As the Internet Grows Up, the News Industry Is Forever Changed

As media managers scramble to maintain those high profit margins, layoffs and buyouts have shaken the newspaper ranks. So far this decade, some 2,800 full-time newspaper jobs have been lost, according to a comprehensive annual report on journalism, The State of the News Media 2006, published by the Project for Excellence in Journalism. Large-scale layoffs have also hit major publishers of news magazines in 2005 and 2006, and magazine publisher Gruner and Jahr sold its properties and left the U.S. market.

Radio news, what there is of it, has changed from what once was heavily local and widely available to a much smaller set of choices: news and talk stations, public broadcasting or, very recently, satellite and high-definition radio. Although its audience is steady, the radio industry's top 25 radio groups aren't expected to post revenue increases above 2.3 percent this year, according to a report released earlier this month by BIA Financial Network.

Magazines, which are extremely market-sensitive, also struggle. Ad pages for major news weeklies are essentially flat, even in this relatively strong economy. Time, Newsweek and U.S. News are losing circulation. But The Economist and the New Yorker's circulations are rising, as is The Week, a five-year-old magazine that, like online news aggregators, culls news from other publications.

Enter the Web

In 1989, Tim Berners-Lee invented the World Wide Web and created the first browser. While most in the media were discussing the impact of cable tv, and a few dabbled in learning about the geeky bulletin board systems, newsgroups and proprietary online networks, like AOL and Compuserve, most never suspected that digital media could converge and threaten to overturn the multi-billion-dollar news industry.

But the Internet offered would-be news entrepreneurs lower costs of entry: You didn't need printing presses, paper or delivery trucks. You didn't need a government license and broadcast towers. You didn't even need a staff. Anyone with a computer and Internet connection, the story went, could compete with the corporate media. Of course, no one could figure out how to make money either, but with the blind courage of true believers and a startup stake from venture capitalists, online news was born.

In the early Internet, during the pre-Web days, scientists, educators and government workers simply traded text reports of niche news over their 1200-to-2400 baud modems.

It took the Web, with its addition of graphics and easy navigability, to begin to attract the established news media. The technology world took to it first, of course, and the most interesting action centered on the West Coast. CNET, perhaps the most successful technology site, tried to marry television to the Internet, and innovated with interactivity before the more mass-market MSNBC came along. Wired magazine went online, covering the culture of technology. Salon, a startup partly funded by Apple Computer, began as a Web publication, soon to be challenged by Microsoft-funded Slate. Many more niche publications started, and folded, and started over.

The Search for Revenue

As the established news industry began creaking into action in the mid-1990s, some tried to charge users for reading their content, just as they did for print subscribers. Others only allowed online access to those who bought a print subscription. The San Jose Mercury News, where I worked online for five years, was at the time the leading purveyor of subscription-required access to the daily paper, although other content was free. But the Merc, in the heart of Silicon Valley full of computer engineers and early adopters of technology, was unable to attract more than 10,000 paying users before it abandoned that business model.

Within the news industry, the drumbeat for charging for online content is steady, but online readers are unwilling in large numbers to pay. With a few exceptions -- the Wall Street Journal, Consumer Reports, opinion columns at the New York Times, news archives and scientific journals -- the subscription model for online news has been discarded.

The next-best hope for income was micropayments, where a user would digitally drop pennies into an online site's account to read an article or gain access to certain data. Technology hadn't quite matured enough for everyone to be able to use micropayments easily, and the revenue was, well, micro.

The now-defunct business technology magazine, The Industry Standard, experimented with selling news-related research reports on the Internet economy through its Web site, where I was the executive online editor in 2000. The sales made money, the related conferences made money, but the magazine didn't and went bankrupt in 2001.

So, barring a genius who creates a new revenue stream, the online news business is left to rely on advertising.