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.

The release says ads, alone, can’t and never have paid for quality journalism. Maybe not. And we’ll find out if J.O. is right that Americans will pay for journalism because they understand it needs to be supported. I’m not so sure. They will pay for convenience, ease of use, utility and access they wouldn’t otherwise have.

What will make this work, I think, is from the reader side:

1. if they can get what they want with ease
2. if the price point is low enough that convenience outweighs the desire to go hunting for the info elsewhere (think iTunes)
3. If there are enough publications available


4. if the content is not commoditized or the kinds of stuff available so many other places that it’s easy to find. (I doubt breaking news or big stories available all over the place will make much money.)

... and for publishers:

1. the ability to make additional incremental revenue from content they couldn’t get on their own.
   strong Incentives to cooperate in the project rather than go it alone, as they’re so used to doing
   ease of installation and use
2. flexible pricing -- Journalism Online is promising to let publishers charge their own prices and adjust them.
3. data, which J.O. is also promising, to allow quick changes in pricing, story mix, etc. (“Journalism Online will provide reports to member publishers on which strategies and tactics are achieving the best results in building circulation revenue while maintaining the traffic necessary to support advertising revenue.”)
4. assurance their content won’t be pilfered, will be in an environment they can trust in every sense
   


5. enough revenue and revenue share that they’ll feel it’s a fair shake, that J.O. isn’t taking too much of a cut.

More here.

A paid subscription also will allow you to interact with the site and its staff, and participate in discussions, daily chats and comment threads; free readers won’t have their voices heard. (I have to say, this is not a bad idea. Many popular newspaper Web sites have comment threads that are out of control and populated largely, it sometimes seems, by idiots who drown out the sane and smart voices. Charging to be part of the conversation is one way to create more rational, intelligent and useful discussions — albeit smaller — between journalists and readers, and readers and other readers.)

It’s good she puts it that way - that the support is during a transitional period. It’s easy to fear that going hand-out to foundations becomes the way those working in the field come to think of as the natural way of things. Others have laid out some of the dangers: Foundations want control; they have specific missions that may be in conflict with the purity of purpose required of investigative journalism; they can be quasi-governmental, slow-moving and bureaucratic. Yet, one could raise equally challenging views of investigative journalism that’s sponsored by commercial interests. It’s hard to find any really good investigative pieces about real estate in any newspaper, reliant as they are on real estate advertising. It’s easy to find reporters and editors who will tell of pieces being tempered for reasons they believe have to do with the need to not offend a sponsor (a.k.a. funder). The ability to continue great journalistic work has relied largely on the strength of character of those doing that work, and their bosses -- anyone from executives of TV networks to the families that run great newspapers. Today, perhaps, that will include the Arianna Huffingtons, Atlantic Philanthropies and Knight Foundations of the world. (An aside: I haven’t seen much discussion of the Medicis and other benefactors who have facilitated creation of some of the great art of our civilizations. Perhaps there’s an analogy there.)

Within the foundation-supported model, the most powerful news organizations will be one(s) that move toward self-sustainability. Mixed revenue models-- without the need to call on the generosity of benefactors -- are surely the best for a number of reasons I won’t get into deeply here, but include everything from creating offsetting revenue streams that bring in different types of cash flows (advertising, subscription, products, events, etc.) to not relying on any one benefactor, so that even if one or the other revenue stream dries up or drops out the core project(s) can continue. Jeff Jarvis writes that what can make this work is the one-percent rule that works in a “gift economy”: If one percent of consumers will support a project, the project can be sustained, as for NPR and Wikipedia. If the one-percent can, ultimately, sustain the journalism without foundation input or control, great. But it doesn’t have to be a gift economy. I’d argue that the one-percent rule is analogous to marketing -- one percent or fewer of people who see a marketing message will take action that justifies the marketing spend. And in this instance the product, itself, is its own marketing message. There is not a need for a separate marketing budget or PR spend (see Fred Wilson's recent Tweet on Twitter and Etsy getting on CBS TV without PR agencies).

And just as the need for short-term profit should not drive a company to destroy its core businesses, the need for ad revenue should not allow a journalistic enterprise to gut its ventures. The effects of that kind of thinking and acting is evident today. We’ve seen weather and sports and tech news blown out while simple coverage of community school boards and local politicians languishes.

The structure of newspapers has not been born of editorial need or service to the communities that consume them but rather commercial convenience. While separate sections for Local, National, International and Opinion may be driven by news decision and interest, one could equally imagine a newspaper where clearly delineated opinion about any given topic appears next to the relevant news story (much as is done with links and feeds digitally) or in which car news and financial news appears on the same page, rather than in separate ‘auto” and “personal finance” sections that serve advertisers of those types of content. Sections have been created and blossomed in those way to support advertisers in each of those verticals. In re-imagining the news business, let’s also free our thinking, as Rosen has done, from the need to have news be created solely by “professionals,” and also from the need to structure news sections and pages according to preconceived notions of what a reader is interested in.

In a “search economy,” people will find and assemble what they want on their Facebook and DailyMe and Netvibes and Instapaper and whatever other pages according to their interests. Those interests create a powerful profile, and “opt-ins” that give clues as to what those folks might be willing to support through contributions, purchases, ad viewing and more. That can then support the journalism they want and need, and, for those willing to tap it while serving them, make the news self-sustaining.

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.

= = = = =

It was striking at the Media Summit in New York today how definitive the people on the future of advertising panel seemed compared to the more unsettled tone of the one on the future of news. The news people, from Vanity Fair writer and Newser.com co-founder Michael Wolff (“We just don’t know how to fashion our product” for the new market of news consumers) to Michael Oreskes of AP and ex- of The New York Times (he said there’s a debate about whether there’s even such a thing as journalism) to Dick Meyer of NPR ex of CBS News (who quoted Clay Shirky’s recent essay on disruption of the newspaper business and said we "don’t have a clue" what’s next), were all candid about their grasp for a business model, let alone an editorial process and structure that works to produce news and satisfy an audience today. (Related thoughts on the disruption being much further than for news, here.)

Meanwhile, the advertising and marketing panelists sounded like they knew the solution -- engage consumers in a conversation, be part of a discussion, don’t just bombard them with ad messages -- and were convinced they simply have to lead others in the industry (product managers, marketers, media buyers) to think on their scale and not be locked into old methodologies. Bob Jeffrey of JWT said it doesn’t matter how much is spent on a campaign, what matters is how much it can engage an audience. Carl Fremont of Digitas called for more “active listening," then a “proactive, reactive strategy" of messaging back to consumers by joining in conversations they are having (presumably in places like social networks). He said old models of pushing ads at people weren’t going to work, and that there would be more development of social applications that provide real value and get consumers to opt in. The panelists all agreed on convergence, and also seemed to think TV would make a comeback as it became more addressable through digital technologies.

A later conversation I had with IBM researcher Bill Battino, who moderated the ad panel, said that the clients -- the companies buying the advertising -- were often leading the charge, had combined what were formally separate and segmented advertising and marketing budgets into a more unified whole from which they could then address the challenge of reaching audience through a holistic rather than silo’d media view (display ads, here, direct marketing over there...).

Whatever the state of play between clients and agencies, there was general agreement on the need for entering the “conversation” with consumers, rather than hitting them with messages, to get people to engage, to use technologies to know more about audiences, and to be genuine in messages, seemed to get general nods of agreement. One would think the same might hold for news ; after all, what better way to get at what a news consumers want than to ask them and have them contribute? I’m loathe, hesitant to say the advertising people are farther along in understanding the ways out of the current morass more than those producing news. But I can say I’ve seen it happen before, where the advertisers adapt and adopt a technology (behavioral targeting comes to mind) well before it’s talked about as a way of delivering content.

Nate,

Finally had a chance to read and consider this piece. Nicely written and reasoned, and even has some smiles. One portion gives me pause:

“Portals should agree to show search results only for the original sources of news content, as opposed to outlets that have repurposed that content.”

That kind of restrictive thinking seems fair at first glance -- after all, shouldn’t the one creating the content be the one who reaps the benefit? -- but it goes against the grain of the way it’s been done not just for the past 10 years of Web journalism, but for the past 40-50 years, with broadcasters and others picking up information, and, if fairly, attributing it to the original source.

Today’s model calls more for incentive than restriction. Perhaps we could allow for some kind of prioritization in the search algorithm for the originator of the content. And some sort of additional revenue to the creator, where there is a shared revenue scheme.

But by highlighting only the creator (which will often mean the large player), Google and the other search engines would be alienating a significant chunk of their constituency, favoring one business over another, and potentially violating tenets of free speech. For example, commentary on a piece of journalism or even pickup of a small portion of it might be fair use, and thus deserve to the be linked to from the search -- and something the searcher would want to see. If the algorithm excludes those results, because they weren’t from the originator of the content, it might be a disservice all around. (Not to mention that the original’s SEO ranking would suffer because of fewer links and accesses to it.)

A final thought: Where would PaidContent be had the system of excluding repurposed content been in place?

This phenomenon is at the heart of a sudden groundswell of concern for the future of the newspaper. Of course, it’s been building, with wave after wave of bad news (which editors thrive on when it refers to anything but their own backyard) of steep declines in circulation and an erosion in advertising that transcends the fall off signaled by the general recession.

And the remedies being proposed? Stripped to their core, there are two. One is to rely on some form of philanthropy. An investment officer at Yale and a financial analyst propose turning newspapers into nonprofit organizations, perhaps endowed by a foundation. They estimate that it would take only $5 billion to fund The New York Times (assuming I suppose a stock market that is more robust that we see at the moment).

The second is to cajole readers to pay something for the online version or to pay more for the print version. In this column I’m focusing on the latter. Another day I’ll add my analysis to the non-profit fantasy.

The re-ignition of the “pay for content”—or as it is now called a “paywall” --- is a response to the tsunami of bad news emanating from all corners of the legacy media business. Although local television and radio are hurting while magazines are downsizing, most of the Sturm und Drang has been about the even worse performance of newspapers. The New York Times has eliminated its dividends to conserve cash and has taken a $250 million loan from a Mexican oligarch. Hearst Corp., once the largest newspaper publisher in the U.S., put the Seattle Post-Intelligencer up for sale Jan. 9, and announced it will convert to digital only or shut it down if a buyer is not found soon. Same for its San Francisco Chronicle. The Detroit Free Press and The Detroit News now deliver papers only on Thursdays, Fridays and Sunday. The Tribune Company is in bankruptcy. And on it goes.

The argument of the growing bandwagon is that newspapers must stop giving away their content free in their online incarnation. They can’t depend on advertising revenue to pay for the same amount of quality journalism that has been supported under the traditional newspaper business model. They need to start charging something. Though not new (I last wrote about it almost three years ago), the subject has been largely dormant until recent months) when a flurry of articles and Blog posts have energized the subject. Tim Burden, at Printed Matters, has nicely annotated the debate since December.

The Achilles heal of this line of reasoning is that advertisers have long covered the full cost of content for newspapers. The share of the total cost of running a newspaper that is derived from circulation revenue has at best covered the cost of the paper, ink and maybe the press, the gas and trucks. Subtract the cost of the presses, printing and delivery and subtract the revenue paid by readers and what is left is the actually the cost of producing the content and the revenue provided by advertisers. At its core, readers have been receiving the information for free for decades.

So if the issue is how can “newspapers” continue to provide whatever mission we think they have fulfilled for the past century as they migrate to an all digital format, then we must follow the money. And that takes us to advertisers-- the same folks who make Google “free” and Yahoo “free” and Huffington Post “free” and “Politico “free.”

If newspapers have essentially been able to thrive on the revenue from advertisers alone (again, with cost of printing more or less covered by circulation revenue), why are they having so much trouble today? The answer is not one single factor, But a major contributor is that newspapers – whether print or digital—are just worth less to advertisers than they were 20 years ago. Back then, local advertisers did not have many options for reaching the mass local audience. What was the alternative for auto dealers? For real estate agents? Supermarkets or department stores? For some, direct mail was one possible option. But that was about it. Using pre-prints instead of ROP became attractive for some large display advertisers, leaving the publishers with a piece of the cash flow. Advertisers were hit with regular rate increases. And they pretty much had to pay, The publishers made good money.

But then a double whammy. Just about the time the Internet became a real alternative for classified listings—think Craigslist, Monster.com, eBay, Autotrader.com—and for retailers—think DoubleClick, Google, et al—the boys at the cable operators had perfected the insertion of highly local spots into their feeds. Between 1989 and 2007 local cable advertising increased from $500 million to $4.3 billion—or from 0.4% of all advertising to 1.6%. Advertising in newspapers fell from 26% to 15% in this period. Although some of the highly local advertisers going to cable may have taken some of their funds from budgets for radio or other local media, it is probable that a significant share came from the hides of newspapers. I estimate perhaps up to 20% of the decline in local newspaper advertising share can be attributed to local cable spots.

The other whammy, the gorilla in the room, is Internet advertising. No need to elaborate. But its impact on newspapers is not just that it has siphoned off dollars per se. Much more importantly is that the Internet has given most advertisers greater market power against newspaper publishers. Many big advertisers—like car dealers, real estate offices and big box retailers—don’t need the newspapers as much.

And this also explains why even an all-digital newspaper may have trouble supporting its economic model with online advertising. If newspapers could have simply eliminated all hard copy production costs and kept its advertising rates at the online equivalent of print milline rate, they could be profitable even with less advertising. But online rates are much lower on an equivalent copy sold vs. online visitor basis.

All old media also had a house edge over advertisers stemming from merchant John Wanamaker’s insight, “Half my advertising dollars are wasted. I just don’t know which half.” Now they do. Publishers (and broadcasters) are at a disadvantage in promoting the efficacy of their product when online metrics provide much greater certainty on who is clicking and even buying, vs. the legacy media.

Hence, the renewed look at shaking coins from the readers or viewers. Easier wished than accomplished. We already have a history of those who have tried and succeeded. It’s a short list: The Wall Street Journal. Those who have tried and considered it a failure include The New York Times, Slate, the Atlanta newspapers and USAToday. The Penny Gap lives.

The magnitude of the challenge can be distilled from The New York Times’ experience with its Times Select. In its two years of existence, the Times attracted 227,000 paying customers, at $49 annually. This translates into about $11 million annually. And this was just for access to a portion of its material. In abandoning a partial pay model, the Times calculated that it could get greater revenue from advertising on those paid for pages by opening them up, no charge.

I suspect that what we will find in the intermediate future is a mix of models and choices, among them:

• The Detroit model is one reasonable experiment: An attractive daily digital version, with home delivery of the paper reduced to Thursday, Friday and Sunday.
• An advertising supported all digital model, with the publisher closing down the printing plant, selling off its trucks, laying off the circulation and production departments.
• A voluntary pay model. This may take one of several forms. The “shareware” model for software has proven to work to a point. Users are asked to pay what they can or think the product is worth. Many users will be free riders. But, as we see with public television and radio, millions in their audience make annual contributions. (In 2007 at least one-third of those who downloaded Radiohead’s free "In Rainbow" album made a payment, in some cases higher than what the band would have received from a CD sale.)

How these and other variations develop will also depend on changes in the mobile business. The rate of adoption of SmartPhones with iPhone-sized screens; the pricing and availability of e-readers, such as the Amazon Kindle and the price for wireless broadband will enter into the viability of digital news formats replacing physical formats.

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.

Their piece starts by quoting Thomas Jefferson, who said he’d prefer a country with newspapers and no government to the inverse. But I don’t know that Jefferson would have anticipated the rise of everything from public radio to the BBC, from Pajamas Media to The Huffington Post to hyper-local news websites. Many people have come to think of newspapers as the catch-alls of community information, with hard news in one section, opinion in another and service in yet other pages. They have been constructed that way, in large part, because of the business model. Advertisers were assured that news would be presented without slant so as to offend no potential customers, while in other sections relevant ads could appear next to relevant content -- food ads next to recipes, electronics in the tech section, car ads near car articles and so on. Of course, the biggest economic decline for newspapers comes from the classifieds, which for newspapers were like printing money.* Today, the newspapers’ cost structures -- everything from huge printing operations to sales staff and organizational hierarchies -- are in place to support such a business model, built up over decades in which their medium had near-monopoly status. Newspaper chains had achieved such levels of profitability that they competed with oil companies for investors' hearts on stock exchanges. Those investors were interested in whopping financial returns rather than any journalism the papers produced, or even seeing that the papers survived.

Yes, as Dave Morgan, Jeff Jarvis, my colleagues on Rebuilding Media, I and others have written, there are ways to use the newspapers’ cost structures to better effect. Sure, there’s a place for the foundation, or at least the not-for-profit contributory model. NPR is one example. The Knight Foundation is experimenting, to the tune of tens of millions of dollars, with endowing various news ventures to see what can survive and thrive. In a recent interview conducted for the We Media Game Changer awards, Knight president Alberto Ibarguen said the best measure of success for the funded projects would be whether those in the local communities used them for news and information, correcting himself when I challenged an earlier assertion he made that success would be spelled when mainstream news organizations used the nascent products. That kind of flexible thinking is unusual in the news business, and it came from a man who once ran the Miami Herald.

Just because the newspaper business as practiced isn’t feasible, that doesn’t mean news will die or that there is no model to support it. Many smaller blogs are serving their local communities and covering their costs -- without large staffs or printing presses, and minimal costs for infrastructure, distribution and sales. I’ve been told that certain free dailies, such as my hometown’s amNY, are profitable, even if their operations are taken as a standalone entity. Blogs and free newspapers run on a shoestring are not the only possible for-profit business models, either. News cannot always be expected to make a profit, on its own. Network news shows were, according to books I've read, originally seen as public service loss leaders, attracting viewers to entertainment shows that in turn funded the news programming. The news shows also helped the networks keep in the good graces of the FCC. (TV news shows apparently became profit machines only after producers in the Roone Arledge era showed that TV news magazines, morning shows and their ilk could bring the kinds of sponsor-pleasing audiences that would earn many millions of dollars.) Other news operations are also supported by separate operations. The Advocate, a leading voice of news for and about the gay and lesbian community, is funded at least in part by an entertainment company that produces movies and other fare. The news operations of Thomson Reuters are a fraction of the operational cost and income of the financial information parts of the company. Other news organizations are supported by events, custom or other paid media, syndication and other outlets.

I'm not saying foundation support of the news business is a bad idea, inasmuch as news is a public trust. They could be a healthy part of the mix. The foundation-supported news product could even feed the for-profit ventures, much like News 21 and Pro Publica are trying to do.

I don’t know in what fashion(s) the news business will survive, but I do have a very clear picture of how to make individual news operations work cost-effectively -- whether funded by benefactors, investors' capital or simply readers and ads. The ramp-up to profitability takes awhile but much less time than the five or more years it typically takes in the print world. Everything from GigaOm to PaidContent to Gawker Media to The Poliico, from MarketWatch to some very targeted products I’ve worked on under non-disclosure agreements are run as real businesses. Whatever you think of their journalism, they’re no less reliable, journalistically, than a panoply of so-called mainstream newspapers and tabloids I could cite.

There are for-profit models there, and great journalism can survive. Just maybe not in the newspaper business the way it’s been run.

* Classified ads were almost literally printing money. Every square inch of the page represented income, and profit. That was so much profit per square inch, in fact, that newspapers for years were in the very top in profitability -- up there competing with oil companies for the highest profit margins. And the list continues, with auto ads, real estate ads, coupons and other forms of informational advertising to a highly interested buying public that has been rendered, if not useless, at least much less cost-effective by a much more efficient Web, delivered online or on mobile devices.

Users also have the option to display two pages across in the layout of the actual newspaper. In this format, the cursor changes to a magnifier, so a click on the low rez image enlarges it to a readable size. Yet another option allows downloading individual sections or even the entire newspaper as a pdf file. (Today’s newspaper was a 46 mb ZIP file). As best as I can tell this still needs some work, as each page is a separate pdf file.

The technology is far more amenable to user preferences than the more static approach taken by YuDu or The Sporting News or other previous digital publications’ digital editions.

The notion behind the digital edition is that it is fixed, being a representation of the print version. It is not updated 24/7. It IS the printed paper, digitally rendered. There is no ink to rub off or newsprint to toss out, but otherwise it has the benefits—pages randomly accessible – and drawbacks—fixed in time—as the print edition. Users are advised to go to the paper’s Web site for updates and breaking news.

I also tried it on my iPhone and it worked well, with the usual caveat of the iPhone’s small screen. But I could use all of the digital version’s functionality. Apparently the digital edition does not use Flash or any other non-browser standard technology.

The digital Free Press (and any other newspaper that adopts a similar technology) won’t appeal to everyone. Nothing does. SmartPhone access can provide some flexibility for mobile use, but is not a satisfying substitute. Reading a digital version, even on a nice widescreen monitor, is confining to a fixed place. But it is not hard to see the possibilities. If compatible with e-readers, such as Amazon’s Kindle or the newly introduced iRex with a 10” “paper” screen, the portability issue and the form factor hurdle recede.

Of course, the technologies only address the economics of the newspaper. They do not solve the enduring bigger question: Who will be paying to buy a newspaper, digital or otherwise?

It’s no surprise that newspapers have been hurting, but the Detroit papers seem to be failing faster than those in other cities. Circulation of the papers is down between 15% (Free Press) and 22% (News), a long term slide that has no doubt been exacerbated by the troubles particular to Detroit’s major business.

The official announcement, expected next week, specifically refers to home delivery, suggesting that the papers will continue to print hard copies daily, with distribution limited to newsstands the four non-delivery days. The digital versions will continue as well.

I would have to assume that, if this comes to pass, the green eye shade folks have figured out the savings for this half-a-loaf strategy. I need to be convinced. If they do indeed still turn the presses every day, then the only savings are the variable costs of ink, newsprint, and delivery costs for the home delivered copies. All other fixed first copy costs stay the same. Subtracted from the savings is the lower advertising rates that could be charged for those days, reflecting lower circulation. The cut back is expected to be accompanied by a dramatic redesign of the print editions, which may have some cost implications. I guess we should wait for the details to make a final judgment.

The pending announcement makes very real the current virtual office pool in media circles, the winner being closest to predicting when the first major city newspaper would announce it would become an online-only service. Indeed, we may have a winner. in his column last week on media predictions for 2009, Business Week columnist Jon Fine included this precocious prophecy: “More than one newspaper in a top-100 market ceases publication or reduces its print edition to something unrecognizable as a daily newspaper.” Had he heard the scuttlebutt about Detroit, or is he just that good? (Fine also wrote “At least one recent, heavily leveraged media deal—Tribune, Univision, Clear Channel, the Minneapolis Star Tribune, I could go on—goes bankrupt. A week later the Tribune company did file for Chapter 11, though that debacle was a bit more foreseeable).

Two months ago, the Christian Science Monitor announced that it would become a weekly in print, along with its continually refreshed Web version. The Monitor has long been suffering so it was even less a surprise that the Tribune filing.

Still, this is quite likely the start of a trend. Some publishers may be emboldened by the Detroit plan to move ahead their own online-only strategy. Others can wait and see how it works out for Gannett and MediaNews, then either follow suit or decide to find other ways to cut costs. My own prediction (drum roll please) if that over the next two or three years more dailies will move to a hybrid platform, akin to Detroit, with less than daily delivery or even printing. The early trickle could become a stampede by the end of the decade, regardless of how fast the economy recovers. Newspaper economics are changing.

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.]

And, in so complaining, he put his finger on a major problem with journalism as it’s practiced. Amid all the tit-for-tat accusations, running around trying to dig up, follow the latest, get the scoops, journalists too often forget to explain to those who desperately want it what the story at its deepest levels is really about -- which also would serve to tell the reading/listening/viewing public why they should care. That kind of depth, of course, doesn’t get the quick pageviews, nor is it the kind of investigative journalism that tends to win Pulitzers and other prizes. In a business sense, it’s not the kind of journalism that will pay for the resources it takes create it. But it is a big public service that can accrue pageviews (on pages carrying ads) over time. And there are ways to “monetize” it beyond the pageview-ad formulation. (partnerships, re-branding, syndication, books, new sections ... that would be another blog post.)

Not that it’s easy to explain something like this crisis. A lot of people tasked with explaining what’s going on probably themselves don’t understand, and good journalists are trained not to let their grasp exceed their reach. Heck, some of the smartest professors I had in business school seem at a loss to completely explain what’s happening in the economy right now. (One wrote an email about the opposing views of who’s to blame, without answering a question I asked about whether models he taught us projecting increased value as debt is taken on were still valid, or formulations for calculating risk should be changed). And, the ones who can explain it all to us -- smart MBAs who do financial modeling -- are, after all, ones who helped get us into this, with the very financial models they created or followed. They’re likely to earn a lot more than the ink- and pixel-stained wretches working in newsrooms. Then, again, there’s a few of those folk who have a bit of free time at the moment. Maybe they could write a little something for the papers, even help come up with some graphics and videos to explain it all.

Even without the business justifications, though, the explanation would be worthwhile and a public service.