original refrain. And the usual “B” roll of someone filling up, with the obligatory quote from the woman in the street who is driving less and someone who will give up their “gas guzzler.” And the anchors commiserating over the latest record. And a reiteration of where Lundburg or AAA thinks the price is going in the “peak driving season.” Compelling stuff, no? Maybe the “Today Show” isn’t so lame.

Not long ago I was asked by a small chain of newspapers to spend a few days with their editors in a session to help them understand and strategize for the challenges facing them. They sent me a large stack of their newspapers so I could get a flavor for them. In the sample were issues from several of the papers with a variation of the headline “It’s Hot Out There.” Immediately I created in my head what this would say. By the third paragraph it would quote some gardener about the heat and how he is coping with it. And sure enough, in the first article I read I was both pleased and disappointed with the copy. There, in the third graph, was a quote from Pedro something, with the Generic Landscape Co. “Yeah, it’s hot. So we start really early and quit by two o’clock,” he explained. I mentally patted myself on the back. But there was more disappointment that the article was so very predictable.

However, the larger point is that, with both CNN and these newspapers (and many others that could be included) that these prominent “stories” were not about news. They were what anyone knew.

In this space I have recently been critical of The Wall Street Journal for a new editorial approach that has often reduced prominence of analysis and surprise in favor of featuring in many cases material that most readers would already know: A who-what-where-when accounting of an earthquake. A routine summary of the previous night’s primary results (and, with its early deadline, less timely that what was in the local newspaper). It is telling readers what many, if not most, could be expected to learn from other media they are likely to have seen.

The legacy “news” media cannot materially change the trend toward whatever is coming via technology. But they can slow their demise by concentrating on the content of their products. And they can enhance the position of their digital products as well by providing audiences with the serendipity factor and with a value added quality that is needed to have users buying, tuning or clicking to their products. That has been the not-so-secret sauce behind the strength of The New York Times, USA Today, Fox News and, until recently, The Wall Street Journal. Give people what they don’t know, not the current weather or yesterday’s price of a gallon of petrol.

Here’s another way to look at more by subtraction. David Pogue, a New York Times tech columnist who I find entertaining and quite informative, had a column last month about why a product can be a success even with acknowledged flaws. Referring to Apple’s Mac Air he wrote:

…When your laptop has the thickness and feel of a legal pad and starts up with the speed of a PalmPilot, it ceases to be a traditional laptop. It becomes something you whip open and shut for quick lookups, something you check while you're standing in line or at the airline counter, something you can use in places where hauling open a regular laptop (and waiting for it) would just be too much hassle.

It's the same lesson I learned when I reviewed the Flip "camcorder" a couple weeks ago: if you change the shape and concept of something enough, it ceases to be that thing. It becomes a new thing, or a descendant of that earlier thing. But it's no longer the original thing, and you can't judge it on the same yardstick.

Lesson learned: Form—the products attributes—can create the function. Thus an entrepreneur can break out of a well-defined category (camcorder, laptop, cell phone) by changing some key characteristics—weight, time to boot up, capabilities—even a dramatic new price point.

Does this insight provide any guidance for the media industry? Should the local newspaper continue trying to be a general interest publication even when online? Is it already something else, in which case it needs to be evaluated by a different metric (i.e., time spent, return visits) than what has been used in the past (i.e., hits or clicks or gross eyeballs or total page views)? Or, perhaps, should legacy media be creating new “things” based on the old? What is the media equivalent of the Mac Air or Flip camcorder: a product that is recognizable but, by changing—often removing—product attributes is used by consumers (and advertisers in this case) in new ways?

Experiments with short form videos—first popularized from the bottom up thanks to the YouTube platform—have now become mainstream with the traditional video programmers. Viacom purchased short film pioneer Atom Films in 2006. But most attention continues to be on finding outlets for conventional programming, such as NBC Universal/News Corp.’s Hulu.

If I had the answer I’d offer it (though probably not here—a guy’s got to feed his family, or in my case, start paying college tuition). But I think it is an area ripe for brainstorming and another round of informed trial and error.

Ready. Fire. Aim.

Wilson looked at many of the more successful Web ventures and observed that what they had in common was a basic service that they offered for free and a step-up premium service that they charged for.

The basic voice over IP service Skype, for example, lets users call anyone anywhere for no cost, so long as both the caller and callee are at broadband-connected computers. However, if you really want to be able to call anyone anywhere—that is, to a land line or cell phone -- there are per minute charges. Want voice mail? Upgrade to Skype Pro.

A wonderful service I use called LogMeIn employs a similar approach. It gives me access to my desktop computer from any other computer, anywhere. A free version lets me see all my directories and files and transfer them to my remote laptop. The upgraded version actually displays the screen of my desktop, with access to any program or file, as though it was on my remote computer.

There are many other examples.

But for the Freemium model to work, Wilson observed there are other characteristics that demarcated the more successful implementations and the others:

• Ideally, they don’t require any downloads or plug ins to start. Lots of exceptions here, but it is a helpful goal.
• Support every browser with any material market share. There is no excuse these days to be FireFox or Safari challenged
• Make sure the service works on various flavors of Windows, OSX, and Linux.

In short, he says, eliminate all barriers to the initial customer acquisition.

But unlike 30 day free trials before having to pay, a true Freemium experience ensures that whatever the customer gets day one for free they are always going to get for free. Nothing is more irritating to a potential customer than a “bait and switch.”

If Freemium is such a great approach, why wasn’t The New York Times’ foray into this model more successful? It gave away a basic service and, with Times Select, offered a premium upgrade.

Part of the answer (there is sometimes but not usually a silver bullet) may be that the model is most likely to succeed when the customer implicitly understands why the paid service has to cost money. Free e-mail accounts that offer greater storage for a fee. Termination cost on other carriers networks in the Skype model is explicit justification. In the case of TimesSelect, it would be obvious to most readers that arbitrary withholding of access to some portions of content was not related to significant costs. It may have made some sense as a “value” play, yet it clearly did not work. “But if your free service is loved and you do a good job articulating the value that comes with the paid service, you can convert to paying users with good results,” concludes Wilson.

The Freemium model was augmented one year later by another venture capitalist, Josh Kopelman. He has labeled his observation “The Penny Gap.” I recall meeting Kopelman when I was teaching at Temple University in Philadelphia. He had started Infonautics Corporation, the predecessor of today's High Beam Research, in the early Internet days. I assume from that he learned some lessons about offering a subscription service that gave users access to a wide range of magazines, journals, reference and newspaper material. (And that he was more successful with a subsequent venture, Half.com, acquired by eBay).

The Penny Gap says in essence that getting a user to go from free to any sort of payment, even a penny, is harder that getting a paying subscriber to pay more. Going from free to $1.00 is a much higher hurdle than from $1 to $2, even though the difference is the same. The Penny Gap is a disconnect with classical economic theory, which would hold that demand increases as the price decreases. As Kopelman illustrated in the accompany figure, getting users to make any financial commitment is the greater hurdle than the amount itself.

What does this say about the content-heavy online ventures of the legacy media business? In large measure it helps explain why they settled for the most part (well, except for The Wall Street Journal) on an advertiser supported Web model. From USA Today to Slate to The New York Times media sites have tried and failed to make a user pay model stick, despite offering some high grade content.

But by dissecting the successful non-media sites that have achieved a substantial user-pay component, could media firms find areas where they can truly find value added to justify a premium? I’m not optimistic. Two years ago I might have offered that a comprehensive ad-free video service could be sold at a premium. Recall CNN tried that with its Pipeline service, providing real time video streams and an archive of telecasts. It met many Freemium characteristics, including a presumption of additional cost for all the storage and bandwidth. Apparently Time Warner determined that more advertising revenue outweighed the subscription dollars. Hulu, the new NBC Universal-News Corporation joint venture, is all free, all the time. It has not made noises about offering paid-for premium content.

The bottom line is that as a generalization the media business may not get over the Penny Gap chasm. For those firms that have been on the electronic side, where advertiser supported has long been the total revenue stream, maintaining that model may be easiest to accept. For that segment of the print media that has been used to drawing at least some of its revenue from consumers, resigning itself to only advertising may be tougher. And perhaps a bit of a blow to its self-esteem.

I first discussed this line of research in an entry a few years ago at my Who Owns the Media? Blog. More recently Anne and I have pursued this notions of media entrepreneurship and have made some encouraging findings about the vibrancy of bottom up media. This is, indeed, a phenomenon that was recognized in America's earlest days. In our most recent paper we note that

It was Frenchman Alexis de Toqueville who first observed in the 1830s the role of media entrepreneurship in the United States. In his second volume of Democracy in America, Toqueville identified the media entrepreneur (though not employing that term) as peculiar to American democracy in a passage titled, “On the Literature Industry.” He may well have been the first to recognize the inherent interdependencies among media, capitalism and democracy, noting that democracy creates a mass market for “literature” (Newspapers, books and a few magazines were then the only mass media) because citizens seek to be informed in order to participate in their democracy.

We characterize media entrepreneurship as “the creation and ownership of a small enterprise or organization whose activity adds at least one voice or innovation to the media marketplace. In her initial work, Anne found that in measuring the incidence of media entrepreneurship in comparison to other U.S. industries, media on the whole were at least as entrepreneurial, and often enjoyed greater rates of entrepreneurship.

In the most recent line of our research we undertook extensive interviews with 14 entrepreneurs who started media businesses. Though not any sort of statistical sample, we did strive to locate a diverse group of subjects. About half were involved in traditional media—newspapers, book publishing, cable and film—while the others were in some type of online media venture.

Although the entrepreneurs we interviewed have come to their media ventures by many different routes and are at different stages in life, there are some striking similarities in their motivations and attitudes toward entrepreneurship as well as their process for discovery and exploitation. In brief, they are hard pressed to recognize any particular barriers, regulatory, technological, structural or otherwise. And while they are working to make their ventures profitable, their first thought about being “successful” is often a reference to having an “impact” or having influence in some sphere.

From my point of view the most noteworthy insight was that this impact appears in two distinct forms. Some view running a media enterprise as more than just an entrepreneurial venture. The media’s power to influence, for this group, is a prime motivator for becoming an entrepreneur. Others exploited their media ideas for reasons similar to those of entrepreneurs in general. We refer to the former group as “missionaries” and the latter the “merchants” -- a potentially significant organizing concept for media entrepreneurship.

For example, typical of the of the missionaries are the comments of one interviewee who said that merely running a business, “holds absolutely no appeal to me…When you say that, I think of payroll taxes, balancing a cash register. When you say media, I think creative, influence, reach.” She added that a media business was appealing because “you can help people in the masses. There are very few other ways to do that."

A minority of those we spoke to we determined were “merchants.” In general, they responded that running a business, not necessarily a media business, was the motivating factor. Merchants talked about success and rewards in terms that could apply generically to any enterprise:

“It’s rewarding from a self fulfillment stand point that, hey, here’s a concept that I took….We brought it to the marketplace and made it successful. That’s, you know, part of it. There’s a real sense of fulfillment now the fact that we have people working for us. People depend on us for their livings. We're supporting other families, paying taxes and being good citizens. … There’s a satisfaction that comes from that."

The research supports the notion that prospects for new media players—and hence voices—is strong. Or at least there are many entrepreneurs who perceive great opportunity. Combined with our data that shows rapid growth in the number of media businesses overall, it bodes well for diversity of formats and sources of media-supplied content. Perhaps most encouraging is that these entrepreneurs barely recognize the existence of barriers to entry to the media business.