Five of the ten publicly-owned U.S. newspaper companies have reported their fourth-quarter 2009 results; five more to go. (Those reporting so far are Gannett, New York Times Co., Media General, Lee Enterprises and McClatchy. We also have results from News Corp., but News publishes newspapers on four continents, and much of its revenue comes from films, television, cable, and book publishing. Its U.S. newspapers represent perhaps 10 percent of News Corp.’s total revenue and are not broken out for comparison.)

Based on these reports (representing about 42 percent of U.S. daily newspaper circulation), it’s clear that the industry in Q4 2009 saw its 14th consecutive advertising revenue decline; the last nine of those quarters were double-digit declines. And Q1 2010, the one we’re in, won’t be a winner: on the conference calls, nobody reported positive trends for January; a typical positive spin statement was that “we’re seeing a modest improvement in the declines” (Janet Robinson of the New York Times Co.)

Extrapolating from the reported numbers, I’m projecting that the NAA will report (sometime in March) a Q4 2009 ad revenue loss for the industry of about 16 percent (versus 28.3, 29.0 and 27.9 percent declines in the first three quarters), bringing total revenue for 2009 to about $28.4 billion, versus $49.4 billion in the boom year of 2005 — a cumulative decline of 43 percent.  The biggest impact continues to be in classified revenue, which will end 2008 at least 66 percent below its peak in 2000.

Based on the releases and statements on earnings calls with analysts, here are the details so far.

• Newspaper advertising revenue was still down across the board — 17.9 percent at Gannett’s publishing division, 20.5 percent at McClatchy, 16.4 percent at Lee, and 14.7 percent at New York Times Company. MediaGeneral doesn’t break out advertising revenue but reported publishing revenue as down 13.8 percent.  News Corporation reported 10.0 percent growth in newspaper revenue, including what it said was a 5 percent ad revenue gain at The Wall Street Journal’s print edition. (News said its Australian papers lost 5 percent in revenue.)
• Online revenue (usually reported as a component of publishing or advertising revenue), was a mixed bag: McClatchy, which has generally done well relative to the others in this area, reported 14.9 percent growth in online revenue. Lee’s online revenue dropped 8.4 percent; Media General’s rose 10.6 percent. Gannett doesn’t break out online revenue in its publishing division. News Corp mentioned 17 percent ad growth in its WSJ Digital Network. New York Times said its Internet revenues, including About.com and its newspaper sites, grew 10.3 percent and represented 15 percent of total revenue in Q4 2009, versus 12 percent in Q4 2008.
• Total revenue at all of the U.S. groups was still down double digits: Gannett 14.4 percent, McClatchy 16.5 percent, Lee 13.8 percent, Media General 14.1 percent, New York Times 11.5 percent. It will be interesting to see whether the forthcoming reports from other companies also fall into this cluster of losses in the low to mid teens. In any event, clearly the industry as a whole continues to decline precipitously even as GDP has grown for the second quarter in a row. Total revenue at News Corp., which encompasses films (Avatar among them), television, cable and book publishing, was up 10 percent.
• Quarterly profits were generally up, bolstered by the cumulative effect of multiple rounds of cost-cutting during 2009, as well as by low newsprint prices. Lee swung from a loss of $34.3 million in Q4 2008 to a gain of $67.7 million in Q4 2009; Media General improved from a loss of $85.5 million to a gain of $27.4 million; McClatchy sank slightly, from a profit of $27.0 million to $25.8 million; Gannett, which took a huge goodwill writeoff in 2008, zoomed from a loss of $5.2 billion to a gain of $259 million; at New York Times Co., profits rose from $27.6 million to $90.9 million. And News Corp., also weighed down by special charges in 2008, soared from a loss of $6.4 billion to a gain of $254 million.
• For their performance during 2009 as a whole, investors have rewarded the publishers with some bounce in their stock valuations, but that’s not saying much. While the stocks show impressive 52 week gains (McClatchy 689%, Lee 1,242%, Gannett 204%, Media General 315%, New York Times 151% as of Wednesday), all five are far down from where they were five years ago (McClatchy -92%, Lee -90%, Gannett -86%, Media General -81%, New York Times -73%).  Even News Corp., on a five-year basis, is down 16%, though it rose 111% in the last 52 weeks. And in most cases, these earnings announcement have been read as disappointments and greeted with selloffs by the market.

So much for across-the-board comparisons.  The earnings reports and calls provide further nuggets of intelligence about the companies individually:

McClatchy:

• CEO Gary Pruitt said in McClatchy’s earnings press release, “We’re seeing some evidence of a recovery in classified advertising.” But he added that in the first few weeks of January, “ad revenues are down in the low- to mid-teens percentage range and that is consistent with where we expect to see ad revenues in the first quarter of 2010.  In other words, McClatchy expects the Q4 decline of 20.5 percent to be followed in Q1 2010 by a decline of somewhat less than 15 percent, and considers that to be an “improving advertising trend.”
• Inevitably, the continuing revenue shortfall will lead to still more expense cuts. “With revenues down, expenses will also have to be down,” Pruitt said.
• Besides nearly $2 billion in long term debt, McClatchy also disclosed that at year-end, its pension plans were underfunded by $494 million in the “qualified” plan (their standard defined benefit plan, which is frozen), and another $100 million in the non-qualified supplemental executive-level plan. This accumulation of future obligations makes McClatchy one of the most-leveraged publishers out there. On Feb. 4, the company successfully brought to market $875 million in bonds designed to push the maturity date of a chunk of its debt out to 2017, but it will pay pay a hefty 11.5 percent interest on that debt.
• A bright spot at McClatchy is the growth of its online traffic (up 18.6 percent in 2009), and the fact that it leads the industry in the percentage of revenue derived from its web sites — online revenue is 16.2 percent of total newspaper advertising revenue. Asked about the possibility of charging for content, Pruitt said the company is “not ideological about this” and plans some experiments, but he added, “We tend to believe that the overwhelming majority model on the Internet will be a free, ad-supported model and in fact that has proven to be very profitable to us, so we feel that the model isn’t broken…We’ll learn from everyone; we wish them all luck.  If somebody cracks the code, we’ll copy them.”

Gannett:

• Gannett’s aggressive and almost continual cost-cutting during the year paid off with a leap in profitability, and perhaps most importantly, a major reduction in debt — $250 million in Q4, and $755 million for the year as a whole. Moreover, the rise in the stock market during 2009 means that Gannett won’t have to make any contributions in 2010 to its underfunded pension plans. As a result, Gannett’s balance sheet looks better, and its debt leverage ratio has dropped to 2.6 times, giving it some breathing room under its bond covenants of 3.5 times.
• Gannett cautioned, however, that not all of its cost reductions are permanent — some relate directly to the revenue declines and would come back if revenue trends turned upward; newsprint pricing remains low but is expected to rise midyear; and employee furloughs are not permanent.
• Some individual revenue categories remain seriously worse than the company’s overall 17.9 percent slippage in Q4, particularly classified.  In its U.S. papers including USA Today, classified as a whole was off 21.8 percent in Q4; within that category, employment was down 38.3 percent and real estate was down 28.4 percent.  The only classified category showing growth was legal advertising, up 14.5 percent — a result of foreclosure advertising, most likely.

Lee Enterprises:

• Lee was also in the “revenue is declining less rapidly” camp, reporting a drop of 13.8 percent for the quarter (it’s Q1 in Lee’s fiscal year), versus average drops of 20 percent in the prior three quarters.
• Lee continues to report positive results in its online enterprises, with unique visitor growth of 14.3 percent at its web sites.
• Lee’s classified ads also continue to be hammered, with employment revenue down 44.9 percent, automotive off 25.9 percent, and real estate off 21.6 percent. (“All other classified” was up 11.3 percent — there’s that foreclosure advertising benefit again.)

Media General:

• Media General touted a “sequential improvement” in the form of total revenue loss of 14 percent, compared with 18 percent in the previous quarter. In one of the brighter spots among the publishers, Media General said that “in the month of December, total revenues were essentially even with December 2008.” (We’ll take “essentially even” to mean that they were down in the low single digits; the slightest gain would have been headlined as such.)
• Media General’s newsprint consumption was down 57 percent for the quarter, but as with the other publishers, this is the kind of cost that will bounce right back up if business improves, creating a higher cost margin for regained revenue.

New York Times Co.:

• Times has been more careful about pruning expenses at the expense of strategic capabilities than most of the other companies; still, it was able to achieve cost reductions of 15.5 percent in Q4 2009 vs Q4 2008, and propel itself to a profit boost from $63 million to $136 million, quarter-over-quarter.
• Times also paid attention to its balance sheet, reducing debt from $1.1 billion at the end of 2008 to $769 million.
• But, Times execs were as cautious as their industry brethren about forecasting blue skies ahead. New York Times president and general manager Scott Heekin-Canedy said in the conference call (italics added) that “The general sense from our advertisers is certainly much more positive then a year ago this time. We have said in our statement that the visibility is still very limited, but we do know of advertiser intentions to improve their spending this year considerably, but they are very guarded in the way that they talk about it and trends that we saw last year of last minute commitments or last minute pullbacks still seem to be operative this year.”
• Asked variously about how things are going in the current quarter, the execs were circumspect, referring to “sequential improvements” in trends, and “stabilizing” revenue in some categories, rather than reporting any actual growth.
• As it is across the board in the industry, the classified picture at Times is dismal, with Q4 real estate revenue down 36.5 percent, employment down 35.3 percent, automotive down 21.1 percent, and “other” down 8.5 percent (no help from legal advertising here). For the year, the company’s total classified revenue was off 40.2 percent.

Photo by Amelia E used under a Creative Commons license.

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.

PREDICTION: No other newspaper companies will file for bankruptcy.

WRONG. By the end of 2008, only Tribune had declared. Since then, the Star-Tribune, the Chicago Sun-Times, Journal Register Company, and the Philadelphia newspapers made trips to the courthouse, most of them right after the first of the year.

PREDICTION: Several cities, besides Denver, that today still have multiple daily newspapers will become single-newspaper towns.

RIGHT: Hearst closed the Seattle Post-Intelligencer (in print, at least), Gannett closed the Tucson Citizen, making those cities one-paper towns. In February, Clarity Media Group closed the Baltimore Examiner, a free daily, leaving the field to the Sun. And Freedom is closing the East Valley Tribune in Mesa, which cuts out a nearby competitor in the Phoenix metro area.

PREDICTION: Whatever gets announced by the Detroit Newspaper Partnership in terms of frequency reduction will be emulated in several more cities (including both single and multiple newspaper markets) within the first half of the year.

WRONG: Nothing similar to the Detroit arrangement has been tried elsewhere.

PREDICTION: Even if both papers in Detroit somehow maintain a seven-day schedule, we’ll see several other major cities and a dozen or more smaller markets cut back from six or seven days to one to four days per week.

WRONG, mostly: We did see a few other outright closings including the Ann Arbor News (with a replacement paper published twice a week), and some eliminations of one or two publishing days. But only the Register-Pajaronian of Watsonville, Calif. announced it will go from six days to three, back in January.

PREDICTION: As part of that shift, some major dailies will switch their Sunday package fully to Saturday and drop Sunday publication entirely. They will see this step as saving production cost, increasing sales via longer shelf life in stores, improving results for advertisers, and driving more weekend website traffic. The “weekend edition” will be more feature-y, less news-y.

WRONG: This really falls in the department of wishful thinking; it’s a strategy I’ve been advocating for the last year or so to follow the audience to the web, jettison the overhead of printing and delivery, but retain the most profitable portion of the print product.

PREDICTION: There will be at least one, and probably several, mergers between some of the top newspaper chains in the country. Top candidate: Media News merges with Hearst. Dow Jones will finally shed Ottaway in a deal engineered by Boston Herald owner (and recently-appointed Ottaway chief) Pat Purcell.

WRONG AGAIN, but this one is going back into the 2010 hopper. Lack of capital by most of the players, and the perception or hope that values may improve, put a big damper on mergers and acquisitions, but there should be renewed interest ahead.

PREDICTION: Google will not buy the New York Times Co., or any other media property. Google is smart enough to stick with its business, which is organizing information, not generating content. On the other hand, Amazon may decide that they are in the content business…And then there’s the long shot possibility that Michael Bloomberg loses his re-election bid next fall, which might generate a 2010 prediction, if NYT is still independent at that point.

RIGHT about Google, and NOT APPLICABLE about Bloomberg (but Bloomberg did acquire BusinessWeek). The Google-NYT pipe dream still gets mentioned on occasion, but it won’t happen.

PREDICTION: There will be a mini-dotcom bust, featuring closings or fire sales of numerous web enterprises launched on the model of “generate traffic now, monetize later.”

WRONG, at least on the mini-bust scenario. Certainly there were closings of various digital enterprises, but it didn’t look like a tidal wave.

PREDICTION: The fifty newspaper execs who gathered at API’s November Summit for an Industry in Crisis will not bother to reconvene six months later (which would be April) as they agreed to do.

RIGHT. There was a very low-key round two with fewer participants in January, without any announced outcomes, and that was it. [Although there was also the May summit in Chicago, which featured many of the same players. —Ed.]

PREDICTION: Newspaper advertising revenue will decline year-over-year 10 percent in the first quarter and 5 percent in the second. It will stabilize, or nearly so, in the second half, but will have a loss for the year. For the year, newspapers will slip below 12 percent of total advertising revenue (from 15 percent in 2007 and around 13.5 percent in 2008). But online advertising at newspaper sites will resume strong upward growth.

WRONG, and way too optimistic. Full-year results won’t be known for months, but the first three quarters have seen losses in the 30 percent ballpark. Gannett and New York Times have suggested Q4 will come in “better” at “only” about 25 percent down. My 12 percent reference was to newspaper share of the total ad market, a metric that has become harder to track this year due to changes in methodology at McCann, but the actual for 2009 ultimately will sugar out at about 10 percent.

PREDICTION: Newspaper circulation, aggregated, will be steady (up or down no more than 1 percent) in each of the 6-month ABC reporting periods ending March 31 and September 30. Losses in print circulation will be offset by gains in ABC-countable paid digital subscriptions, including facsimile editions and e-reader editions.

WRONG, and also way too optimistic. The March period drop was 7.1 percent, the September drop was 10.6 percent, and digital subscription didn’t have much impact.

PREDICTION: At least 25 daily newspapers will close outright. This includes the Rocky Mountain News, and it will include other papers in multi-newspaper markets. But most closings will be in smaller markets.

WRONG, and too pessimistic. About half a dozen daily papers closed for good during the year.

PREDICTION: One hundred or more independent local startup sites focused on local news will be launched. A number of them will launch weekly newspapers, as well, repurposing the content they’ve already published online. Some of these enterprises are for-profit, some are nonprofit. There will be some steps toward formation of a national association of local online news publishers, perhaps initiated by one of the journalism schools.

Hard to tell, but probably RIGHT. Nobody is really keeping track of how many hyperlocals are active, or their comings and goings. An authoritative central database would be a Good Thing.

PREDICTION: The Dow Industrials will be up 15 percent for the year. The stocks of newspaper firms will beat the market.

RIGHT. The Dow finished the year up 18.8 percent. (This prediction is the one that got the most “you must be dreaming” reactions last year.

And RIGHT about newspapers beating the market (as measured by the Dow Industrials), which got even bigger laughs from the skeptics. There is no index of newspaper stocks, but on the whole, they’ve done well. It helps to have started in the sub-basement at year-end 2008, of course, which was the basis of my prediction. Among those beating the Dow, based on numbers gathered by Poynter’s Rick Edmonds, were New York Times (+69%), AH Belo (+164%), Lee Enterprises (+746%), McClatchy (+343%), Journal Communications (+59%), EW Scripps (+215%), Media General (+348%), and Gannett (+86%). Only Washington Post Co. (+13%) lagged the market. Not listed, of course, are those still in bankruptcy.

PREDICTION: At least one publicly-owned newspaper chain will go private.

NOPE.

PREDICTION: A survey will show that the median age of people reading a printed newspaper at least 5 days per week is is now over 60.

UNKNOWN: I’m not aware of a 2009 survey of this metric, but I’ll wager that the median age figure is correct.

PREDICTION: Reading news on a Kindle or other e-reader will grow by leaps and bounds. E-readers will be the hot gadget of the year. The New York Times, which currently has over 10,000 subscribers on Kindle, will push that number to 75,000. The Times will report that 75 percent of these subscribers were not previously readers of the print edition, and half of them are under 40. The Wall Street Journal and Washington Post will not be far behind in e-reader subscriptions.

UNKNOWN, as far as the subscription counts go: newspapers and Kindle have not announced e-reader subscription levels during the year. The Times now has at least 30,000, as does the Wall Street Journal (according to a post by Staci Kramer in November; see my comment there as well). There have been a number of new e-reader introductions, but none of them look much better than their predecessors as news readers. My guess would be that by year end, the Times will have closer to 40,000 Kindle readers and the Journal 35,000. During 2010, 75,000 should be attainable for the Times, especially counting all e-editions (which include the Times Reader and 53,353 weekdays and 34,435 Sundays for the six months ending Sept. 30.

PREDICTION: The advent of a color Kindle (or other brand color e-reader) will be rumored in November 2009, but won’t be introduced before the end of the year.

RIGHT: plenty of rumors, but no color e-reader, except Fujitsu’s Flepia, which is expensive, experimental, and only for sale in Japan.

PREDICTION: Some newspaper companies will buy or launch news aggregation sites. Others will find ways to collaborate with aggregators.

RIGHT: Hearst launched its topic pages site LMK.com. And various companies are working with EVRI, Daylife and others to bring aggregated feeds to their sites.

PREDICTION: As newsrooms, with or without corporate direction, begin to truly embrace an online-first culture, outbound links embedded in news copy, blog-style, as well as standalone outbound linking, will proliferate on newspaper sites. A reporter without an active blog will start to be seen as a dinosaur.

MORE WISHFUL THINKING, although there’s progress. Many reporters still don’t blog, still don’t tweet, and many papers are still on content management systems that inhibit embedded links.

PREDICTION: The Reuters-Politico deal will inspire other networking arrangements whereby one content generator shares content with others, in return for right to place ads on the participating web sites on a revenue-sharing basis.

YES, we’re seeing more sharing of content, with various financial arrangements.

PREDICTION: The Obama administration will launch a White House wiki to help citizens follow the Changes, and in time will add staff blogs, public commenting, and other public interaction.

NOT SO FAR, although a new Open Government Initiative was recently announced by the White House. This grew out of some wiki-like public input earlier in the year.

PREDICTION: The Washington Post will launch a news wiki with pages on current news topics that will be updated with new developments.

YES — kicked off in January, it’s called WhoRunsGov.com.

PREDICTION: The New York Times will launch a sophisticated new Facebook application built around news content. The basic idea will be that the content of the news (and advertising) package you get by being a Times fan on Facebook will be influenced by the interests and social connections you have established on Facebook. There will be discussion of, if not experimentation with, applying a personal CPM based on social connections, which could result in a rewards system for participating individuals.

NO. Although the Times has continued to come out with innovative online experiments, this was not one of them.

PREDICTION: Craigslist will partner with a newspaper consortium in a project to generate and deliver classified advertising. There will be no new revenue in the model, but the goal will be to get more people to go to newspaper web sites to find classified ads. There will be talk of expanding this collaboration to include eBay.

NO. This still seems like a good idea, but probably it should have happened in 2006 and the opportunity has passed.

PREDICTION: Look for some big deals among the social networks. In particular, Twitter will begin to falter as it proves to be unable to identify a clearly attainable revenue stream. By year-end, it will either be acquired or will be seeking to merge or be acquired. The most likely buyer remains Facebook, but interest will come from others as well and Twitter will work hard to generate an auction that produces a high valuation for the company.

NO DEAL, so far. But RIGHT about Twitter beginning to falter and still having no “clearly attainable” revenue stream in sight. Twitter’s unique visitors and site visits, as measured by Compete.com, peaked last summer and have been declining, slowly, ever since. Quantcast agrees. [But note that neither of those traffic stats count people interacting with Twitter via the API, through Twitter apps, or by texting. —Ed.]

PREDICTION: Some innovative new approaches to journalism will emanate from Cedar Rapids, Iowa.

YES, as described in this post and this post. See also the blogs of Steve Buttry and Chuck Peters. The Cedar Rapids Gazette and its affiliated TV station and web site are in the process of reinventing and reconstructing their entire workflow for news gathering and distribution.

PREDICTION: A major motion picture or HBO series featuring a journalism theme (perhaps a blogger involved in saving the world from nefarious schemes) will generate renewed interest in journalism as a career.

RIGHT. Well, I’m not sure if it has generated renewed interest in journalism as a career, but the movie State of Play featured both print reporters and bloggers. And Julie of Julie & Julia was a blogger, as well. [Bit of a reach there, Martin. —Ed.]

—

[ADDENDUM: I posted about Martin's predictions when he made them and wrote this:

I’d agree with most, although (a) I think there will be at least one other newspaper company bankruptcy, (b) I think Q3/Q4 revenue numbers will be down from 2008, not flat, (c) circ will be down, not stable, (d) newspaper stocks won’t beat the market, (e) the Kindle boom won’t be as big as he thinks for newspapers, and (f) Twitter won’t be in major trouble in [2009] — Facebook is more likely to feel the pinch with its high server-farm costs.

I was right on (a), (b), and (c) and wrong on (d). Gimme half credit for (f), since Twitter is now profitable and Facebook didn’t seem too affected by server expenses. Uncertain on (e), but I’ll eat my hat if “75 percent of [NYT Kindle] subscribers were not previously readers of the print edition, and half of them are under 40.” —Josh]

Photo of fortune-teller postcard by Cheryl Hicks used under a Creative Commons license.

“The idea that you can do ‘more with less‘ is, in my view, one of the four great lies,” Keller told his staff. “What you can do with less, is less. But if you are smart and careful, you can limit the harm.” To that end, Keller said the Times is looking to streamline its copyediting and page design. He ruled out eliminating sections and said layoffs, if necessary, would be based on merit.

On the digital front, Keller said again that a decision on charging for the Times website would come soon. He described the company’s predicament:

First of all, the website earns a lot of money from advertisers — and that, by the way, has started to grow again at a healthy rate. If you charge readers to reach your content, some of them will stop coming to the site. If enough of them stop coming to the site, you lose more in ad revenue than you gain from direct payments. That’s a risk that can be minimized, but it can’t be ignored.

If you DO decide to go to a pay model, there are many intricate questions about how you charge, how much you charge, whether you do it alone or in some partnership with other papers, and how fancy a technical infrastructure you build.

It would only be natural for the Times Co. to consider every option, but that’s the first time I’ve seen anyone there mention a “partnership with other papers” — like, say, Steve Brill’s Journalism Online — as an option. Also, the Times has more than 70 blogs, and Keller said those “consuming considerable effort and expense with little reward” might be cut.

Here’s a full transcript of Keller’s remarks, which was posted on an internal Times server and passed along to me. Don’t miss Keller’s knock on the newly redesigned CNN.com, which he said “has hardly any news”:

Good morning. Welcome to another episode of Throw Stuff at Bill. This year we’ve added one innovation to the Throw-Stuff methodology. As usual we’ve offered foreign and domestic bureaus the ability to join us by conference call, but this year they have the ability to e-mail me questions in real time, and the questions will pop up on the laptop in front of me. Whether I have the ability to find the incoming questions, let alone answer them, remains to be seen.

In a fairer world, this would be a time for celebration. Since we last met here, The Times has won just about every prize in the world of journalism — for the brilliance of our reporting and photography, for the beauty of our graphic design, for the ingenuity of our online storytelling. We have put important but invisible subjects onto the public agenda — the dangers of distracted driving, for instance, and the alarming rates of brain damage in football, to cite two examples where our work has mobilized a government response and may well end up saving lives. We have lived up to our obligation to hold powerful institutions accountable, and to help our readers navigate the complications of life in hard times. Our reporters have unearthed scandal from Washington (the Ensign family, for instance) to Afghanistan (the Karzai family). On the big running news stories of the day — the health care debate, the attempts to rescue the economy, the strategy in Afghanistan, the political ferment from City Hall to Capitol Hill — we have been the great indispensable source. In short, when so much of our competition is in retreat, our journalism has remained astonishingly good, and readers know it.

Almost miraculously, twice this year we have had correspondents freed from captivity in Afghanistan — although in one case the rescue came with a heartbreaking price — and we have used those experiences as opportunities to bear witness. David Rohde’s seven-month hostage ordeal became a gripping narrative of life inside the place we’ve come to call Talibanistan.

We’ve launched a new local news project in the San Francisco Bay Area, with another on the way in Chicago — experiments that may become an important revenue source, but in any case are a sign of new life in print. All of this and much more should be abundant cause for pride.

But the subject that looms over all of us is the impending loss of 100 jobs — with the anxiety and sadness that brings in the short run, and the fear it arouses about the long run. So let me focus today on four questions that I’ve been hearing around the newsroom — and then turn to you for anything else that’s on your mind.

The four questions are:

Why now?

What’s the plan?

Will we get some relief by charging for our journalism online?

And, where will it all end?

Let me acknowledge up front that I operate under three constraints. For starters, I can’t foresee the future. There are also some things in the here and now that I just don’t know. And there are some things I know but can’t say without calling down the wrath of our lawyers. Within those limits I will be as candid as I can be, and I trust that in return you’ll regard this as a discussion within the family, not material for your Twitter followers or Facebook friends.

First, why now? Why, after pay cuts and furloughs that were supposed to carry us through the hard times, are we suddenly talking about buyouts and layoffs in 2009?

Of course, the possibility of another staff cut has hovered over us, really, since the last staff cut, but none of us expected it to happen before next year, and all of us hoped that with the recession bottoming out we had a chance of avoiding a staff cut altogether. Yet here we are.

The fact that we were suddenly faced with buyouts and layoffs does NOT mean that the business of the company has taken a sudden turn for the worse.

On the contrary, the national economy has begun growing again, and, as Janet and Arthur noted two weeks ago in their report on the 3rd quarter results, we have the first, tentative signs that advertising may be stirring back to life, modestly in print and more significantly online. Things seem to be looking up a little. But they are not looking up enough to support a newsroom of 1250 journalists in the years ahead. While advertising may rebound, there is still a lot of advertising that is unlikely to return to the levels of our financial heyday. Look at it this way: Advertising used to account for about 70 percent of the revenues of The New York Times. That number is now approaching 50 percent. We’ve made up for some of the lost advertising by increasing the price of the printed newspaper and by cutting costs, but there’s a limit to how deep you can cut and how much you can demand from your customers. Thus the decision to cut 100 jobs — to create a newsroom staff level that we hope will be sustainable for the long haul.

Once the decision was made to have a staff cut, the reason for doing it now rather than waiting until next year amounted to a simple, hard fact of life: under the Guild contract, anyone who is working here on January 1, 2010, is entitled to all of his or her paid vacation. By making the cuts before the end of the year, the company saves those costs. In practical terms, that means if we wait until next year, to get the same saving we would have to cut more jobs than the 100, probably another ten jobs. Certainly, I’d rather make these cuts later. In fact, I’d rather not make them at all. But if we have to face this, I’d rather face it and get it over with, and move on.

Next question: What’s the plan? How do we shrink the newsroom staff by 100 jobs? Much as we hoped to avoid it, we have not had our heads in the sand. The masthead has been at work on a variety of contingency plans to minimize the damage to a great news report in the event we had to cut staff. The idea that you can do “more with less” is, in my view, one of the four great lies. (You can Google the other three, starting with “the check is in the mail.”) What you can do with less, is less. But if you are smart and careful, you can limit the harm.

We’ve had a lot of experience in cutting budgets — and there are basically three things you can do:

First, you look for any slack in the system, any way to do what we do more efficiently, more economically. In the early days, when we began imposing tighter discipline over management of the newsroom, that meant booking travel through Expedia rather than American Express, it meant looking for cheaper meals and lodging, it meant somewhat less frequent moves of correspondents from one bureau to another, it meant having correspondents work from home rather than commuting to an office. We now run a much tighter ship than we did a few years ago, which has enabled us to save money without compromising coverage.

This time, in our quest for new efficiencies, we’re looking hard at how we move copy — from reporter to publication, whether in print or on the Web. We suspect we can save some slots by streamlining the process.

Could we for example combine some of our copy desks and save a few FTEs by gaining economies of scale and scheduling without compromising the rich, specialized expertise that resides in our cadre of copy editors? Or consider how pages get made. We have skilled designers who draw our pages, paginators who execute those designs and other production staffers who calibrate the tone and color of the pages. We’re looking at whether we can streamline some of that work. Susan Edgerley, Fiona Spruill, Patrick Laforge and Allan Flippen are deep into a study of how we handle copy, and I expect to reach some conclusions in the next week or two. Those are the kind of questions we’re examining, under the general rubric of doing things more efficiently.

Besides looking for slack, you look for things you can stop doing, or things you can do less often. Are there things that aren’t essential to the news report, features that we can live without? In the early days of newsroom cost-cutting, that meant things like stock tables and the Sunday TV book — essentially lists of raw information that were easily accessible on the web. More recently it meant doing away with the City weekly and the regional weeklies. Of course, along the way we have created new things, too. The regionals and City section gave birth to the new Metropolitan section, with zoned pages for the suburbs, and I don’t think I’m alone in regarding it as a tremendous success.

This time, one thing we are doing is taking a close look at our long roster of 70 or so blogs and our online verticals, as we call our focused packages of online content. We think we can save some slots there. Many of our blogs serve a valuable journalistic purpose. Many draw a lot of traffic to the website. Some of them are experiments that deserve more time to prove themselves. We don’t want to lose the inventiveness we have achieved by letting a thousand flowers bloom. But if we find instances where a blog or a vertical is consuming considerable effort and expense with little reward, we’re prepared to do some pruning.

In the days since we announced the plans for a staff cut, I’ve heard some speculation about other things we might be targeting. Since Metro took a hit last time, my friends in Metro wonder if they are in for another round of particular pain. I’ve heard similar rumbles from writers and editors in the features sections — Dining, Home, Travel, Styles and the rest. One of the armchair experts quoted by the public editor wondered why we don’t eliminate the Sports section. I’d like to be as clear as possible: none of those things is on the table. I can’t think of a better reminder of how much our readers count on Metro than our deep and distinguished coverage of this week’s election campaigns, or a better reminder of what we bring to sports fans than our dazzling coverage of the World Series.

I don’t know who will take the buyouts, and I don’t want to suggest that any department is completely immune, but believe we can get to 100 slots without anything so drastic as reducing Metro coverage or downsizing the Sports section — and I believe it would be unwise, at a time when we are asking readers to pay a premium price for our work, to give them conspicuously less of it. Indeed, that’s a point of view you will find echoed enthusiastically by our friends on the business side, who understand that we are more than ever dependent on satisfied subscribers for our revenues.

And, by the way, I think it may be time we stopped referring to sections as “core” or “not core.” The newsroom is a more complicated ecosystem than that. Consider this: although we are a national newspaper, New York is our biggest circulation area, a hugely desirable market for advertisers, and, you might say, our soul. That underscores the importance of Metro. But it’s not just about Metro. Covering New York is the work of Bizday reporters on Wall Street, of our theater, music and art critics, of our fashion reporters and our Dining and Real Estate sections. Folks, we’re all in this together.

So, you cut spending by getting more efficient, by shutting down things that are not essential — and, frankly, by looking for people who, for one reason or another, are not pulling their weight. This is not a newsroom of slackers; we recruit selectively, and we have gotten pretty good at managing out people who don’t live up to our high standards. But when we are forced to cut staff, we look at performance.

As you know, we have offered voluntary buyouts, and I’d be relieved if 100 of you saw a buyout as being in your interest. But if we do not get enough buyout volunteers, and we do have to resort to layoffs, let me be very clear about one thing: we intend to use merit to decide who is laid off and who is not. Nobody in the newsroom is going to get laid off solely because they lack seniority, despite what you may have heard. Our contract with the Guild allows us to go out of seniority and make cuts on the basis of merit. That’s what we did last time, and it will be my priority this time.

One final point on coping with these cuts. This is a cut of about 8 percent in our staff. But some of that lost manpower will be offset because we will not be doing furloughs next year. We’ll each be working 10 more days next year than we did this year. I leave it to you whether that is a blessing, but it will somewhat ease the strain of losing so many people.

The third question that hangs over the newsroom is, what about the website? When will we have a new business model for our online journalism? Briefly put, what is the right mix of advertising revenue and subscription revenue to build the strongest business on the Web?

Jill and I have spent a lot of hours with our colleagues from around the building, including Arthur and Janet, who will make the final decision. I don’t think there’s a variation we haven’t considered, a competing website we haven’t studied, a scenario we haven’t run through a rigorous analysis. It’s taken longer than some of us expected, because, simply put, the answers aren’t as obvious as some people think.

First of all, the website earns a lot of money from advertisers — and that, by the way, has started to grow again at a healthy rate. If you charge readers to reach your content, some of them will stop coming to the site. If enough of them stop coming to the site, you lose more in ad revenue than you gain from direct payments. That’s a risk that can be minimized, but it can’t be ignored.

If you DO decide to go to a pay model, there are many intricate questions about how you charge, how much you charge, whether you do it alone or in some partnership with other papers, and how fancy a technical infrastructure you build.

I can assure you that we’ve covered a lot of ground, and I don’t think you have very long to wait for an outcome. We are indisputably the leader in quality online journalism, and, as the leader, we can afford the time to get this right.

Fourth and last on my list of preemptive questions: will we make it?

I confess to being an optimist by nature, but I’m no Pollyanna. I don’t kid myself that advertising will rebound to the billion-dollar levels of five years ago, or that we can count on digital advertising growing at 30 percent a year again. I don’t think this will be easy. But, yes, we will make it.

You’ve all heard my riff about supply and demand — the persistent, even growing demand for first-rate journalism, and the sadly dwindling supply. That’s no less true, and it is the bedrock on which my own optimism about this place is built. The demand for our work is evident in the print subscribers who pay good money for the glory of the daily New York Times — and who stick with us through price increases and their own economic hardships. It is evident in the floods of visitors to our website — numbers we believe to be much higher than the 20 million monthly uniques counted by Nielsen.

As for the diminishing supply of real, reported news that matters, every week brings another example. Here’s one that’s fresh in my mind. The other day some of us spent half an hour looking at CNN’s redesigned website. It is the second most heavily trafficked online news site. The redesign is cleaner and brighter. Just one thing: It has hardly any news. On Tuesday, when CNN television was treating Election Day with the usual bells and whistles, the home page of CNN.com did not seem to be aware that there was voting going on. The most striking news story on the page had the following headline: “Canadian folk singer killed by coyotes.” (Now, if it had been Joni Mitchell, or Leonard Cohen.…)

A lot of the people predicting (and in some cases unabashedly yearning for) the death of newspapers overlook the simple fact that a recession lowers the tide for all boats. Daniel Gross put it nicely in a contrarian essay last week on Slate:

“In case anybody has forgotten,” he wrote, “we’ve had a deep, long recession, a huge spike in unemployment, and a credit crunch. Consumers have cut back sharply on all sorts of expenditures. There are plenty of members of what I call the 40 percent club: businesses, many tethered to finance and credit, that have seen sales plummet by nearly one-half. These include automobiles, homes, luxury apparel, and diamonds. Many other components of consumer discretionary spending — hotels, restaurants, air travel — have fallen off significantly. Do we draw a line from trends over the last few years and declare that in 15 years there will be only a handful of hotels? I’m not sure why we would expect consumption of a purely discretionary item that costs a few hundred dollars per year not to fall in the type of macroeconomic climate we’ve had.

“Especially when you consider that rather than discounting the product, many newspapers (and magazines) have been jacking up prices aggressively.…

“This,” he concludes, “is the new emerging model — cutting costs, raising prices. It may still fail in the end. But we shouldn’t act as if the online-only crowd has it all figured out. Every month, several million Americans pay to have newspapers and magazines delivered to their homes — a trick most online publications have yet to pull off. In fact, in some regards, print-online hybrids like newspapers and magazines have outperformed online-only publications. The Web operations of the New York Times, Washington Post, and Wall Street Journal aren’t exactly slouches when it comes to selling online ads. And as poorly as the stock of the New York Times has performed over the past decade, most people would have preferred owning it to the stock of Salon.com, or TheStreet.com.”

Maintaining the excellence of the news report has always been a priority of the newsroom and a commitment of the Ochs-Sulzberger family. Because of the growing dependence on circulation revenue, it is more than ever a business imperative as well as a journalistic mission. If we cut the staff to the point where our readers see quality in decline, they will no longer be willing to pay a premium price for it. That’s not just an argument that I will make. It’s an argument the business side will make more passionately than ever.

To that I would add that the recession WILL end, because they always do. Consumers WILL resume spending, maybe not at the profligate bubble-fueled pace of the ’90s, but they will spend. Advertisers WILL advertise and a lot of them will continue to see huge advantage in advertising to the educated, discerning, successful people who read the NYT, in print AND online.

And, last but not least, on my list of reasons for optimism is that we have demonstrated, as a company and as a newsroom, a tremendous ability to adapt, invent, including the game-changing, game-SAVING decision to make The Times a national newspaper, including the luscious franchise of the T magazines, including the font of journalistic invention that is our website, including a cascade of ideas from the newsroom in recent months.

As you know, Jill and I have spent a lot of our time the last few weeks immersed more than ever in our digital journalism, and it is invigorating to spend time with the amazingly inventive producers, product managers, software-builders and others — many of whom have chosen to be at this place rather than in some online startup because they believe in the work as much as those of us who come from the world of ink on cellulose.

Most of you know me well enough to know that standing up in front of crowds is not my VERY favorite thing to do, but there is one reason I relish these occasions. They give me an opportunity to say something that doesn’t get said nearly often enough, and it is this:

The value of The Times, ultimately, is the people here who, through thick and thin, manage to create journalism that is fearless, intelligent and rich — literally in a class by itself. Even during these tense weeks since we announced the news that we would have to have another round of staff cuts, just look at the glorious news reports we have published, day by day, hour by hour. I’d like to end with a simple but deeply felt thank you to everyone here who works their hearts out to create and support the singular mission of The New York Times. It’s an honor to work alongside you.

Now, I welcome your questions or comments.

“Craig inherited the job of standards editor in a world that regularly rattles our conventions,” executive editor Bill Keller told staffers at a newsroom event on Wednesday. (A transcript of the speech was posted on an internal Times site and forwarded along to us.) I found Keller’s remarks revealing of the Times’ angst as it attempts to find new revenue streams and reinvent itself online while sometimes reconsidering long-held standards. Keller mentioned a number of specific issues with which Whitney has dealt, including:

— The New York Times Wine Club
— Times Talks and the use of reporters at Times-sponsored events
— Times reporters appearing on opinionated TV talk shows
— standards for reporters using social networks like Twitter and Facebook
— use of the word “pooping” in a Times blog post about toilet training
— Theater critic Charles Isherwood’s cameo appearance on Gossip Girl
— Film critic A.O. Scott hosting At the Movies
— long-sleeve shirts with the date of President Obama’s inauguration
— speaking fees for reporters

That’s a very different set of issues than someone in Whitney’s shoes would have faced in, say, 1980.

Keller also took a shot at The Washington Post’s aborted salons: “Let’s put it this way. I don’t think there was ever any prospect that Arthur would propose to invite opinion-makers to his house for paid salons with our reporters — but if someone at The Times had given birth to such a scheme, I have no doubt Craig would have been the first to smother it in its crib.”

Here’s the full transcript of Keller’s speech:

The jobs Craig Whitney has performed for this paper over the past four decades range from intern to AME, and include bureaus in Moscow, Bonn, Paris and Washington — with datelines from pretty much every country on the planet that possesses at least one pipe organ. It’s too much career to cram into a toast, and I won’t even try to be comprehensive.

We had a little party for Craig the other night, and he told a lot of great stories about his life at The Times, and I couldn’t help noticing that not one of his stories involved being an editor. Some of us probably understand that better than others.

But today I’d like to say a few words about what Craig has done the last few years — the largely thankless task of helping keep the paper honest at a time when we are hungry for revenues, besieged by ideologues and fly-specked by a legion of self-appointed critics.

Craig inherited the job of standards editor in a world that regularly rattles our conventions. His challenges included the high-speed journalism of the Web, where it is harder to edit rigorously and easier to lose the distinction between news and opinion; they included brand extensions like NYT Wine Clubs and NYT events; they included talk-show hosts who want guest reporters to go beyond telling stories and render verdicts.

He has managed to be gracious and open-minded about all these novelties that arise, but clear-eyed and firm about where the lines must be drawn to protect the integrity and independence of our journalism — in fact and in appearance. His response to new ventures has consistently been — NOT “we don’t do things that way,” but “Is there a way to do that within our standards?” And if the answer was “no,” he was not timid about saying so.

Let’s put it this way. I don’t think there was ever any prospect that Arthur would propose to invite opinion-makers to his house for paid salons with our reporters — but if someone at The Times had given birth to such a scheme, I have no doubt Craig would have been the first to smother it in its crib.

Craig did not save us from the Daily Show, but on a number of occasions he has saved us from ourselves.

Like a lot of judges — especially those at the Appeals Court level — Craig’s job involves making a lot of law. Some of it is written down in formal policy, like legal decisions handed down from the bench. So thanks to him we now have a policy defining how The Times company can use Times journalists in Times-sponsored events, and a whole new policy how we should and should not use social networking sites like Twitter and Facebook and LinkedIn in our reporting.

But a lot of his pronouncements are handled less formally — common law rather than written edict — opinions rendered in phone and e-mail exchanges with a staff and freelance population curious to know what they can and cannot do when it comes to appearing on TV, making a speech, writing a book, taking someone to lunch, being taken to lunch by someone else, doing a freelance article or signing a petition. He has always been, in his judgments and deliberations, resolutely Episcopalian — which is to say polite and measured and well-mannered. When a freelancer or a blogger ventures a little too far into the land of opinion, particularly political opinion, Craig is there to gently pull them back. “It is a just a fact of life that The Times and everybody connected with it is held under a much more powerful microscope than a lot of other publications,” Craig has observed. “What I am saying is, be careful.”

But it is true that the sudden explosion of tweeting and twittering that erupted out of the newsroom has also puzzled him, as it has perhaps puzzled a lot of us. While Craig understands the utility and the appeal of this sort of networking, and its intersection with our journalism, he wonders about the lack of boundaries among some people who twitter. “Too many tweets can make a twitterer sound like a birdbrain,” he has often been heard to say.

Along with Greg Brock, he has read every correction. And along with Phil Corbett, his successor, he has worried about all the words that appear not only in the paper but, now, on the web (a recent exchange with a department head involved the appearance of the word “pooping” in one of our sites). He cleared the way for Charles Isherwood to make a cameo appearance on the show Gossip Girl; did the groundwork to ensure that Tony Scott can appear as a co-host of At the Movies, and worried whether the Times marketing of men’s and women’s long-sleeve shirts with the Obama inauguration date and NYT logo made us look just a little too close to the new administration.

And he has vetted the scale of speaking fees for reporters invited to give outside talks, although the money some groups are willing to pay to hear his colleagues talk has never failed to amaze Craig. “The American Guild of Organists never offered me that much money for a speech,” Craig complained mildly once. For those of you puzzled by all the references to things organic: Craig is an accomplished organist, and has written a book about organs.

Greg Brock told me that whenever he attended a management training session with Craig, he would open the session by reviewing examples of egregious errors we had made. “Now, that’s an embarrassing error to have to admit, isn’t it?” he would say. Then he’d read another one: “Well, anyone should have known that.” And another one: “Can you BELIEVE we got that wrong?”

Of course, all of the errors were under the byline “Craig R. Whitney.” That’s the Whitney style.

One of Craig’s plans after he walks out the door is to write a book about the Second Amendment — and part of me wonders whether his new interest in guns relates at all to the frustrations of being standards editor. For the last few years, Craig has been enforcing the rules in our Dodge City of a newsroom, armed only with the ethics code and his own abundant reasonableness. Perhaps he hankers to pack something with a little more firepower.

At our party the other night I pointed out that it took three people to take over the duties of Al Siegal when he left, and now we’re subdividing Craig’s work among three people: Phil Corbett, Bill Schmidt and Greg Brock. Even with three people picking up his work, Craig will be a very hard act to follow, and we’ll miss him.

Some of the presentations would be familiar to loyal readers of this site: Amanda Michel’s distributed reporting at ProPublica, Ethan Zuckerman’s Media Cloud and “nutritional labeling” for news, DocumentCloud, and The Guardian’s crowdsourcing tool. Here, then, are five other projects that piqued my interest at the conference:

OpenCalais

I’ve mentioned OpenCalais in the context of DocumentCloud, but there’s much more to the software, which was purchased by Thomson Reuters in 2007. In a sentence, OpenCalais parses text for names, locations, organizations, and other entities to make unstructured documents more useful. Oh, and it’s free.

Above are the slides presented by Tom Tague, head of OpenCalais, whose talk focused on how publishers are using the service. The best example is on the last slide: Two investigative-journalism networks, which Tague did not name, are using OpenCalais to compare birth, death, and wedding records with government contracts to identify conflicts of interest that wouldn’t be otherwise apparent.

IBM’s DeepQA project

IBM’s successor to Deep Blue, the chess-playing supercomputer that defeated Gary Kasparov, is DeepQA, a natural language processor that’s being trained to play Jeopardy. It’s a whole different challenge, the complexities of which were explained in a New York Times article last spring and in the IBM promotional video above.

What does this have to do with journalism? Nothing, at first, but the research behind DeepQA (or “Watson,” as they call it at IBM) could improve the way information is processed and interpreted — and hasn’t that long been the news industry’s specialty?

Maplight

Maplight is a project funded primarily by the Sunlight Foundation that seeks to “illuminate” the connection between money and politics in California and the federal government. Their databases allow users to compare votes on particular bills with campaign funding from interest groups that supported or opposed the legislation. The widget above, for instance, demonstrates the correlation, if not causation, between contributions and votes on a Medicare bill in 2007.

IBM’s Many Eyes project

Many Eyes is IBM’s free data-visualization software. (I used it for two posts earlier this year.) Fernanda Viégas and Martin Wattenberg demonstrated some of their best text-based visualizations, like Word Tree, and previewed a new one that compares Google searches, pictured above comparing the most common endings of searches for “is my son…” and “is my daughter…” Think of it as an amped-up version of Google Suggest.

Linked data at The New York Times

I actually missed this presentation, but Alexis Lloyd of The New York Times Co.’s research and development group, which we profiled at length in May, discussed how the Times is using linked data to organize its content. ReadWriteWeb reported on this project in June. The slide above, for instance, illustrates how the Times classifies airline accidents to create a more-intelligent archive of its plane-crash coverage.

Slide photos by Andreas Myhrvold Braendhaugen and lite used under a Creative Commons license.

In his monthly memo to staff yesterday, Times president Scott Heekin-Canedy, channeling the Style section, called the ensemble “a summer sensation for The Times Store.” The umbrellas have sold out, and the rain coats (sold separately for $65) are in short supply, though I’m told more of both are on their way. The items were produced exclusively for the Times, but neither has the newspaper’s branding on it.

Though hot-selling merchandise will hardly cure the Times Co.’s cashflow woes, the collaboration with Mizrahi points to potential revenue streams for news organizations selling tangible, private goods. The Globe and Mail, in Toronto, sold out 500 spots on a luxury cruise with its journalists last year. And The Telegraph, in London, has found success selling items from tulips to panama hats. Obviously, newspaper stores aren’t just for framed reprints anymore, although Heekin-Canedy noted that a 40th-anniversary edition of the Times’ famous “Men Walk on Moon” front page, signed by Buzz Aldrin, was “one of the store’s most popular items” this summer, despite a $795 price tag.

The Times first collaborated with Mizrahi earlier this year, when he produced a silk scarf and leather hand bag in a warm palette that Adolph Ochs might have found garish. (A recent Times review of Mizrahi’s work described it as “awash in gorgeous color.”) The hand bag included a gothic “T” medallion on its handle, a subtle form of branding that’s absent from the rain gear.

In addition to its Times Store wares, the newspaper recently launched a wine club at $90 or $180 for six bottles. (The Wall Street Journal and USA Today are also hawking vino.) In his memo, Heekin-Canedy said that Times employees, many of whom absorbed a 5-percent pay cut earlier this year, can get a 30-percent discount on their first shipment from the club.

I kid about all this, but merchandise sales, whether t-shirts or transparent vinyl rain coats, are likely to play a significant role as news organizations scramble to replace print advertising revenue. Mizrahi, who gained fame as a designer for Target before moving to Liz Claiborne last year, once said of his work: ”My goal is that you won’t always be able to tell the difference between what is Target and what is couture.” For the Times, the idea is you won’t be able to tell the difference between a newspaper company and a fashion label. Stacy Green, a Times spokeswoman, told me in an email, “We are looking to work with other designers in the future as well.”

What does this have to do with the New York Times Co. and its plan to sell the Boston Globe? One of three bids being considered would draw on the nonprofit sector. But for all the recent talk in Congress and other places of converting newspapers to nonprofits, there hasn’t been much action. A look at the bidding for the Globe in light of my experience with my Honda might help explain why the nonprofit model isn’t working for daily metro newspapers — and why newspaper owners are choosing instead to go with the death spiral.

The Globe does cost a lot more than my Honda to operate. But the really big bucks — the $1.1 billion purchase price — is money long since spent. Just like the cost of a new car bought 13 years ago, there’s no way to recover anything close to the purchase price. I can tell by checking the Blue Book value.

The execs at the NYT Co. no doubt are learning a similar lesson after putting the Globe on the market recently.

The offer from Celtics co-owner Stephen Pagliuca and Partners HealthCare chairman Jack Connors proposed a “civic approach’’ that would involve a nonprofit foundation to help fund and run the news operation, according to a Globe report. No word on the financial terms.

Another, from the Beverly Hills buyout firm Platinum Equity, proposes a payment of $35 million and assumption of $59 million in liabilities for the Globe and associated properties in the New England Media Group, according to a report in the Los Angeles Times.

At first, I thought the LAT’s numbers must have been mistaken — the $94 million value of the bid is less than 10 percent of the NYT’s purchase price in 1993. But Platinum apparently was able to buy the San Diego Union-Tribune for $50 million. So assuming for now that’s what the market will bear, Platinum’s offer carries an implied message to the NYT Co.: We bet you can’t make the Globe produce profits worth more than $94 million any time in the forseeable future.

If I were at the NYT Co., I’d feel a bit insulted — and I’d start looking at the Globe the same way I look at my Honda. Sure, I could sell it for a couple thousand dollars. But it’s worth more than that to me, even in its depreciated, degraded state.

So here’s the question: What would it take for the Globe to generate profits that would be worth $94 million in today’s dollars? A scenario based on data from the NYT’s most recent 10-K report might help us see the Globe from the NYT Co.’s point of view in purely financial terms.

Let’s assume the worst — that Globe/NEMG revenues, which were $523 million in 2008, continue dropping 12 percent per year, and that the cost of capital comes at a usurious Carlos Slim rate of 12 percent per year. And let’s assume a short-run time frame of five years. Even then, the Globe would have to eke out a relatively meager profit of less than 8 percent per year to do better than the Platinum bid.

Would that require more cost cutting? Probably. But the cuts almost certainly would be kinder than anything Platinum would impose. Suddenly, if I’m at the NYT Co., keeping the Globe doesn’t seem like such a bad option — which is probably what the folks at Cox decided recently when they pulled the Austin American-Statesman from the auction block.

And why wouldn’t the NYT Co. sell to the local guys who want to go nonprofit? It’s essentially the same reason I don’t donate my Honda to charity. I’m not planning to quit driving any time soon. And though the Honda might die in the next year or two, it probably won’t. So even if it gets a few more dings and the hinky passenger window stops working, I’ll keep driving it. When the wheels finally do come off, that’s when I’ll take my tax deduction.

Photo of a 1996 Honda Civic by Gian Cayetano used under a Creative Commons license.

But I’m still hoping to see that lawsuit — not because I think The Huffington Post is necessarily in the wrong but because a major case of that sort could begin to clarify the increasingly muddled issues of copyright on the Internet. For instance, how do you apply a 91-year-old legal doctrine known as “hot news” to a website that never heard of news that isn’t sizzling?

Well, I’m no copyright lawyer, but UCLA professor Doug Lichtman is, and he just released a wonderful, hourlong podcast on what intellectual property means in the context of news reporting. Most of the program focuses on the dueling lawsuits over Shepard Fairey’s use of an Associated Press photograph in his iconic Obama “Hope” poster. Lichtman interviews lawyers from both sides and offers a more thoughtful discussion of the case than I’ve seen anywhere else.

But my interest was really piqued by his chat with The New York Times Co.’s general counsel, Ken Richieri, who considers whether news aggregators are protected by “fair use,” the legal standard that permits reproduction of copyrighted material under guidelines that, as Richieri says, “work a lot better in the analog world than they do in a digital world.”

He ends up largely dissenting from the view of other media companies in suggesting that while news aggregation might constitute unfair competition, it isn’t really a copyright issue: “The AP’s saying, ‘Well, if all of these facts are listed in the same place [on an unlicensed site], that’s a substitute.’ And that may well be, but I’m not sure it’s a substitute for the expression, which is what copyright protects.” He also observes that “traditionally, newspapers were the users of fair use, and pretty much that’s all they did and saw themselves as.” Richieri:

I mean, I think the big issue online and the pressure publishers are feeling is that publishers online are having a hard time replicating the economics that they saw offline. And many of them are looking at that through the lens of copyright…. I think where I would just draw a distinction is I am not so sure that copyright is really the culprit in a lot of this…that that’s an imperfect lens and an imperfect remedy.

Lichtman has graciously allowed me to clip his 7-minute interview with Richieri and reproduce it here with a transcript, which is after the jump. (Despite the news value, I’m pretty sure this wouldn’t qualify as fair use of Lichtman’s podcast. But, again, I do think the full hour is worth your time.) Here’s the clip, which begins with Lichtman:

[See post to listen to audio]

Richieri and Lichtman have an interesting backstory: They were on opposite sides of a copyright and unfair-competition lawsuit that ended in January. The Boston Globe, which is owned by the Times Co., had launched a series of localized aggregation sites that, among other material, reproduced headlines and ledes from GateHouse Media’s community newspapers. GateHouse sued and hired Lichtman to produce an expert opinion supporting their case.

The Times Co. defended its practice but ultimately settled on terms that were favorable to GateHouse and which ended much of the aggregation in question. Though they don’t address the case specifically, that’s certainly part of the background from which Richieri and Lichtman approach the issue of fair use.

Here’s a transcript of their conversation:

Doug Lichtman: I would think that the newspaper world would look at fair use and also at the idea-expression dichotomy and all the rest and want to be very cautious. In essence, saying, Look, we’re in trouble. We’re having a lot of our stuff used or reused and linked to and so on, and that’s wonderful for spreading information and good for public policy and learning. But, wow, we need to still defend some boundaries to make sure that somehow we can still fund the business. Is it the right starting point, to think about fair use?

Ken Richieri: I actually don’t think that’s the right starting point just ’cause historically it’s not. Most newspaper lawyers, as opposed to copyright lawyers — copyright lawyers are going to approach fair use from an ownership perspective, and newspapers approach fair use from, for lack of a better word, the fair perspective. In other words, traditionally, newspapers were the users of fair use, and pretty much that’s all they did and saw themselves as. So there’s a much more First Amendment component to how newspapers view fair use and the Copyright Act generally than, I think, you would get if you just talked to people whose formative experience was solely on the IP world. So they’re solely representing licensors and licensees.

Lichtman: I get that. To make good news reporting, you’re going to be doing a lot of borrowing and quoting. That sounds right to me. Is there a good touchstone that the newspaper industry is kind of fumbling toward to understand where we draw the line?

Richieri: Well, I think fumbling is a very good verb to use. I think that people are fumbling towards a standard. And I actually think that some of the best work or thinking is done on some of the larger sites like NYTimes.com, where we are at the same time creators of content as well as users of other content. And so we’re very much in two camps sometimes. You know, sometimes you have a creator cap on and sometimes you have more of the cap of somebody who is trying to utilize fairly someone else’s content.

Lichtman: Fair use tries to articulate touchstones — transformative, economic impact, and so on. Do those work?

Richieri: I think the traditional fair-use guidelines, in my experience, work a lot better in the analog world than they do in a digital world. Now, whether that’s because we’re more used to the analog world so the rules are better known. I think that’s part of it. I think a large part of it, however — there are several things. One is that in the online world things move so rapidly and the underlying economics are still developing, so it’s very difficult to have a settled legal rule when those things are moving so quickly. And then also, you have just new innovations, constant layering. You think, OK, I understanding framing or something like that and then layer on layer comes on top of it and changes it how it works and what the economics are.

I mean, I think the big issue online and the pressure publishers are feeling is that publishers online are having a hard time replicating the economics that they saw offline. And many of them are looking at that through the lens of copyright, and I’m not — I think where I would just draw a distinction is I am not so sure that copyright is really the culprit in a lot of this, and I don’t know — that that’s an imperfect lens and an imperfect remedy.

Lichtman: So what changes when we go online? One thing that changes, obviously, is there are more sources. And that kind of competition, we would just say, the industry has to mature and live with. So to the extent the economics changes because there’s a bunch of bloggers or Twitterers or this’s or that or everybody can — great. And maybe that will lead to nice diversity of viewpoints in reporting. Maybe it’s too many voices, and we drown each other out. Regardless, the law wouldn’t intervene with that. We let competition go. Another story, though, is about all the linking, the framing you mention. There are all these ways where the competition is competing with your own stuff. And I think that’s why people go back to copyright law. Because that’s used to be a set of rules that stopped you from having to compete with yourself.

Richieri: Well, I would say, see, let’s just start with linking. It’s very hard for me to see linking as a copyright violation. Linking is what makes the web the web. Without linking it wouldn’t be a web. Linking is a way to get from one place to another. To the extent that people, the content creators, are complaining — in my perspective, oftentimes — to the extent they’re complaining about the copyright implications of linking, what they are really saying, is, “I’m not able to monetize that traffic as much as I would like.” That’s really their underlying complaint. I don’t know that — if it were a true copyright, if it were really grounded in copyright, the argument would be, “Well, because these links exist, people are not coming to my site. They are just reading the link and being satisfied with it.” That’s not what I think they’re saying. So I don’t think it’s a substitutability issue.

Lichtman: And yet, sometimes the link could be a substitute, like in news aggregation. The Associated Press has been active on this, for instance, arguing, Look, you take a bunch of our links and maybe and take our headlines or a snippet of our stories, and people won’t come to the other sites that have that data because you’ve basically taken over the aggregator’s role, to the extent of demand is just, skim the headlines to know the big ten stories. Now no one clicks through the link, and you’ve really hurt me.

Richieri: Yes, the AP has made a lot of that. I think that that kind of a position is best articulated on some notion of unfair competition than it is under copyright, which again, at bottom, is grounded on taking the expression. You know, there is that old fact, you know, the fact-expression dichotomy in copyright. And, at some level, again, if you just abstract the argument, I mean, the AP’s saying, “Well, if all of these facts are listed in the same place, that’s a substitute.” And that may well be, but I’m not sure it’s a substitute for the expression, which is what copyright protects.

Lichtman: Right. And I guess you could go the other way to say, Look, if I didn’t take any of your expression and I’m careful about how I link back and how I choreograph my links, the big-picture economic issue might look exactly the same.

Richieri: Exactly right.

Lichtman: And so that tells us then that we ought to be thinking about the big-picture economic issue using different words rather than the copyright words, which go to expression.

Richieri: Right. I think it’s useful to keep in mind that certainly the newspaper world lived with this for a long time. I mean, I’ve — there have been many years, when for years I’d get up in the morning, I’d turn on the radio, and you hear, The New York Times is reporting today that, blank.

Lichtman: Right.

Richieri: That was a mainstay of television and radio reporting of news.

The New York Times website, nytimes.com, is considering charging a monthly fee of $5.00 to access its content, including all its articles, blogs and multimedia.

It also asked about a $2.50-a-month “discounted fee” for print subscribers.

What bugs me most about that survey isn’t the idea that the Times wants to charge for its web site. As a news consumer, I love having the world’s newspapers free and a click away. But I know enough about the financial situations of most American newspapers — and the desperation they feel about their tumbling revenue numbers — that I’ve come to accept that we’re going to see a lot more experimentation with charging for access in the coming months. I wouldn’t be shocked if the majority of major American newspapers erected some sort of pay wall by year’s end.

No, what bugs me most is that the Times is thinking about charging so little.

The Times is the premier brand in American journalism, and it appeals to an elite audience. Charging anything for access to a newspaper web site is going to drive away a lot of readers. But if you’re going to charge and go through the massive dislocation of turning something free into something with a price tag — charging just $5 makes it seem like a damaged item in the discount bin. Here are three arguments for why the Times — if it’s going to charge — should charge more:

— Five bucks a month doesn’t generate enough revenue to make a dent in the paper’s problems. Hamilton Nolan at Gawker notes approvingly that “if all 650,000 print subscribers paid $5 a month for the website, that would be an instant $39 million per year.” That’s likely very optimistic, since the Times is talking about half-off for print subscribers — and, of course, a hefty portion of Times print subscribers are plenty happy with a print-only lifestyle. But let’s say half of print subscribers sign up at $2.50 a month. That’s $19.5 million a year.

How about online-only readers? The Times Select experiment topped out at a little over 200,000 subscribers and $10 million in annual revenue; that was at $50 a year and covered only a small fraction of the Times’ content. Let’s imagine the number of non-subscribers willing to pay is now three times what it used to be. At $5 a month, that’s $36 million.

This is obviously back-of-the-envelope stuff — and I suspect it’s an optimistic envelope — but that’s about $55 million a year. The New York Times Media Group (which also includes the International Herald Tribune) had revenue of $396 million in the first quarter. In other words, this probably optimistic estimate would bump up revenues by about 3.5 percent. And that’s before you factor in the inevitable loss of online advertising revenue, no matter how semi-permeable the pay wall ends up being.

At a time when advertising revenues are cratering — and nytimes.com is the single strongest untapped asset the newspaper has — to go through all the dislocation of a pay wall for only a tiny bump in revenue doesn’t seem worth it.

— It ignores the lessons of micropayments. There’s been plenty of debate over Chris Anderson’s Free, but one of his strongest arguments is that there’s a huge mental gap between something that’s free and something that costs even a tiny amount. The mental transaction cost of paying for something when free options are available is very real. But the flip side of that is that the fear newspaper execs have about charging for their web sites should be primarily about the act of charging — not about the specific price point.

The Times is well aware that mental transaction costs are a big hurdle; that’s why they’re down on micropayments as a solution. As Scott Heekin-Canedy, New York Times Media Group president/GM, said recently:

Our general view is that micropayments are too cumbersome. It is just like getting in a taxi and the meter is running for every word or page you consume. It creates an anxiety that just doesn’t belong here.

Anderson writes about a Dan Ariely experiment in which people are faced with the choice of “buying” a 14-cent chocolate truffle or a free Hershey’s Kiss. Sixty-nine percent chose the free Kiss. When the prices were hiked a penny — 15 cents for the truffle and 1 cent for the formerly free Kiss — 73 percent chose the truffle. (Some folks disagree about the specific numbers.)

One lesson to draw from this is that free is a very attractive price, and that charging anything above zero will drive away a lot of customers. And that will no doubt happen if the Times puts all its news behind a pay wall.

But the other lesson is that, once you get past that zero barrier, you have more flexibility with pricing. Raising the price of a truffle from 14 to 15 cents didn’t drive everyone away.

Or to look at it another way: If someone is willing to pay $5 a month for the Times, wouldn’t they probably also be willing to pay $6? Or $7? There are probably some people for whom there really is a magical cut off at $5.75 or whatever. But I’d wager the vast majority of people who are willing to pay $5 would also be willing to pay $10. And a big chunk would be willing to pay $15. The big hurdle is from free to non-free, getting people to actually turn over their credit cards and commit to paying anything. Once you’re past that, setting too low a price is leaving money on the table.

— It sets an implicit ceiling on what other newspapers can charge. Say you’re an exec at The Seattle Times, or The Kansas City Star, or my old paper, The Dallas Morning News. You’re bleeding heavily; your newsroom is maybe half what it used to be, and the numbers aren’t getting any better. You’re thinking about how you can get away with charging for your web site to generate some revenue.

Then you hear that the Times — the gold standard of American newspapers — thinks its web site is worth about $5 (or $2.50) a month. How much pricing room does that leave you? Once that becomes the top of the market, what are you stuck with — three bucks a month?

We already have a marketplace for digital news to compare this to. On the Kindle, the Times costs $13.99 a month, but regional papers price themselves are priced at somewhat less ($9.99 for the Boston Globe, Chicago Tribune, Arizona Republic) or a lot less ($5.99 for the Seattle Times, Philadelphia Inquirer, Atlanta Journal-Constitution, Houston Chronicle). If that gap in prices carries over at all into how newspaper value their web sites, everyone who’s not the Times (or the Wall Street Journal and maybe Washington Post or Los Angeles Times) is going to be stuck in the bargain bin before they even start charging. (Update: Someone pointed out to me that Amazon sets Kindle subscription pricing, not newspapers — my apologies. But if anything, I think that strengthens the argument, since Amazon has the richest data across publishers of what digital subscribers will stand for and is presumably trying to maximize its revenues.)

(Kindle pricing also forces the question: If Times stories without video, without interactivity, without color — and without all the other stuff at nytimes.com — are worth $14 a month on the Kindle, why in the world is the web site only worth $5?)

What price would I set for nytimes.com? There are plenty of smart business people at the Times, and they have access to a lot more data (like those survey results) than I do. But I think charging anything less than $10 a month devalues the product and doesn’t maximize revenue.

But as we’ve seen with other news sites, the huge spike didn’t produce much advertising revenue — or, at least, not the copious coin you might expect from traffic at a rate of 7,300 hits per second. That’s because the Times could only serve cheap, remnant ads to its unanticipated visitors.

Deputy managing editor Jonathan Landman told me over the phone today that they might have been able to wring more revenue from the traffic if Yahoo had linked to an article in the site’s Theater or Small Business sections, where demand is much higher for expensive advertising sold by the Times.

I wrote about this quandary when The Wichita Eagle got a similar bump from the same spot on Yahoo’s homepage but only generated “a few thousand dollars” in ad revenue. There’s no easy solution here, but I still wonder if major publishers like McClatchy, which owns the Eagle, or The New York Times Co. could better prepare for selling ads against traffic spikes. One option might be forming an ad network of news sites expressly for that purpose.

On the other hand, a link from Yahoo, the web’s second-most-popular site, is a unique experience that may be impossible to anticipate. “We get lots of trafffic from Drudge and Huffington Post,” Landman said in our brief conversation, “but under no circumstances do we ever get a spike like this.” An excerpt from the memo by Landman and Denise Warren, general manager of NYTimes.com, is after the jump.

Links from other sites generate traffic to ours. Usually this happens incrementally, a little here, a little there, adding up over time. Every once in awhile, though, it comes with a rush you can almost hear, causing wild traffic spikes at the most unexpected moments.

On Thursday afternoon, Yahoo put a link in the “Featured” box at the top of their home page to this Home and Garden story. http://www.nytimes.com/2009/06/18/garden/18houses.html

In an instant, traffic to our site nearly tripled, breaking a couple of records: nearly 7,300 hits per second and 4.9 million page views for the hour in which the spike occurred, then 4.2 million in the following hour. That’s higher than anything we saw during the 2008 election campaigns, when the previous records were set.

It’s at moments like this when our technology is put to the test, along with the developers who build and maintain it. To their great credit, everything worked brilliantly.

UPDATE, June 28, 5:20 p.m.: I fixed my description of the Home and Garden article, which leads with a house next to a rail line but is more generally about nice homes purchased on the cheap by virtue of their unfortunate locations. Thanks to Sarah Maslin Nir, who wrote the piece, for emailing me today with that correction.

1. Newspaper companies that attempt a pay wall imperil their value. Sorry to put on my French cuffs here, but this is an important point: With so many local newspapers on the brink, it’s fair to assume they have only one more chance to find a revenue stream in online subscriptions. And until they make that last attempt, investors can all be hopeful about the prospects of charging for news online.

That hope is currently priced into the stock of Gannett Co., The New York Times Co., News Corp., McClatchy, and every other publicly traded company with hobbled newspapers on their hands. If they try and fail to erect a pay wall, their already-flimsy valuations could evaporate as investors decide there’s no hope for newspapers to find a new business model.

And keep in mind that many of these companies would still like to unload some properties on private investors who are more bullish about the newspaper business (the Sam Zells of 2009). That’s a lot harder to pull off if it’s plainly evident the papers won’t be able to wring any subscription revenue from their onine readers.

2. Pay walls aren’t necessarily intended to generate revenue. It’s counterintuitive, but charging for the website may be an effective way to protect the print edition, which still provides 80-90 percent of income at most newspaper companies. In fact, MediaNews Group’s president, Jody Lodovic, recently told Editor & Publisher that while the company plans to erect pay walls, it doesn’t expect a windfall from them. “The whole idea is to stop the erosion from print to online and encourage people to become print subscribers,” she said.

It’s obviously not a great longterm strategy. But when we consider whether pay walls will work, it’s important to realize that newspaper executives may have a different definition of success here.

3. “It’s not pay wall/no pay wall.” That’s a quote from Alan Murray, executive editor of The Wall Street Journal Online, whom I interviewed last month on this topic. Murray’s point is that an effective model — or, at least, the Journal’s model — for charging online pinpoints exactly what content readers are willing to pay for and leaves the rest free. And in that sense, “pay wall” is a total misnomer. Not a serious suggestion, but maybe we should call it a pay window?

Last month, Times Co. CEO Janet Robinson said this about pay walls: “Our goal is to add substantial new revenue from our users, without materially affecting our leading display advertising business.” To me, that means the Times is not planning to charge for much or any of the content it currently produces but will ask select readers to pay for extra services that don’t yet exist. That’s like pay molding.

4. Even if pay walls are the future of newspapers, they aren’t the future of news. Newspapers face a very specific financial situation that’s driving their choice to charge for content or not. These companies are giant ships with dim prospects for quickly turning around in this economic tempest, so naturally they will turn to stopgap measures. It would be a mistake to read much more into it than that.

Our tour of The New York Times Co.’s research and development lab, which concludes with today’s video, represents the first time many of their projects have been seen in the wild. But before we got in there, similar tours had been given to more than 150 advertisers. The company, of course, has a huge stake in the next generation of marketing, which appears as uncertain as the future of news.

Some of the R&D group’s advertising innovations include: RFID chips that connect print ads to more dynamic content on the web, ads that can shift from one screen to another, ads that are linked to what friends are chatting about online, and targeted advertising of all sorts. They also developed the new, more-prominent, advertising units that have been adopted by members of the Online Publishers Association. Those ads are scheduled to roll out in June on major sites like the Times, ESPN, and CBS.

If the news industry’s paradox is declining revenues amid unprecedented popularity of its content, advertisers face the opposite problem: in the midst of record spending, there’s increasing evidence that their work is largely ignored. And while the fate of advertising is not necessarily tied up with the fate of news, the opposite is certainly true, so it’s no surprise that much of the R&D group’s work is focused on this area.

Loyal viewers of our first four videos from the R&D lab will notice that I’ve repurposed some footage for today’s installment, but most of it is new. And as always, a full transcript of the video is after the jump.

Nick Bilton: 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. [...]

Alexis Lloyd: It used to be that you had a newspaper, and that was your sole conduit to the general public, and advertisers were buying a piece of that ability to talk to the mass audience, and that’s no longer really the case. And you see advertisers trying to create content — and sometimes successful, usually not very successful — and we’re looking at, are there new kinds of partnerships that can be formed that are beneficial for the advertiser, beneficial for the end user, hopefully, and that don’t compromise our journalistic ethics and mission. So as, so we’re exploring some of those models, whether it’s ways of helping advertisers to create content because that’s our expertise and that’s not really their expertise. Whether it’s ways of integrating advertising into some of these experiences that we’re showing you. We’ve also helped to develop some of the new online ad units that all the OPA sites are going to be launching with in June. So those are some of the areas we’re looking at in terms of advertising innovation. [...]

Michael Young: Right here I have one of our new ad units for the website that are actually going to go live this summer. It’s just one of the new OPA units. It’s just an expandable ad. So we wanted to look at this to say, what parts of advertising, you know, could we send to a TV if we wanted to, for example? So in this case, it’s a Ralph Lauren ad that we mocked up. Any component of the ad I can actually take to look on the TV on a larger screen. So if it was, in this case it’s shots from the runway. So if I saw this and wanted to have a better look at some of these clothes, again I could just take this and drag it up to the TV and see the high-res image of this on the television. [...]

Bilton: I think the question is not, it’s not finding the place [to put advertising], it’s culling it, right? It’s finding where not to put it. Because you could put it anywhere in these interfaces. You could, you know, there could be ads on the side and bluh bluh bluh, all over the place, but I think that the real challenge is, as we look to aggregate content better based on the device and look at the challenges between content and context, advertising becomes equally as important as far as where it goes. So it’s not necessarily, you know, it’s more about limiting it and figuring out the best possible solution for where you see it. And the CustomTimes experience, you know, if I watch Mark Bittman, you know what I’m watching, you know what device I’m on. You can give me a really, really great advertising experience that actually makes sense.  It’s not just a random, you know, car ad or whatever, you know?

Lloyd: And I think that one of the things that we’re seeing is that advertising doesn’t always have to be a bad experience. I never thought I’d hear myself say that. But it doesn’t always have to be a bad experience for the user. [...]

Ted Roden: Nick just tweeted. He’s a big clotheshorse, and the new Ralph Lauren line is out, he says. It looks awesome. Now we can just look at that and say, this is the new line from Ralph Lauren, and we can parse that out and figure out what’s going on and figure out if we have an ad based on that. So we fling that over and see what he’s talking about there, and the ad comes up. [..]

Lloyd: And in that case, advertising can be a value-added proposition for both the advertiser and the user, in that it’s more particularly targeted to what you’re doing, what you’re talking about. And therefore you’re more likely to actually respond to an ad and find it useful rather than intrusive.

Josh Benton: As people who look at what’s going on in online advertising, are there any sites or any advertisers who you think are doing a particularly effective job in breaking through the sort of way that the web experience, at least, teaches you to ignore the ads? Have you seen anyone who’s really doing something interesting that you think is effective?

Lloyd: Yeah, I mean, I think that the new Honda ad on Vimeo —

Bilton: Yeah, that’s fantastic.

Lloyd: I thought was a really, really fantastic use of the page.

Benton: Made me watch it.

Lloyd: It did. It made me watch it. I would never watch a car ad, I don’t, you know, really drive much. [Laughter] But —

Bilton: I think Gawker’s actually done some really innovative advertising work. They did a piece a while ago where the content looked like it was sitting on like these cartoon bookshelves. And I really like the fact that they take over the whole page, and the whole page becomes this big storytelling mechanism. Who else?

Roden: There was a great Wario Land or Wario Wii game that took over the whole YouTube, which is probably a pricey ad buy. And it was the whole page and it was kind like the Vimeo one: You pressed play, but then the whole page fell apart ’cause it was so violent or whatever. It was really good, though, ’cause it was so subtle for a very long time.

Lloyd: And I think one example of where people are using technology to target people is on Facebook, but I don’t actually think it’s — it’s an example of how targeting isn’t the whole story, that it has to be interesting or useful advertising as well. It’s almost creepy how well targeted the ads are.

Bilton: I saw an ad for a dentist that said, “New York Times employees get 20 percent off with this dentist.” And I was like, “Whoa, cool,” and I clicked on it, and then I realized that it probably just changed it for — it doesn’t matter what network you’re in, and that’s it.

Benton: Just search for your employer.

Bilton: A lot of the advertisers, you know, with the recession, they’re having a tough time trying to figure out what’s working, and the ability to experiment is not there where it used to be. The mobile space is a clear example of that. There’s not a lot of innovation in mobile advertising. You know, even on iPhones, there’s still little banner ads that click off to a regular mobile site. There’s a few that have worked, and they’ve actually created iPhone-specific ads, but there’s not that many, and I think that what we’re trying to do is say, hey, look, these are the things you can do. Maybe, you know, it’s what we call a duvet ad that covers the whole thing. You could blow on it to make it disappear or all these different things that you could do along those lines to take advantage of the experiences, the applications they’re using.

We’re back in Living Room 2.0 at The New York Times Co. today for their research and development group’s vision of how news will fit into the armchair experience of the future. Ted Roden, a creative technologist in the group, describes two applications for Times content that might work well on your television or other large screens.

The commuter app is a mashup of publicly available traffic cameras, Google Maps, and location-specific content from the Times. Laying out news on a map is a tired concept that rarely lives up to its promise, but this app points to what feels like a truly effective use of geocoded articles and blog posts: informing me of what stands between my current location and my destination. In his keynote address at the O’Reilly Tools of Change Conference, design integration editor Nick Bilton discussed some other promising uses of geocoded news.

Roden also demonstrates what RSS feeds, Twitter, and other lifestreams might look like in the living room. The concept seems poised to go mainstream this year or next with Yahoo’s widgets for web-enabled televisions, though who knows if people really want their friends’ tweets to share the screen with Lost. (There’s evidence they do.)

It’s important to note that the R&D group doesn’t expect people will mount four screens on the wall of their living room, awesome as that would be. Their best guess is that consumers will segment their widescreen TVs in the style of cable news channels. A lot of innovation will be required to make that a pleasant experience. My living room is a two-screen operation — three, if you count a picture frame that could be repurposed to display the latest New York Times photography — and it works pretty well, even if I can’t yet flick a Mark Bittman video over to my television.

This is the fourth installment of our five-part series on the Times R&D group. Tomorrow we’ll conclude with their stabs at the future of advertising. A transcript of today’s video is after the jump.

Ted Roden: We were looking at that Jeff Han video wall, which I imagine you’ve seen.

[Clip from CNN]

Abbi Tatton: This is from John Laura, who’s in the northern part of the state. But this kind of thing above the highway seems to be a theme today.

[End of clip]

Roden: And our thought was, you know, these TVs, they’re so big and they’re so thin — they’ll get bigger and thinner, but not much. But one of the things you’ll be able to do with them is going to be touch. They’re going to add in new features. All TVs now have, are going to have Internet capability and, soon enough, probably touch.  So one of the things you’re going to be able to do with that is say, I want my stocks to be this big, I want my email to be this big, and then I want the TV to be this big. And then you sit back, and you can kind of watch your email filter in and then your stocks come in and then watch TV at the same time. And it was with that kind of thought that we built these apps on these screens. [...]

This is our commuter app that we’ve been working on. And this is pretty interesting. These are all things that are kind of publicly available, but again, on so many different sites. These are actually traffic cams that are from the New York City Department of Transportation. And you can get one at a time here. But what we’ve done is we all mapped our routes on the way into work here in the morning and grabbed — this is actually Nick’s route because he has the most interesting route — and we grabbed web cams from along the way showing the actual live traffic conditions. You can tell it’s raining out. These are totally live.

And what’s great about this is he can glance at it in the morning before he heads out and see what’s traffic like before he gets into the tunnel as he rides his scooter in from Brooklyn. And so he can say, do I need to take the tunnel or can I take the bridge? And he actually will look at this every morning. There’s an iPhone version of this, too, that he can pull out, and when he gets to an intersection just before it, where it says, should I take the tunnel or the bridge? And it actually saves a lot of time in the morning.

And also, we pipe in live traffic alerts from Yahoo, and all of our content is geocoded as well. And so the City Room blog has a lot of stuff throughout the city, so you see a lot of City Room content springing up on there. And it’s kind of a great way to get another quick glance overview of what’s going on.  

And the final piece to this is just a lifestream app.  Now they have these on the desktop. You can get these.  All this one does is filter in your RSS feeds, your TimesPeople feeds, Twitter, it’s got Friendfeed, it’s got Facebook. Kind of any social updates that you can have will show up on here. And these are all live. These are things from just the past few days. And this isn’t a new concept, but our thought was, what happens when this makes it into the living room, and how does that change the course of things?

So on your desktop, you’d click, you’d see a link here, and you would click on the link and it would open in your browser. But what happens when you’re not at your browser? So one of the thoughts was, we have— Mike recently shared a Mark Bittman video, and Mark Bittman is our resident cook, cooking guy. He does these great videos and great articles and great recipes around food and things like that, and they’re in the Times all the time. So what we can do with this here is, you would click on this, and it would take you off to the website, and you could look at the recipe and all that. But in the living room, what you can do is drag that over to the TV, and it plays right on the TV.

And, of course, that brings up the CustomTimes on my phone, too, since I’m in the room. It opened up, it opened up on my phone. And so now I can actually delve deeper in. I can see some photos from the shoot. Click on it here, and it shows it on the TV. And I can also click on the recipe, so I can actually follow along with what he’s cooking on the recipe. And then, if I wanted to, I could go to the website. You know, I could click through it on the link and read the actual big article he wrote along with it. But here in the living room, this kind of a much more sit-down approach to that.

And also, we did look at this as far as ads go. So let me just stop that there. So we looked at this as far as ads go because a lot of times, you know, part of this news feed is just things my friends are saying. And a lot of times my friends talk about products. Someone just bought an iPhone, or someone didn’t like their flight or whatever it is.  

And so we looked at how will advertising work in this world.  And so we can just take like here, Nick just tweeted. He’s a big clothes horse, and the new Ralph Lauren line is out, he says. It looks awesome. Now we can just look at that and say, this is the new line of Ralph Lauren, and we can parse that out and figure out what’s going on and figure out if we have an ad based on that. So we fling that over and see what he’s talking about there, and the ad comes up. Now that could easily be a video or even a coupon that gets sent to your phone or anything like that, but all kind of based around how this plays out in the living room.

In a corner of the research and development lab at The New York Times Co., they’ve prototyped a living room of the future. It’s not as whizbang awesome as you might hope — a lamp glows red or green depending on how the markets are doing — but it does feel like a reasonable conception of Living Room 2.0. Their major bet: as Internet-enabled televisions become more common, people will increasingly choose to consume web material on those huge, high-definition screens.

That wouldn’t, on its face, be an advantageous development for the Times, which produces the vast majority of its content in longform text you’d never consider reading on TV. But as Alexis Lloyd, a creative technologist in the R&D group, explains in today’s video, it may be possible to shift gears in the living room and emphasize the newspaper’s multimedia content. She demonstrates the concept with “Choking on Growth,” a major series on environmental damage in China from 2007.

This is the third in our weeklong series of videos from the R&D group, and it may be the one that’s easiest to imagine coming to pass. Laptop and desktop computers are already commonplace in the living room, Boxee is a huge hit, and Apple keeps plugging away at converging TV and the Internet. (On Oxygen’s The Bad Girls Club, the cast members check their email on a television in the living room. QED.)

Still, reimagining The New York Times in HDTV is a challenging leap. (You might recall the Times Co. made an unsuccessful foray into television with the Discovery Channel earlier this decade.) The newspaper produces a ton of multimedia content — certainly more than its competitors — but a satisfactory living-room experience would require video on a scale the Times isn’t yet producing. That’s why they call it the future.

You’ll see more of the R&D group’s living room in tomorrow’s video (yesterday’s was also shot in there). After the jump, you’ll find a mock-up by design integration editor Nick Bilton, which adds a projector but is otherwise pretty faithful to the actual room. And below that, there a transcript of today’s video.

Alexis Lloyd: The main problem we see with content from The New York Times in the living room is that our primary form of storytelling is still long-form text, which works really well on paper, still works well on the web — but once you’re sitting ten feet from a television in your living room, that pretty much breaks down. But we do produce all this great multimedia content. It’s just usually pushed off to the side a little bit. So in this demo we are asking the question: Can we flip that paradigm around and use the media that works really well in the living room — the video and the images — and make that the spine of the story, but still pull in some of the text and pull in some degree of interactivity that you might want when you’re in the living room?

So I’ll show you this. In this case, I’m using a standard mouse to navigate this, but we’re also looking at a lot of devices like these air mice that I could sit and navigate from my sofa, as well as doing custom remote controls and interfaces like the kind that Mike showed you on CustomTimes.

So this is just a one-minute video that I’m going to start playing, and as the video plays there are these panels that appear that I can open up to show you contextual information about what’s being discussed in the video. So in this case, I can get background information about the turtle that’s being mentioned. It’s text, but it’s short, it’s big, and furthermore, it’s optional. So I can just open it up, read it, and then I’m back in the video. So it doesn’t take me out of that central experience of sitting back and being told a story, which is my primary kind of mode when I’m in the living room.

And we can do this with all kinds of content. So in that case, that was some, a piece of text that was related to what they’re talking about in the video. In this case, there’s a woman who is being interviewed. She’s written a book about mammals in China. I can open this up to read an excerpt from that book. Furthermore, it knows it’s a book, so there’s an e-commerce component that’s integrated into this. And I can just choose from this interface to buy the book. It goes into my Amazon one-click shopping process, and I’m back in the video. So I’ve done all this, but I haven’t been taken out of that basic experience.

And this is really pointing to the idea of creating more granular levels of metadata about content. So we have metadata about our videos as a whole, but now we can begin to say, at this particular point in time in the video, we have a related map or at this particular point in time, they’re talking about this lake. And we have a slide show about that. So I’m going to open that up.

And then you can see our photojournalism really has a place on the big screen because the photos are stunning at this size. And furthermore, the photos themselves have this more granular level of metadata where there are these hot spots that I can use to get deeper information about objects or people in the video — or in the photo, rather. So I can find out all about this toxic algae that’s growing on this lake as a result of chemical plants dumping on it.

And at the end of the video, we’ve also integrated some social functionality, so I can choose to share this video with other friends, and it pulls in the people I most frequently share with. I can say, I want to share this with Michael, and then it will go into any number of his social feeds and into our lifestream app, which Ted will show you in a moment. There’s also some contextual advertising in here, so you might be inspired to give to Unicef’s clean water campaign after watching that video.

And furthermore, that’s just a one-minute video piece, but this series was a yearlong series. There is a huge collection of multimedia content that was created for it. So we started asking the question of can we use the metadata that we’re already creating for our content to allow readers and users different lenses into these large collection of media that might be overwhelming to them?

So in this case I have four different views that I can go into that are dynamically created from the metadata associated with it. So there’s an editors’ choice where I can say I just want to know what the New York Times editors think are the highlights of this collection or this package. But I can take that same content and I can sort it geographically, or I can sort it over time and see a timeline. Or I can sort it thematically and start to see relationships between different themes in the collection of media.

So those are some of the different ideas we’re looking at around how our content could be produced and packaged and repurposed for exploration in the living room.