Newspaper ad revenue: At least technically, the recession is over, with GDP growth measured at 2.2 percent in Q3 of 2009 and widely forecast in Q4 to exceed that rate. But newspaper revenue has not followed suit, dropping 28 percent in Q3. McClatchy and the New York Times Company (which both came in at about that level in Q3) hinted recently that Q4 would be better, in the negative low-to-mid 20 percent range. This is not unexpected — in the last few recessions with actual GDP contraction (1990-91 and 2001), newspaper revenue remained in negative territory for at least two quarters after the GDP returned to growth. But the newspaper dip has been bigger each time, and the current slide started (without precedent) a year and a half before the recession did, with a cumulative revenue loss of nearly 50 percent. Newspaper revenue has never grown by much more than 10 percent (year over year) in any one quarter, so no real recovery is likely; this is a permanently downsized industry. My call for revenue by quarter during 2010 is: -11%, -10%, -6%, -2%.

Newspaper online revenue (included in the overall prediction above) will be the only bright spot, breaking even in Q1 and ramping up to 15% growth by Q4.

Newspaper circulation revenue will grow, because publishers are realizing that print is now a niche they can and should charge for, rather than trying to keep marginal subscribers with non-stop discounting. But this means circulation will continue to drop. In 2009, we saw drops of 7.1 percent in the six-month period ending March 31 and 10.6 percent for the period ending Sept. 30. In 2010, we’ll see a losses of at least 7.5% in each period.

Newspaper bankruptcies: I don’t think we’re out of the woods, or off the courthouse steps, although the newspaper bankruptcy flurry in 2009 was in the first half of the year. The trouble is the above-mentioned revenue decline. If it continues at double-digit rates, several companies will hit the wall, where they have no capital or credit resources left and where a “restructuring” is preferable and probably more strategic than continuing to slash expenses to match revenue losses. So I will predict at least one bankruptcy of a major newspaper company. In fact, let’s make that at least two.

Newspaper closings and publishing-frequency reductions: Yup, there will be closing and frequency reductions. Those revenue and circulation declines will hit harder in some places than others, forcing more extinction than we saw in 2009.

Mergers: It’s interesting that we saw very little M&A activity in 2009 — none of the players saw much opportunity to gain by consolidation. They all just hunkered down waiting for the recession to end. It has ended, but if my prediction is right and revenue doesn’t turn up or at least flatten by Q2, the urge to merge or otherwise restructure will set in. Expect to see at least a few fairly big newspaper firms merge or be acquired by other media outfits. (But, as in 2009, don’t expect Google to buy the New York Times or any other print media.)

Shakeups: Given the fact that newspaper stocks generally outperformed the market, it’s not surprising that there were few changes in the executive suites. But if the industry continues to contract, those stock prices will head back down. Don’t be surprised to see some boards turn to new talent. If they do, they’ll bring in specialists from outside the industry good at creative downsizing and reinvention of business models. Sooner would be better than later, in some cases.

Hyperlocal: There will be more and more launches of online and online/print combos focused on covering towns, neighborhoods, cities and regions, with both for-profit and nonprofit business models. Startups and major media firms looking to enter this space with standardized and mechanized approaches won’t do nearly as well as one-off ventures where real people take a risk, start a site, cover their market like a blanket, create a brand and sell themselves to local advertisers.

Paid content: At the end of 2008, this wasn’t yet much of a discussion topic. It became the obsession of 2009, but the year is ending with few actual moves toward full paywalls or more nuanced models. Steve Brill’s Journalism Online promises a beta rollout soon and claims a client list numbering well over 1,000 publications. Those are not commitments to use JO’s system — rather, they’re signatories to a non-binding letter of intent that gives them access to some of the findings from JO’s beta test. Many publishers, including many who have signed that letter, remain firmly on the sidelines, realizing that they have little content that’s unique or valuable enough to readers to charge for. JO itself has not speculated what kind of content might garner reader revenue, although its founders have been clear that they’re not recommending across-the-board paywalls.

So where are we heading in 2010? My predictions are that by the end of the year, most daily papers will still be publishing the vast majority of their content free on the web; that most of those experimenting with pay systems will be disappointed; and that the few broad paywalls in place now at local and regional dailies will prove of no value in stemming print circulation declines.

Gadgets: The recently announced consortium led by Time Inc. to publish magazine and (eventually) newspaper content on tablets and other platforms will see the first fruits of its efforts late in the year as Apple and several others unveil tablet devices — essentially oversized iPhones that don’t make phone calls but have 10-inch screens and make great color readers. Expect pricing in the $500 ballpark plus a data plan, which could include a selection of magazine subscriptions (sort of like channels in cable packages, but with more à la carte choice). If newspapers are on the ball, they can join Time’s consortium and be part of the plan. Tablet sales will put a pretty good dent in Kindle sales. One wish/hope for the (as yet unnamed) publisher consortium: Atomize the content and let me pick individual articles — don’t force me to subscribe to a magazine or buy a whole copy. In other words, don’t attempt to replicate the print model on a tablet.

Social networks: Twitter’s own site usage will continue to be flat (it has actually lost traffic slowly but steadily since summer), but that probably means more people are accessing Twitter through various apps on computers and smartphones, so actual engagement is hard to gauge.  Facebook will continue to grow internationally but is probably close to maxing out in the U.S. With Facebook now cash-flow positive, and Twitter still essentially revenue-less except for lucrative search deals with Google and Bing, could Mark Zuckerberg and Evan Williams be holding deal talks sometime during the year? It wouldn’t surprise me.

Privacy: The Federal Trade Commission will recommend to Congress a new set of online privacy initiatives requiring clearer “opt-in” provisions governing how personal information of web users may be used for things like targeting ads and content. Anticipating this, Facebook, Google and others will continue to maneuver to lock consumers into opt-in settings that allow broad use of personal data without having to ask consumers to reset their preferences in response to the legislation. In the end, Congress will dither but not pass a major overhaul of privacy regs.

Mobile (with thanks to Art Howe of Verve Wireless): By the end of 2010 a huge shift toward mobile consumption of news will be evident. In 2009, mobile news was just getting on the radar screen, but during the year several million people downloaded the AP’s mobile app to their iPhones, and several million more adopted apps from individual publishers. By the end of 2010, with many more smartphone users, news apps will find tens of millions of new users (Art might project 100 million), and that’s with tablets just appearing on the playing field. During 2009, web readership of news (though not of newspaper content) overtook news in printed newspapers. Looking out to sometime in 2011 or 2012, more people will get their news from a mobile device than from a desktop or laptop, and news in print will be left completely in the dust.

Stocks: I accurately predicted the Dow’s rise during 2009 and that newspaper stocks would beat the market. The Dow will rise by 8% (from its Dec. 31 close), but newspaper stocks will sink as revenue fails to rebound quarter after quarter.

I’ve been skeptical of the impact of Kindles and Kindle-like devices on newspaper business models. And I think that’s been borne out — we learned earlier this week that The Los Angeles Times has only 2,700 Kindle subscribers, which produces roughly the revenue required to pay for one reporter.

But the Nook also has the potential to differentiate itself from the Kindle to newspaper publishers — none of whom are particularly happy about their financial arrangements with Amazon. Amazon gets to set the prices newspapers sell for, and it keeps 70 percent of the revenue.

I emailed B&N’s P.R. people to ask whether the revenue share might be any different for the Nook, and where pricing power would rest. I got what amounts to a “no comment.” (“Barnes & Noble has strong relationships with publishers including newspapers and magazines…we’re reaching out to all of our publishing partners to work together,” etc.)

I also asked what other newspapers were among the “more than 20″ that would be available for subscription on the Nook. (The announcement mentioned only the big four: The New York Times, The Washington Post, The Wall Street Journal, and The Los Angeles Times.) B&N declined to say.

Can anyone on the financial side of a soon-to-be-Nooked newspaper tell us about Barnes & Noble’s approach? Are they offering a revenue share better than Amazon’s?

I don’t own an iPhone, but I play with one on TV. Apple’s widely praised ads, with their relentless focus on the phone itself, have demonstrated the magic of its mobile device even to those of us who cling to our BlackBerries. Lately, I’ve been made aware that the iPhone can shoot and edit video and level a bookshelf.

But most of all, I know how good the New York Times website looks on the iPhone. Since the first TV spots in 2007, Apple has chosen to demonstrate its mobile browser almost exclusively with NYTimes.com. And that makes the Times very happy indeed.

“The Times recently secured prime product placement in conjunction with the release of Apple’s iPhone 3G S,” crowed Scott Heekin-Canedy, who runs the business side at the Times, in a memo to staffers last week. He listed all of the newspaper’s cameos in Apple’s latest marketing campaign, including: the homepage in a spot demonstrating copy-and-paste, Inauguration Day coverage in the guided tour, and the Times iPhone app in Apple’s “staff picks.” He also noted, “We’re used to illustrate the iPhone as a ‘breakthrough Internet device’ and ‘it works like no other phone: multi-touch.’”

Not long ago, Apple sought to improve its own brand by linking the PowerBook with Mission: Impossible and, more recently, landing its products on The Office, 24, and seemingly all of HBO’s programming short of Deadwood. Legacy newspapers, meanwhile, have generally relied on history, name recognition, and those boxes on every downtown street corner as their most powerful marketing tools.

But the iPhone campaign demonstrates how in a digital age, device makers from Apple to Amazon enjoy immense power to which news organizations may be unavoidably beholden. In his memo, Heekin-Canedy explained, “Not only does this raise awareness of our iPhone app, but it also extends our innovation message through close alignment with one of today’s top brands.”

I asked Diane McNulty, a spokeswoman for the Times, if the newspaper has paid for its product placement in Apple’s marketing. She replied, “Actually, they asked us if they could feature NYTimes.com in their promotion — and we were happy to oblige.” Apple has run several huge, animated ads on the Times homepage since last year.

On laptop and desktop computers, consumers can rely on a diversity of news and information sources — a diversity that undermines the notion of a newspaper site as a reader’s single source of news. But the mobile space — with its emphasis on individual news-organization-built applications — may present a better opportunity for some news sites to serve as one-stop shops of information for readers checking the news in spare moments. And in that sense, the Times has much to gain from its association with the iPhone’s browser.

Other news organizations could attempt analogous marketing relationships with the Amazon’s Kindle, RIM’s BlackBerry, Palm’s Pre, TechCrunch’s forthcoming CrunchPad, and so on. Instead, companies like Hearst are attempting to produce their own mobile devices. That may work, but associating with an already strong brand seems more reliable than completely reinventing your own.

Now it appears Amazon’s Jeff Bezos is betting on something similar, promising a conference audience that he was happy to give his hardware people “competition” by putting Kindle-format books on “other mobile devices and other computing devices” at the same price as on the Kindle itself. As Gizmodo puts it, “either Bezos has something mysterious up his sleeve, or he’s come to terms with the fact that the Kindle — and indeed every dedicated e-reader — is essentially a stopgap device, awkwardly carrying out its single, simple task until something more versatile comes along.”

On the format front, Amazon is facing renewed competition, as it should when it’s taking a ridiculous 70 percent of revenue. But I have a lot more faith in the Kindle format beating out rivals than the kludgy Kindle device doing the same. Meanwhile, for newspapers counting on the Kindle as an economic savior, get ready for the same sort of platform-agnostic commoditization that drives content prices to zero.

The New York Times Co.’s research and development group has some of the best views in their midtown skyscraper — 24 floors above the newsrooms, higher even than the executives’ suites. Developers in the core R&D group — with titles like “lead creative technologist” and, my favorite, “futurist-in-residence” — are charged by the brass 14 floors below them with anticipating how news will next be consumed.

Among their hunches: in the living room.

Josh and I visited the R&D group last week, and this week we’ll be running five videos showing how they’re looking at the future of news. Today we begin with design integration editor Nick Bilton, who runs through their thinking on e-reader devices, news consumption outside the web browser, and interactive advertising.

You’ll notice there’s a marketing or advertising component to nearly all of what the group is working on. While this is the first time much of the lab has been seen publicly, they’ve given similar tours to more than a hundred advertisers and agencies, Bilton told us. And keep in mind the company has an interest in appearing ahead of the curve to investors.

They drink better coffee in the R&D group, not the burnt stuff chugged by reporters on deadline. Maybe that’s because they have time to let the grinds brew: what they’re envisioning won’t reach anyone’s living room for at least two years — if at all.

Up there on the 28th floor, the group’s toys — e-readers torn apart, touchscreen displays, netbooks that bend in every direction — can feel a touch presumptuous for a company surviving debt payment to debt payment. It was just this winter when Michael Hirschorn loudly suggested in The Atlantic that the Times Co. could go out of business, “like, this May.” The Times will endure, in one form or another, and the R&D group is the beta version of the company’s future.

You’ll find the details of what Bilton and his colleagues are thinking about in each of the five videos, and I’ll address some of their key ideas as the week progresses. (Note: In today’s video, Bilton demos an Adobe AIR application that’s very similar to Times Reader 2.0, which is set for release this week.) There’s a full transcript of the video after the jump, and be sure to come back each day this week for more from our visit.

Nick Bilton: This is the core R&D group, and these are just some of the projects we’re working on. This is what we call the newspaper 2.0 table, and it’s looking at these next generation of reader devices and really trying to stay ahead of the curve with these devices.

There’s two things that we are doing here. One is trying to educate the company on where these devices are going, but the other thing is actually prototyping content on them. So this is an E Ink development kit that actually was broken in transit from Vegas last week. It’s a little chipped, but this was a device that we got from E Ink where we prototyped what content would look like on an E-Ink device that didn’t exist yet. And so we have the full layout with the typography and different user interactions that we can experiment with. And so this is really trying to prototype and understand where these devices are before they even exist and what our content will look like and how it will translate.

This is just some flexible e-ink. There is a big push for flexible displays and devices and where they’ll be. There’s been some breakthroughs in the past six months that will allow devices to become more flexible with the PCBs being more flexible, the chips are going to start to become more flexible over the next few years. And that’s really going to change these devices. The one question is: How do you tell someone that it’s bendable but not foldable? So.

Josh Benton: Gotta educate the customer.

Bilton: Gotta educate the customer. And then, you know, a lot of it is just trying to understand the user interaction and really trying to work with the manufacturers. We work with Sony and Kindle and all these guys. We work with this guy Rob Samuels, who is the project manager at nytimes.com for these devices, and we’re trying to work with all the device manufacturers to say, you know, this is how our content should work and how it should follow through.

Another big thing that we always explore are the netbooks. These put a whole different generation of people online, and we’ve been looking at how you tell stories on these machines. You know, some of them have foldable screens, some of the are touchscreen, they’re all different sizes, and we really have to understand how our content, the stories are told on there.

An interesting technology that is going to affect the e-book reader industry in the next year or so is the screen from the One Laptop Per Child. Mary Lou Jepsen came from One Laptop Per Child. She invented the screen, which is actually called Pixel Qi — Pixel Q-I. It’s based off the E-Ink technology and LCD, and it’s mashed together, and it creates a color version of E-Ink that you can actually switch between this LCD with full movement to E-Ink in low-light situations and low power and things like that. So she’s going to be shipping those devices, the screens in November or so which means that we’ll probably start seeing them in the market place in the next year or year and a half, which should be really interesting.

We talk a bit about making the paper more interactive and adding functionality. This is just a tikitag RFID chip, and so here is an ad for Chanel. So if I could put this on my computer, it will go off and get the appropriate ad that goes along with that. So it automatically knows because it’s RFID, it’s connected that it’s Chanel ad that goes along with this experience.

So it’s just really trying to explore and understand where RFIDs — there’s this company in Boston that’s starting to explore printing RFID in paper at a penny to five cents a piece, which could really open up different areas for advertising.  

As far as working with reporters, these are different GPS devices that we’ve been playing around with. We’ve given some to some reporters, and it actually automatically geocodes where they are, and whenever the time stamp of the story is uploaded. It then cross-correlates it and says, this is where this story or this photo has been filed from, or this photo, and it automatically puts it on the map.  And it’s a whole different method of story-telling that nobody is really required to get involved with. It does it automatically. So we did this with the Frugal Traveler and a couple of other reporters, and it’s been pretty interesting to see that happen.

Another application, going back to these news reader devices is, I mean, we’re looking at touchscreen constantly. [Dialog box appears on screen.] Thank you, Windows. [Laughter] This is the International Herald Tribune Reader that we’ve been working on with Adobe, and it’s built on Adobe AIR. And one of the really interesting features of it is that it can reformat and re-lay itself out accordingly depending on what size display it’s in. So if I’m on a screen this big, it will format and lay itself out. If I’m on a screen the size of one of those little notebooks it will, it’ll re-lay itself out that way. It does the same thing on the article level if I want to resize the font, I can go smaller and it reformats itself and fits in that thing.  

You’ve got the crossword that you can do. It’s got all the features from the web and even more sit-back experiences — like we have the news in video and the news in pictures that can become full screen. I can navigate through this way. And then another interesting feature is this browse feature where it sits back and it says, let me navigate the content just by flicking through, and I can go from section to section and article to article, and then just jump right in.  So it’s a really interesting visual way of navigating this content.

Benton: What do you think — there’s so much inertia and momentum in the old, the traditional web browser, and that’s how most people get their news electronicaly now. What do you think it’s going to take to get people to move to something like this? To step out of the browser and have an Adobe AIR application, or have a dedicated device, or interact in a different way. What’s the tipping point?

Bilton: Well it’s, you know, if I constantly — I mean, look at Twitter. If I kept going to twitter.com, and it turned out that it was a much easier experience for me to download an AIR application or Tweetie or something like that and just have it running constantly on my desktop. So why couldn’t I have this experience? I still go to twitter.com sometimes, so this is just an alternate for that. And this is also looking at devices. This is all offline reading. This is, you know, if I want to put this on a tablet PC and read it on the subway, then I can do that and it formats and fits for that experience.

You know, I personally think that the browser — there’s too much going on on there. I mean, what buttons do you use other than the back button and to actually type in a URL? So it could be a full-screen experience, it could be a desktop application. There should be a blur between those lines I think.

Though details weren’t immediately available, the new, $489 Kindle DX will be available at a subsidized price for those who buy digital subscriptions to The New York Times, Washington Post, or Boston Globe (where home delivery of the print edition isn’t available.) We’ve covered the Kindle and other e-readers extensively over the past six months. Here’s a guide to our coverage, including — after the jump — video from the E-Ink laboratory where the screens for these devices were developed:

In November, we revealed that The New York Times had “more than 10,000 paid subscribers” on the Kindle for revenue of roughly $1.7 million a year. (We also ranked how other newspapers were doing on the device.) In April, I covered plans by several major news organizations to repackage their multipart, investigative series into “digital newsbooks” for e-reader devices — but not the Kindle.

Meanwhile, Josh has written extensively about the Kindle’s potential to boost the news industry. (Magic Eight Ball version: “outlook not so good.”) His provocative column, “Why the Kindle will fail,” prompted some great discussion in the comments. More recently, he observed that the age demographics of Kindle owners is pretty similar to print newspapers. In presentations, one of Josh’s key points has been that the Kindle is “more valuable as a market divider than a value creator” because it separates out the small portion of readers who are willing to pay for content.

Finally, as promised, Ted got a tour of E-Ink headquarters and interviewed CEO Russ Wilcox, which he wrote about in February. Here’s the video he produced:

Photo of Times publisher Arthur Sulzberger and Amazon CEO Jeff Bezos at today’s event, by Gizmodo.

It shows the possibilities for very thin, very portable, color e-paper (or other display technology) touch-screen devices for use in many applications including news consumption.  Watch for a glimpse of a foldable electronic newspaper.

For a full 5-minute version, with an expanded version of the e-newspaper scenario at 4:10, have a look here (scroll down to the second video.)

Of course, it’s all vaporware and some of this is stuff that definitely falls into the futureporn category.  (Where’s my flying car?  Where’s my personal robot and vacation on Mars?)    But note that often, the future visions of 20 years ago actually fall far short of where we’ve traveled to.

A late-1980s video from Ameritech at Paleo-Future, for example, while envisioning an information service delivered via a TV/computer screen, completely misses quite a number of key developments that would be powering the Web just a few years later.  Note the database navigation prototyped at 5:05 — there are no hyperlinks, and navigation is totally by means of choices the user makes to move stepwise through hierarchichally-organized data.  The obvious idea of navigation by means of search is completely absent (perhaps because no one could then envision the speed at which the entire Web could eventually be searched within microseconds).

So, while my fellow Niemanite Josh Benton, a Kindle naysayer, may may be correct in the sense that Kindle could prove to be an evolutionary dead end, similar to the Ameritech demo, I believe that thinner, sexier, and more portable displays for many applications including news will proliferate.  While you can now turn your iPhone into a Kindle reader, phone screens won’t become all-purpose display devices, for the simple reason that you might actually want to read something and talk on the phone at the same time.  And you’ll certainly want bigger, foldable displays when they become available.

The ubiquitous E-readers and e-info devices  suggested in the Microsoft video will need a variety of innovative new navigational tools, along with color, motion and flexibility, and surely all of those are on the drawing boards at Amazon, Sony, Philips, E Ink, Hearst, Apple and others.  The future is as likely to outstrip our imagination as it is to fall short.

The Kindle is going to fail.

It is not “the iPod of books.” It will never be.

To support this hunch, I offer two data points:

— I’m a nerdy guy. And I’m a writer. I work at Harvard, which is filled with nerdy people who are writers. I write about the intersection of writing and technology for a living. I’m a classic “early adopter” for tech. I buy a lot of books; my girlfriend is editorial director at a book publisher; I have lots of friends who’ve written books; and I’ve got a variety of fiction and non-fiction book projects of my own, in varying states of completion and disarray.

I say all this to illustrate that I am the exact target audience for the Kindle — precisely the mix of book reader and tech lover who should want one. And yet, 15 months after the Kindle, I have not seen one single Kindle in the flesh.

Not one.

— I’m spending a couple days at the O’Reilly Tools of Change for Publishing conference in New York City. It’s a conference for people in the publishing industry who are interested in books’ digital future — lots of sessions on ebook publishing models, online reading habits, XML best practices for long-form content, and so on. (I’ll write a lot more about the highlights here over the next couple days.) If there is anyone who is more of a perfect target for the Kindle than me, that person is here.

And yet yesterday, during a panel on ebooks, the moderator asked the audience of hundreds of tech-savvy (or at least tech-interested) publishing professionals how many of them had a Kindle. I’d say maybe 1 in 8 raised their hands. Then he asked how many had an iPhone — about 1 in 2. (Later on in the day, someone asked how many were on Twitter — maybe 1 in 3.)

If Amazon can’t win in this room — people willing to spend two or three days sitting through sessions on XML and such, people who love books and who want to navigate through the coming digital thicket of their business — then the Kindle ain’t going nowhere.

As I wrote the other day, the distribution model behind the Kindle is much more likely to be a success. But I think Amazon’s battle to expand people’s three discrete screens — cell phone, computer, TV — into four is headed nowhere.

That decision could end up being more important to the company’s fortunes than the new device announced today — which, while a nice upgrade, doesn’t seem to radically change the calculus of whether or not to buy a Kindle. And it could have big implications for news organizations looking to the Kindle as a potential savior.

Business schools have long taught the razor-and-blades business model, in which a high-value good (like a razor) is given away or sold cheaply — with the idea that creating a world with a lot of razors will create big demand for the sale of razor blades. Give away the razor; make millions on the blades.

Apple has made a gazillion dollars by doing the opposite. They sell lots of songs through the iTunes Music Store and make not that much on each. Most of each song’s 99-cent price tag goes to the record label or to overhead. But if people are buying music on iTunes, they’re much more likely to buy a portable device to play those songs on — an iPod, a device where Apple makes a mint on each sale. Give away the blades; make millions on the razor.

Either way, the company is really in two related but discrete businesses: a device and a distribution channel through which to sell other devices.

It’s unclear how, exactly, Amazon is making money on the Kindle. It charges big money for the device, but e-paper tech is expensive enough that it may not be making much, if anything, on the device. (If you’ve seen reliable estimates of the manufacturing cost of a Kindle, speak up in the comments.) And the publisher/Amazon share of ebook revenues aren’t, to my knowledge, public either.

But putting Kindle readers on cell phones would seem to, in one swoop:

— massively increase the potential audience for Kindle ebooks, and
— massively decrease the demand for the Kindle device itself.

If I can buy and read Kindle ebooks on my iPhone, the chances of me paying $300+ for another gadget to carry around just dropped substantially. (Especially if there’s an iPhone-like device with a larger form factor in the works.)

For Amazon, that might be a perfectly reasonable trade-off. Owning the de facto standard for ebook distribution is a very valuable thing, as is having a huge potential customer base.

But I wonder if it does much good for news organizations.

After all, the newspaper hope for the Kindle is that people will be willing to pay $10 a month (or so) to subscribe to their news on the device. It’s the device that’s the key part of the equation; people are already used to paying $0 for news on their PCs or their cell phones. The value proposition for the Kindle is that this is a unique product tied to the device, and thus worth paying.

But if Amazon is willing to give up some market for the Kindle device in exchange for a larger Kindle distribution channel, then where does that leave news organizations? After all, if you want to read The New York Times on your iPhone, you can already go to www.nytimes.com or use the free NYTimes app. You don’t need to pay $10 a month for that. News, unlike ebooks, already has a working distribution channel: the Internet. A Kindle app on a cell phone would do wonders for ebook sales, but it could eliminate a lot of the appeal of news products sold through the service.

Obviously, it’s too early in the game to know what kind of implications this decision could have — we haven’t even seen the first app. But I suspect this decision will go down as an unhelpful one for news organizations.

Today was a day for dueling e-book readers. Amazon just announced its update to the Kindle, which is significantly sexier than its predecessor (although, at $359, it’s no less reasonably priced). And market newcomer Plastic Logic announced its first content partners for its larger-screened device, which include USA Today and the Financial Times.

We’ve been hearing for years now that the future of news distribution was in portable e-paper devices. And while news on Kindles or similar gadgets is still a very small niche, there is some real momentum gathering in the news business’ big sister, book publishing.

I spoke recently with Russ Wilcox, the CEO and president of E-Ink — the Cambridge company behind a lot of the sector’s technology. He said that it made sense to introduce the tech through book readers. Because earlier displays required a second to reload, that lag imitated the time it took to turn a books page and could have been frustrating with the back-and-forth that comes with reading multiple news stories. And those devices’ text-only environment were a decent facsimile of the book-reading experience.

Why is e-paper interesting to news organizations? First, it’s a potential solution to the decoupling of content and advertising that happens online. As Wilcox put it: “Think of a newspaper as three things: You’ve got the container, you’ve got the news in it, and you’ve got the advertising. You’ve got those things physically bundled together in a way that can’t be physically separated. What’s happening with digital media is that those things can be easily separated.”

On a Kindle-like device, eventually, ads and content could be packaged in a way that doesn’t leave the advertising skipped over, as it often is on the web. And it could push people to think of their news consumption as part of a package deal again — thinking of The New York Times as a packaged good, rather than as a random conglomeration of articles your brother can email you links to.

Second, it’s a possible route to getting readers to pay for the news again. As we reported in November, the Times has more than 10,000 subscribers on the Kindle, each paying $13.99 a month — even though all that content is available for free on the Times’ web site. That’s the beginning of a revenue stream lots of newspapers would love to have.

And it could help solve the portability issue. Not everybody spends all day sitting in front of a computer at work, and for many, the portability of the print newspaper package is a big plus.

So after a decade-plus of hype, what can we reasonably expect from the e-paper world in the next year or two?

— Color. E-Ink and other e-paper manufacturers will likely get color displays to market in 2010, Wilcox said — something that could help with a potential advertising model.

— More powerful displays. In 2009 E-Ink will introduce a display that diminishes the delay time the comes from moving from one page to the next on e-paper systems. (The new Kindle promises page turns 20 percent faster than the old one.) There’ll also be larger displays than currently available, likely in plastic rather than glass.

— Flexibility. At Arizona State University’s Flexible Display Center, researchers recently introduced a display that flexes easily and is durable.

What’s still still unclear is how big the market penetration will be for devices like these. Three or four hundred dollars is still a significant price for most people. Wilcox wonders whether the move by a number of universities to equip its students with e-readers might lead to a pipeline that journalism organizations can exploit. And he suggests advertisers could some day subsidize the cost of getting devices in people’s hands more cheaply. But nearly everyone has a cell phone and a computer — we’ll have to see whether the Kindle or its kind can make a significant dent in those devices, or whether we’ll be waiting another decade or so for “the future” to kick in.

But the “make the reader pay” crowd just keeps sending new combatants with new fodder into the fray.  The latest is Jon Austin, one of the perpetrators of  The Same Rowdy Crowd, in a very long and well-informed post entitled “Fixing the Newspaper Business or ‘Do I have to Do Everything Around Here?‘”  You can read it for its considerable entertainment value (and very thoughtful chain of comments), or save yourself half an hour with Paul Gillin’s summation, or Austin’s own:

Let me wrap up by reviewing the preceding 4,543 words: 1) journalism is not dead, dying or irrelevant; 2) micropayments are the answer to the economic discontinuity afflicting newspapers, and; 3) advances in distribution and display technologies will make digital paper a reality and a viable alternative to paper.

Basically, Austin suggests (a) that news sites adopt a micropayment system in which content is priced in pennies, or perhaps even fractions of pennies, or perhaps even variably priced for different content and for different readers; and (b) that what he calls versions 2.0 and 3.0 of e-paper gizmos will enable newspapers to get to a realistic pay-for-content model.  (Version 1.0 being the Amazon Kindle or Sony Reader, version 2.0 the promised Plastic Logic reader and maybe Kindle 2.0, and version 3.0 a fully flexible, very thin, paperlike, color reader: basically a reusable newspaper).

One problem with this vision is that the Kindle and other e-readers are, for now, one-way content downloading devices that don’t send back data that could be used in a pay-per-click micropayment system.  So newspaper content delivered to e-readers is paid for on a subscription basis, and the results so far seem to point to viability for this model: The New York Times has reportedly signed up 10,000 Kindle readers, or about 1 percent of its 1,000,000 paid circulation base.  It shares the lead among the best-selling Kindle newspapers with the Wall Street Journal, and its not hard to envision the Times and Journal building their e-reader base to 100,000 each on e-readers 2.o, and to 1,000,000 — equalling or beginning to replace print — once 3.0 arrives in a few years.  At $10-$15 a month, that would be real money, even for the Times and Journal.  I mention all this because Austin mentions e-readers as “Thing 2,” but e-readers don’t entail micropayments for microcontent, except maybe as a way to pay for digital “single copies.”

So back to “Thing 1,” micropayments.  This has been a long, drawn-out argument already.  Clay Shirky detailed the case against micropayments as long ago as 2000, as did Andrew Odlyzko in 2003.  To their arguments you might add, “if consumers would accept micropayments, somebody would have figured out how to do it by now.”  The biggest issue is really that any payment at all is an enormous deterrent to usage.  In a web world that has been operational for nearly 16 years now (yes, really!), free has indeed turned out to be a business model that works.

But.  Think about this: micropayments can flow in any direction.  If attention, rather than content, is what has value, because it is scarce in the web world, then why can’t a portion of the micropayments that flow from an advertiser to a content publisher for delivering a page view (or a clickthrough) be diverted to the reader of that page?

If a web users views 500 web pages in a day, which is entirely possible and probably not an unusual level among intense online readers (my history showed 400 yesterday), even at just a quarter-cent per click, that becomes an expensive reading habit (around $450 a year) relative to typical costs for news on paper.

But in a web environment, not far down the road, in which the delivery of commercial content delivery to me is greatly enhanced by whatever I’ve been willing to share about myself in personal profiles on social networks, and by whatever has been gleaned about my preferences from my willingly shared social connections, my searches, my feeds, my content referrals to others, my purchases and my reading —  a world in which the whole web, for practical purposes, has become one big social network —  in that environment, don’t talk to me about paying micropayments.  I — the deliverer of the scarce resource called attention — I don’t want to pay. I want to get paid.

You can pay me, perhaps, in reward points of some kind.  You can charge me for some of the content I view. (I’d willingly pay a few cents, but not the standard $2.95 or more, for the occasional archived news story or Wall Street Journal piece I want to read.)  But on the whole, if my personal CPM is reasonably high, and I continue to read widely, I’ll come out ahead.  And actually, the right model would pay off or break even even for less-intensive web users willing to share some profile data.

But, you may object, clickthrough rates are miserable and online CPMs keep falling — how can there be enough money in the equation to pay readers?  The answer, I think, is in the web’s evolution through 2.0 and toward 3.0.  In a fully social, partially semantic web, vastly better commercial content, vastly more targeted — in  fact, to a large extent invited — will be possible.  The web today attracts only $11 billion in advertising, less than 5 percent of the U. S. total.  With a smarter web and an economic recovery, that will grow exponentially and faster than the associated content creation cost, which opens up the opportunity not only  to finance online news enterprises, but for consumers to get their slice of the pie.