A clear, crisp winter morning in the South End of Boston. Beneath an overpass, at the crossroads of two of the\ncity\u2019s main highways, yellow-and-blue delivery trucks line the parking lot of The Boston Herald,\nthe nation\u2019s 43rd-largest newspaper, with a daily circulation of approximately 230,000 (150,000 on Sundays). Once a part of the Hearst publishing empire,\nthe struggling paper was sold in 1982 to Rupert Murdoch\u2019s News America Corp. for a mere $1 million. Murdoch promptly laid off nearly 200 employees and\noffered others buyouts. The media mogul introduced computers and Australian editors to the newsroom, and the paper offered prizes and giveaways to attract\nreaders. In 1994, with the tabloid still struggling, Murdoch sold it to its publisher, Patrick J. Purcell, for between $15 million and $20 million. Today,\ninside the cluttered Herald newsroom, reporters and editors peck away at keyboards amid the crackle of police scanners. The carpeting is stained and threadbare,\nwires hang pendulously from the ceiling. The room is dotted with empty desks, in large part because the paper has laid off at least 25 percent of its writers\nand editors over the past couple of years. Memos, including an aging photocopy of how to properly fill out a time slip, are taped to pillars running down the\nmiddle of the room. Dismal as it may seem to an outsider, the scene is nothing new to the Herald, a paper that for years has run a distant second to its\ncrosstown rival, the New York Times\u2013owned Boston Globe, with its daily circulation of 414,000 (670,000\non Sundays). But it doesn\u2019t take a visit to the Herald\u2019s run-down newsroom to understand how badly the newspaper industry has fared in recent\nyears. Across the industry, ad revenue\u00ad, which is how newspapers make most of their money, grew by less than 3 percent in 2005 before flatlining in 2006,\naccording to this year\u2019s \u201cState of the News Media\u201d report by the Project for Excellence in Journalism. The Newspaper Association of America reported this past fall that circulation\nfor the some 770 dailies in the United States dropped 2.8 percent in 2006. On Wall Street, newspaper companies took a pummeling, with stock prices typically\nfalling by an average of 14 percent. In desperation, many newspapers have begun to merge with, or acquire, their competitors in an attempt to gain market\nshare and leverage economies of scale. In March 2006, Knight Ridder, then America\u2019s second-largest newspaper publisher behind Gannett, was bought by\na smaller outfit, McClatchy. In New York, former General Electric CEO Jack Welch and some investors offered to purchase the Globe from the Times for between\n$500 million and $600 million. The Times, which had bought the previously family-owned Globe for $1.1 billion in 1993, rejected the offer. But just a few\nmonths later, in January 2007, the Times turned around and devalued the Globe and the Worcester Telegram & Gazette (another Times property) by more\nthan $800 million.What\u2019s gone so horribly wrong with the newspaper business?Many believe the answer is simple, profound and inescapable:the Web.\n\n\n\tAs Print Slept, the Web Became Its Nightmare\n\t\n\tNewspaper executives, many analysts argue, just don\u2019t understand the disruptive\n\teffect of the Web on their business and as a result have jeopardized the future of their papers, their companies and the investments of their shareholders.\n\tOthers take a more nuanced view, claiming the newspaper industry\u2019s response to the Web is typical of any mature industry confronted by a new, disruptive\n\ttechnology. That is, the newspaper lords knew it was important; they just didn\u2019t know how to incorporate it into what is, in the United States, a\n\t300-year-old business model. With pressure from stockholders and investors, publishers worried about the bottom line for the coming quarter or year, not\n\tabout what might happen in five years.\n\n\t\u201cIt was rational self-interest,\u201d says Phillip Meyer, a journalism professor at the University\n\tof North Carolina who has studied how newspapers have been affected by new Internet technologies. \u201cIf their goal was to maximize return on investment,\n\tthen sticking to [print] and avoiding high-risk [Internet] investments made sense,\u201d he says.Despite the pessimism of those who tally the mergers,\n\tlayoffs and tanking stocks in the newspaper business, some experts believe newspapers can be saved by using the Web to reinvent themselves and thereby retain\n\ttheir role as a vital institution in American society. If they fail, and newspapers begin to fold with the great rapidity many expect, the loss to the American\n\tpolity will be incalculable. In either case, there will be some valuable lessons other businesses can learn about dealing with disruptive technologies:\n\tprincipally, that one\u2019s customer base and competition can change overnight, and a failure to prepare for that change can have catastrophic consequences.\n\n\tTOP 5 DAILY NEWSPAPER SITES\n\t\tThe Web has expanded the overall readership for the nation's top daily newspapers.\n\t\tHere are website statistics for the top 5.\n\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tNEWSPAPER\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tUNIQUE VISITORS JULY 2006\n\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tThe New York Times\n\t\t\t\t\t\n\t\t\t\t\t12,048,924\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\tThe Washington Post\n\t\t\t\t\t10,172,717\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\tUSA Today\n\t\t\t\t\t8,612,138\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\tThe Wall Street Journal\n\t\t\t\t\t6,512,920\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\tThe Los Angeles Times\n\t\t\t\t\t4,260,858\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\tSource: Nielsen NetRatings.\n\t\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\n\n\n\tMistakes Were Made\n\tJennifer Carroll, vice president of new media for Gannett\u2014America\u2019s largest newspaper publisher, with 90 titles, including\n\tUSA Today\u2014has been working in the industry since\n\t1981. She got her start as a reporter at the Port Huron Times in Michigan. Climbing the editorial ranks, she became managing editor of the\n\tDetroit News in 1997, a period remembered as critical (and ultimately regrettable) in the history of American newspapers. With the dotcom\n\tbubble in its infancy and acknowledging the importance of establishing an online presence, Gannett and its competitors began putting their\n\tpapers online\u2014the news stories, the features, the comics and the classifieds. It was a newspaper you could view in a browser and little more.\n\n\t\u201cIndustrywide, if there\u2019s anything we know now that I wished we\u2019d known then, it was about how to use the Internet and then\n\trespond accordingly,\u201d Carroll reflects. \u201cBut instead we raced to put our print newspaper online.\u201d\n\n\tDuring this era, newspapers made a mistake typical of companies adjusting to new technologies: They attempted to employ old methods in a new\n\tenvironment. Scott Anthony is president of Innosight, a consultancy started by Harvard professor Clayton Christensen, who was credited with\n\tcoining the phrase disruptive technology. Anthony says that instead of exploring the Internet\u2019s capabilities, newspapers simply replicated\n\ttheir print product on the website. \u201cA colleague of mine calls it \u2018All the news that\u2019s fit to pixel,\u2019\u201d Anthony says.\n\t\u201cNone of this was bad, but it wasn\u2019t sufficient.\u201d Many, however, thought it was.\n\n\tFor a while, doom and gloom forecasts abated and the industry enjoyed reasonable growth. \u201cA lot of print people said this isn\u2019t going\n\tto be so bad and a lot of this isn\u2019t going to come to pass,\u201d says Marc Frons, CTO for digital operations at\n\tThe New York Times. \u201cI think it\u2019s only been\n\tin the last year or so that a lot of media companies have woken to the fact that not only is the Internet here to stay, but it\u2019s really\n\tchanging and impacting their businesses in profound ways.\u201d\n\n\tIn addition to reproducing an old product online, the industry\u2019s strategy preserved ancient internal processes in amber. During the late\n\t1990s and the early part of this decade, many papers began to try to merge their online and print departments, believing it would streamline\n\ttheir business to have their staffs working for both mediums, says Vin Crosbie, who runs a newspaper consultancy called Digital Deliverance.\n\tRather than acknowledge the difference between print and the Web, and the markets they serve, they tried to run both products on the print\n\tbusiness model. \u201cThere\u2019s a whole fleet of people trying to do convergence,\u201d says Crosbie, \u201cbut the papers that created\n\tseparate [online and print] departments often did better because they could do what should be done online without having to worry about the\n\tlegacy content and business models.\u201dWebsites Stalk Newspaper RevenueYou\u2019ve probably heard this story\n\tby now. In the mid-1990s, Craig Newmark started Craigslist.org\n\tout of his apartment in San Francisco. (See\n\there\u00a0\n\tfor Newmark\u2019s views on online business.) It began organically, with users posting information about concerts, apartment rentals and job\n\tpostings\u2014all free of charge. Though he didn\u2019t know it at the time, Newmark had begun eviscerating the classified advertising market,\n\ta staple revenue generator in the print newspaper business model. \u201cThe ultimate bad competitor is Craig Newmark,\u201d says UNC\u2019s\n\tMeyer. \u201cI used Craigs\u00adlist recently, and I felt guilty about it.\u201d\n\n\tIf they love newspapers as much as Meyer, Craigslist users should feel guilty. The Project for Excellence in Journalism reported that in 2004\n\tthe San Francisco Chronicle in Newmark\u2019s\n\thometown lost an estimated $50 million in classified ad revenue to the site. More significantly, Craigslist\u2019s effect on newspapers highlights\n\tone of the main challenges an industry encounters when a disruptive technology upsets its market: Not only is the core business broadsided by the\n\tfact that its product becomes available at a lower cost, but the task of identifying the emerging competition becomes strategically daunting.\n\tNewspapers with deep pockets have partially weathered bad competitors like Craigslist by analyzing the demographics of their customer base through\n\tregistration data and surveys. At the New York Times, for instance, Chief Advertising Officer and Senior Vice President Denise Warren says the\n\tNYTimes.com audience\u2014with an average age of 48\u2014is \u201ceducated and affluent,\u201d and knowing that helps her reach advertisers.\n\n\t\u201cIn any business, you\u2019re going to have the providers who are free or low cost, and you\u2019re going to have providers that are high\n\tvalue,\u201d says Warren. Since the Times can\u2019t compete on price with competitors like Craigslist, it is attempting to sell advertisers on\n\tthe uniqueness of its specific audience.\n\n\n\n\tOld Business Models Fight for New Life\n\tHow effective this has been for the Times, widely seen as the industry\u2019s leader, remains to be seen. On Sept. 21, 2005, the Times reported on\n\tits own business page that it would cut its workforce by 500 employees, using buyouts and severance packages. It attributed the decision to soft\n\tgrowth in advertising revenue and dips in circulation. While NYTimes.com has garnered the largest Web audience of any newspaper, its staggering\n\ttraffic still doesn\u2019t drop much to the bottom line. In fact, around 8 percent of the company\u2019s revenue comes from online operations,\n\tsays Warren.\n\n\tThat\u2019s one of the major problems in dealing with disruptive technology. When a company is propelled abruptly into a new business with new\n\tcompetitors, the old business (which is in decline) remains for a significant time the primary bread\u00adwinner. In fact, according to a recent\n\treport by Merrill Lynch, it could take newspapers 30 years before online revenue will represent at least 50 percent of their top line.\n\n\tClosing the gap between the revenue generated by the old model and that produced by the new is one of the greatest challenges for businesses adapting\n\tto disruptive technologies, and it\u2019s been an especially tough nut to crack for newspapers, says Gannett\u2019s Carroll.\n\n\tOne strategy newspapers have employed has been to try to ensure that online revenue growth outpaces the annual decline of print and to adjust investment\n\taccordingly. But Innosight\u2019s Anthony says executives facing disruptive change should utilize technology to improve their old business too\u2014not\n\tjust to build the new.\n\n\tIn December 2006, Wall Street Journal\n\tPublisher L. Gordon Crovitz published an open letter to his readers, telling them that as the paper\u2019s website has been so effective in covering breaking\n\tnews on a 24\/7 basis, the print paper would start producing more \u201canalysis.\u201d (Subsequently, the Journal drastically reduced the size of its print\n\tproduct\u2019s format.)\n\n\tSmall and midsize newspapers across the country have begun trending in that direction too. At the\n\tSeattle Times, Executive Producer Stanley Farrar says\n\tanalysis is \u201cthe most important thing we do.\u201d People working in the industry claim the strategy of defining different roles for the online and\n\tprint products has given many newspapers a new sense of purpose and more optimism about their future. Newspaper-killer Newmark adds, \u201cAt some newspapers,\n\tthey\u2019re making good progress using the new technology to do a better job,\u201d he says. \u201cAt others, they\u2019re using new technology as an\n\texcuse.\u201dHow Quick and Dirty Can Win the RaceNewspapers have informed the world of their plight.\n\t\u201cRead any newspaper,\u201d says David Thurm, VP and CIO of the New York Times. \u201cWe report a lot about ourselves.\u201d\n\n\tLately, however, newspapers have quit whining. They don\u2019t have time for it. Workforces have been trimmed and in some cases obliterated (the Boston Globe\n\tclosed its last three foreign bureaus in January), replaced with news from wire services\u2014all during a time when they\u2019re being asked to produce\n\tmore than ever. Rather than lament past missteps, many papers have begun leveraging the Internet to reach customers in ways once never thought possible.\n\t(See \u201cNewspapers Turn Readers Into Content Contributors,\u201d\u00a0for one new approach.)\n\tAt the small- and mid-market papers, where resources have been stretched especially thin, there\u2019s no time for perfectionism when implementing technology.\n\tInstead, Innosight\u2019s Anthony says, the mantra should be \u201cgood enough,\u201d a critical concept when dealing with disruptive technologies.\n\n\tWhen the good enough theory is applied to an industry steeped in idealism, it\u2019s sometimes interpreted as degrading the mission. But papers employing\n\tthe strategy disagree, noting it\u2019s mostly rooted in finding effective yet economical technology to use in delivering their products.\n\n\tAt the Delaware News Journal, for instance, readers\n\twanted to see more video accompanying breaking news on their site, Delawareonline.com. Photographers needed the ability to shoot video in the field, return\n\tto the newsroom, edit it and post it on the website as quickly as possible. Initially, the paper bought two top-of the-line $4,000 Sony cameras with very\n\texpensive software to accompany them. \u201cThere was a pretty steep learning curve,\u201d says Pankaj Paul, the News Journal\u2019s managing editor\n\tof niche and new initiatives. Consequently, only two people could effectively upload and edit video using the complex software, which could take\n\thours\u2014enough time to be scooped by another website. So Paul went the good enough route and bought six Canon and Panasonic videocameras for about\n\t$400 each. Further simplifying matters, photographers on staff already had Macs that came equipped with Apple\u2019s user-friendly iMovie software for\n\tvideo editing. Paul says the picture quality wasn\u2019t outstanding, but it worked. \u201cAll you have to do is make sure it looks decent,\u201d\n\the says. \u201cWe\u2019re not doing HD here.\u201d\n\n\tQuickly, the News Journal jumped from two people editing video to at least 17. With the Sony cameras, the Journal was posting 50 videos a month. The\n\tfollowing month, after moving to the simpler hardware and iMovie, it posted 195 videos. Meanwhile, readers have responded, as traffic on Delawareonline.com\n\tcontinues to climb. In December 2005, the site reported 3.9 million news page views. In October 2006, that number jumped to nearly 6.5 million. And Paul\n\tsays the News Journal will continue to push for the good enough approach.\n\n\t\u201cI\u2019m sure some purists will disagree,\u201d he says. \u201cIf you\u2019re the New York Times or the Washington Post, and you have the\n\tpeople and time, go ahead and do it. I don\u2019t have that luxury.\u201d\n\n\n\n\tWhat Do Readers Want?As Time magazine aptly noted by making \u201cYou\u201d its Person of the Year, everyone on the Internet\n\thas a voice and no longer needs to vault the entry barrier posed by a newspaper\u2019s heavily edited and sometimes censored Letters to the Editor\n\tpage. Gannett\u2019s Carroll says this is forcing a huge shift in how papers view their readers. \u201cWe have the opportunity to be much more\n\tdemocratic than we\u2019ve ever been before,\u201d she says. Innosight\u2019s Anthony says this change epitomizes another disruptive technology\n\tconcept: A business\u2019s relationship with potential customers can change abruptly. In these conditions, he says, identifying new customers can\n\tbe baffling and requires a lot of trial and error.\n\n\tNewspapers, for instance, have been using customization tools to gain a better understanding of what their readers want and need. The New York Times\n\tis beta testing My Times, which allows users to create a personal homepage with stories on their favorite topics and by their favorite writers\u2014even\n\tif they are from competing news sources. At the Seattle Times, users can move content blocks\u2014from business, sports, arts, local news\u2014up and\n\tdown the page in the order they find most desirable. \u201cNo one really uses it,\u201d says Seattletimes-.com\u2019s Farrar. \u201cBut we\u2019re\n\tconstantly evolving\u201d and trying new things.\n\n\tIn Indiana, the Gannett-owned Indi\u00adan\u00adapolis Star\n\tlaunched a website called IndyMoms.com, an outlet for mothers to discuss,\n\tpost and read relevant content. It has not only helped editorial hit a niche customer, but the advertising department has reaped the benefits. \u201cWe\u2019re\n\table to say to advertisers, \u2018If you\u2019re interested in young women, especially mothers, we are now growing our audience and we have numbers to show\n\tthe extensive traffic,\u2019\u201d says Carroll.\n\n\tDigital Deliverance\u2019s Crosbie says that newspapers have just begun to scratch the surface of the customization tools available to them. \u201cI\u2019m\n\ta Formula One and soccer fan, but I can\u2019t get that stuff in the New York Times, which I subscribe to,\u201d Crosbie says. \u201cBut I know they have\n\tthe stories, because I used to be the Reuters executive who sold them the soccer and racing wire.\u201d\n\n\n\n\tDoom, Gloom Haunt Nation\u2019s NewsroomsThe newspaper industry\u2019s failures are by no means unique. They are simply a tangible\n\texample of an old industry that did not adapt to a disruptive technology. While it\u2019s easy to blame newspaper executives for their paralysis during\n\tthe late 1990s and the early part of this century, UNC\u2019s Meyer says, that explanation unfairly absolves the many shareholders and investors who\n\twere placing short-term demands on them to perform and who didn\u2019t encourage long-term investments in technology.\n\n\tOthers believe newspapers will die simply because they are too stuck-up to change their business models, fearing they\u2019ll lose their journalistic souls\n\tin the process\u2014a theory disputed by many in the industry. \u201cThere\u2019s this notion that older print guys are dinosaurs just slowly slinking\n\taway,\u201d says the Times\u2019 Thurm. \u201cIt really hasn\u2019t been that way at all.\u201d\n\n\tAnd he has a point. NYTimes.com attracts hundreds of millions of page views per month from all over the world\u2014and that doesn\u2019t happen without\n\tits employees (some of whom used to work only in print) stepping up and producing excellent work. No matter how much a business has been disrupted by a\n\tnew technology, customers always respond to quality.\nBut that\u2019s the Times.\n\tMost analysts believe casualties among big city daily newspapers will become more numerous in the near future. But that doesn\u2019t mean they will go\n\tdown easily.\n\n\tSitting in his office at the Boston Herald, John Strahinich, the paper\u2019s former Sunday editor (recently promoted to senior executive city\n\teditor\/Enterprise), looks out a grimy window at Boston\u2019s financial district in the distance, towering above the nearby expressway. A newspaper\n\tveteran, he\u2019s in his second stint at the Herald. He was in Boston the first time the Herald almost died (when Murdoch bought it from Hearst).\n\tWhen asked if he\u2019s worried about his paper\u2019s future, he considers the question for a moment before replying, \u201cWe\u2019re always\n\tliving on the edge. That\u2019s nothing new.\u201d\nAnd every Sunday, he continues to put out the best paper he can.Associate Staff Writer C.G. Lynch can be reached at email@example.com.