Web advertising has never generated anything like the same revenue per reader, mobile looks even worse, and the continuing rise in online advertising generally is now often bypassing traditional news properties altogether. Meanwhile, hoped-for sources of direct fees—pay walls, micropayments, mobile apps, digital subscriptions—have either failed or underperformed.Of these, digital subscriptions, as practiced at the Los Angeles Times, Minneapolis Star-Tribune, New York Times and others have done best, but even here the net effect of subscriptions has not made up the print shortfall. Furthermore, because most digital subscriptions are designed to increase print circulation, the short-term effect of digital subscriptions has the immediate effect of making the papers more reliant on print revenue, despite the long-term deterioration of print.We do not believe the continued erosion of traditional ad revenue will be made up on other platforms over the next three to five years. For the vast majority of news organizations, the next phase of their existence will resemble the last one—cost reduction as a forced move, albeit in a less urgent (and, we hope, more strategic) way, one that takes into account new news techniques and organizational models.
This restructuring will mean rethinking every organizational aspect of news production—increased openness to partnerships; increased reliance on publicly available data; increased use of individuals, crowds and machines to produce raw material; even increased reliance on machines to produce some of the output.
On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.
The wastefulness of pack journalism and the empty calories of unimproved wire service news are both bad fits for most institutions in the current environment. The organizations that set out to provide a public with a large part of the news will more often be aggregators, in the manner of Huffington Post or BuzzFeed.
Update, Feb. 22, 2013: Massimo Pigliucci weighs in well on this issue.