For its digital revenue, the Times has bet heavily on a mainly ad-driven business model. Both print and Web content are mostly free, though users have to register, which helps the Times maximize advertising revenue by pinpointing demographic characteristics of its readers. Only about 2 percent to 3 percent of the material in the paper or the online edition—most notably the columnists—is “behind the wall” and requires an annual premium subscription of $49.95, unless you already subscribe to the print edition. The strategy, according to Times Company executives, is that a content-rich Web environment will entice more readers to bond with the Times online and spend a lot of time with it, thus making the paper a very attractive advertising buy. The Times Company last year earned about $273 million in digital income, out of total revenues of around $3.3 billion. Of that, about two-thirds came from the Times itself. Only about $10 million of that Web revenue is from premium content, the rest is ad income.

In 2006, the Times had a down year, taking a one-time $814.4 million charge for the reduced asset value of its New England media group, principally The Boston Globe . Even without that charge, the Times Company’s operating profit was about 8.9 percent, or less than half the industry average. Responding to a reporter’s question at the Davos meeting about the survival of local newspapers, Arthur Sulzberger, Jr. recently observed that the Times is not a local paper but a national one based in New York. E-mails of the comment rocketed around the Globe newsroom, a local Times property where people are still smarting from buyouts, layoffs, and foreign bureau closures.

The more highly diversified Dow Jones Company, meanwhile, enjoyed increased earnings last year. Its Wall Street Journal uses a business model that gives far greater emphasis than the Times to paid Internet content. Dow Jones executives believe their material is so specialized and valuable to its affluent, Web-savvy readers that the potential audience is in the millions. A great deal of Web effort goes into online updates to provide investors with breaking business news, according to Web managing editor Bill Grueskin. At the end of 2006, the Journal reported about 811,000 premium online-only subscribers who paid $99 a year each. An undisclosed number of print subscribers paid $49 for the additional Web content. With its paid-subscription model, the Journal has far less Web traffic than the Times, despite its larger print circulation. But the Journal can charge more to advertisers for its premium audience, according to Grueskin. The Journal projects 2007 growth in online revenue of 20 percent, somewhat below the industry average. Some in the industry think the Journal is mistaken in its strategy of forgoing more Web visitors in exchange for premium subscription income. On the other hand, as Grueskin puts it, “The marginal cost of servicing an additional Web subscriber is basically free.” The Journal, in its recent shift to a smaller page size, has taken a gamble that it will maximize its unique franchise by redoubling its print and Web commitment to business and financial news. In a letter to readers posted on the Journal’s Web site, explaining the Journal’s new, smaller page format (which reduced the news hole by about 10 percent), publisher L. Gordon Crovitz promised, “We’ll deliver more value-added analysis of financial data,” as well as expanded personal material. What Crovitz didn’t emphasize was the sharp cutback in the Journal’s traditionally superb political reporting and analysis of social trends.

The Times, Post, and Journal, already well on their way to becoming print-digital hybrids, will surely navigate this transition. At the other end of the spectrum, small-town and suburban weeklies, community tabloids, and papers targeted to ethnic groups are much better defended against Internet incursions. Readership of print weeklies continues to grow, using a model that is part paid and part “controlled,” meaning free to readers but guaranteed to advertisers, thus aping the free content of the Internet. Free community papers clearly have momentum; subscription and single-copy income is down, but ad income, and overall income, is up. The advertising base of local weeklies was never as reliant on large national advertisers, and their intensely local franchise is retaining both a readership and local advertising bond that the Web is challenging at a far slower rate than it assaults regional dailies.

Robert Kuttner is co-editor of The American Prospect.