In December 2008, a year after* Rupert Murdoch’s News Corp. purchased The Wall Street Journal, the paper had a holiday “party.” Each news department was escorted separately, in turn, into a brightly lit conference room. A large horseshoe-shaped conference table took up most of the space, leaving little room to stand. Amenities were sparse. “They spent maybe $30 on the little plastic wineglasses,” recalls a reporter who, like nearly every Journal employee interviewed for this article, requested anonymity. Everyone hovered awkwardly at the side of the horseshoe. Then Robert Thomson, the Australian editor hired by Murdoch to run the paper, made his entrance. He seemed—and Journal reporters often characterize him this way—unsure of what to say to his employees. “He said we were up seven percentage points. He said something about a focus group. He told us we were moving the needle,” the reporter says. “After an hour, they flashed the lights and it was time for another group to come in. I thought, ‘Thanks, that’s really why we went into journalism. To move the needle.’”

At the Journal’s offices in lower Manhattan, just about everyone is grateful that the new owner has deep pockets and is willing to invest in reporting—both rare commodities in the industry these days. Yet there are reasons to fear that in the midst of a global financial crisis, arguably the biggest test a business newspaper could face, with greater demand for high-quality journalism on finance and the economy than at anytime in decades, the Journal is abandoning values that have long distinguished it: a commitment to deep reporting and elegant writing. Murdoch and his team can keep news organizations afloat. They can move the needle of a media company—they’ve proven that over the decades. But though Murdoch went to considerable lengths to acquire the Journal, he and his top lieutenants have displayed barely disguised contempt for its core strengths. They have moved the paper decisively toward a more terse, scoop-oriented form of journalism that they believe is more in keeping with the information age. The question, then, is whether this strategy will work at the Journal, and if so, at what cost? Murdoch’s managers, as one reporter put it, “don’t fully appreciate what they have.”

That said, it would be a mistake to overlook the good news at Murdoch’s Journal. Widespread fears that its news pages would become a platform for its new owner’s political views and business interests have proved unfounded. In 2007, as Murdoch pursued the paper, its Chinese bureau, citing that year’s Pulitzer for its work on China’s pursuit of unbridled capitalism, wrote to the Bancroft family (which had controlled the paper since 1902) and urged it to decline Murdoch’s offer, given the mogul’s record of putting his business relationships with China ahead of honest journalism. Ian Johnson, whose work on the Chinese government’s suppression of the Falun Gong spiritual movement also won a Pulitzer, weighed in with his own public statement, warning that Murdoch would view the China bureau’s hard-hitting work as a “nuisance” and ask editors to tone it down.

That hasn’t happened, says Johnson, who is still reporting for the Journal from Beijing. In fact, Murdoch has come to the aid of the Chinese bureau. Soon after Murdoch bought the paper, Johnson was denied a visa because the government didn’t like his critical reporting. When China did this to reporters in the past, previous owners did little: “China was too far away and not important enough for Dow Jones to solve this problem,” says Johnson, and the company “lacked the institutional heft” to help anyway. By contrast, he recalls, “The News Corp. team was professional and effective, from their government-relations expert to Mr. Murdoch himself, who lobbied personally on my behalf to a Chinese minister.”

Indeed, as the CEO of a global conglomerate, Murdoch has a global sensibility, and is already making the Journal a far more international paper. He has let Robert Thomson invest $6 million in foreign coverage. At a time when other newspapers’ coverage of the world outside the U.S. is declining, Thomson says, the Journal can attract readers by providing foreign news. And some of the recent foreign coverage has been top-notch. A remarkable March 18 story, for example, on how Iranian imports have devastated the Iraqi economy, focused with illuminating specificity on how the U.S. occupation, with its consequent erratic fuel and electricity supplies, had undercut the famously sturdy quality of Iraqi bricks.

Another bright spot at the new Journal is its Web site, which is more readable and relevant than before. Many of the blogs have a strong following, and it’s easy to see why—one tracks out-of-work mbas in their quest to rebuild their lives; it offers readers the gossipy schadenfreude of seeing privileged people struggling, but also insight into the psychology of unemployment and the practicalities of the job search. Mostly, however, the site is a dependable source of breaking news. Readership of wsj.com, Thomson says, has been up at least 84 percent year-on-year in recent months, with more than a million paid subscribers and 23 million unique visitors a month. (Nielsen Online counts just 6.8 million unique visitors, however.)

Murdoch and Thomson clearly love newspapers, and are working hard to make the Journal viable. At a time when most newspapers are either hemorrhaging readers, or folding altogether, the Journal’s readership has increased. Even sales of the print newspaper rose 2 to 3 percent over the past year, according to Thomson, although this growth must be qualified a bit, given the heavily discounted subscriptions the Journal was selling before September, and given the fact that many financial-news outlets are gaining readers during these difficult days. Furthermore, the entire move-the-needle case should be considered in the context of the $8.4 billion in write-downs that News Corp. recently took, $3 billion of them in the print division. Still, Thomson insists that “the decline of once-great papers doesn’t mean the readers are disappearing.” He’s got evidence to support his bullish position. In a March 23 memo, Thomson cited a reader-tracking survey that had been in use at the Journal for years, remarking, “Former subscribers are now twice as likely to resubscribe. There is no doubt that revenue remains challenged, but there is a large and growing audience for our content.”

Central to this move-the-needle strategy is the elevation of breaking news above the more considered coverage that has long been the Journal’s trademark. It’s a controversial move within the paper. Theo Francis, a former Journal reporter who left last summer for Business Week, observes, “There’s been this creeping tendency for the paper to be about what happened yesterday, rather than telling people about things they didn’t know, and would never know if the Journal didn’t tell them.” Francis and others note, in fairness, that this trend predates Murdoch, but there’s no doubt it has escalated under his leadership. On March 19, Thomson sent a memo to the staff urging more cooperation with the company’s newswires: “A breaking corporate, economic or political news story is of crucial value to our Newswires subscribers. Even a headstart of a few seconds is priceless for a commodities trader or bond dealer—that same story can be repurposed for different audiences but its value diminishes with the passing of time. Given that revenue reality, henceforth all Journal reporters will be judged on whether they break news for the Newswires.”

Something had to give. In the past, Journal editors would teach new hires how to be reporters—not urge them to feed the wire. “Young reporters here now don’t know what they’re missing,” says one newsroom veteran. “I remember my first leder. I gave it to my bureau chief, and it came back completely marked up: ‘Needs more color! What were the streets like? Were they paved?’” (“Leder” refers to the long, heavily reported stories originating on page one.) The same reporter points to a March 2009 A-hed—a quirky, page-one feature—that was reported entirely over the phone. “That would have been unheard of in the past,” he says.

Other forms of institutional support for deep reporting are disappearing, too. In March, Journal management closed the paper’s library, which had provided research help to reporters. And a number of reporters told me that the decision last summer to get rid of the copy desk not only allowed more typos into print, but also cost the paper an important line of defense against errors of fact and logic. In January and February 2009, the paper published 194 corrections, a 36 percent increase from the same period in 2007, before Murdoch bought the paper.

Then there is the matter of space. The Wall Street Journal has, for years, been known for long-form articles like Tony Horwitz’s 9 to Nowhere series (which won a Pulitzer in 1995), in which he explored the dead-end, mind-numbing, and often disgusting nature of six of the 1990s’ fastest-growing jobs. Horwitz learned about some of these jobs by doing them. I remember one about a poultry plant as if it were a documentary film: his co-workers collapsing with fatigue, or stumbling, onto sodden piles of chicken fat and skin.

One man, an immigrant who came to this country with great hopes, is asked what skills he has learned in that plant. He has to think for a moment. “There is one thing, yes,” he says finally. “I can tell a chicken gizzard from a chicken liver. I can do that well.”

He pauses again and picks at a calloused finger. “Please tell me,” he says, “what a man may do with that.”

It’s clear from conversations with reporters on a range of beats, throughout the newsroom, that the emphasis on breaking news, coupled with the shrinking space for stories, means the paper is less committed to this sort of journalism. “We’re getting down to four hundred/five hundred words,” says one reporter. “You can barely introduce what you’re talking about. What’s the point?” Within a week in March 2007, the Journal published a dozen stories over two thousand words in the front section; within the same week in March 2009, only three stories exceeded that length.

Even if the space were available, the pressure to constantly churn out news makes it extremely difficult to produce articles like Horwitz’s. “I don’t have time,” says one award-winning reporter. “I’m just going to press conferences all the time.” He recalls one pre-Murdoch memo explaining how to write an A-hed: the reporter was advised to build in an extra half-day for interviews that she might not actually use, as this is where she might find her most surprising material. “That memo wouldn’t even make sense if you showed it to a new reporter today,” the reporter says, “because the whole thing is supposed to be done in half a day!”

“Doing The Math to Find the Good Jobs,” a January 26, 2009, story on the nation’s best and worst jobs, provides a depressing contrast with Horwitz’s series. The news hook was a new study on the topic, not original reporting. It provided a list, and some quotes from the people who hold the best and worst jobs. It is forgettable. It sheds no light on the nature of present-day capitalism. How could it? It was reported and written from a desk.

News Corp. employees have described Robert Thomson as “cold,” so I was pleasantly surprised when I got him on the phone to find him charming, and passionate about newspapers. But he regards the culture of the Journal with, at best, tough love. “Certain U.S. newspapers,” Thomson says, “have been designed for journalists rather than for readers.” With a chuckle, he avoided saying whether he’s talking about the Journal, but it was obvious that he was. Journalists, he says, too often choose “self-indulgence over readability. If a reader is used to the Web, he has developed a ruthless functionality in reading—just clicking on what he’s interested in.” Turning to a newspaper, Thomson says, that reader then “confronts this Neanderthal product. Taking four paragraphs to get to the point is too long. Where is the editorial empathy?”

Thomson defended his emphasis on breaking news: “A newspaper without news is like a Prius without a battery.” He insisted, if tepidly, that there is a place for long-form journalism at the paper, but it has to “make people turn to the inside, because it’s clear that not every reader does.” He notes that the Journal is publishing more series lately, to provide depth without sacrificing readability, as well as publishing a long essay on the front page of the Weekend section. “Look, if it’s in there now, there’s a place for it,” Thomson says with a laugh, pointing to his paper’s “five-thousand words on Raoul Wallenberg.” Indeed, the February 28 saga about the Swede who disappeared in Russian captivity during World War II was neither breaking news nor brief. But there’s a problem with this example: the reporter, Joshua Prager, recently left the paper because that very story was cut down from a three-part series to just the single piece. It made him realize that he could no longer do the kind of work he cared about at the Journal: “I knew that it was time for me to leave the paper,” Prager wrote in a farewell manifesto to his colleagues. “The worship of bylines and word counts and all that is ‘urgent’ has doubtless stifled the boundless creativity of the Journal staff.” Prager noted that Thomson had observed that some page-one stories had the “‘gestation of a llama.’ Mine certainly did. The paper and I were no longer a good fit.”

Half an hour uptown from the Journal’s newsroom, at Columbia University’s business school, professor Bruce Greenwald, the author of Competition Demystified, teaches a course on competitive strategy. The moral of almost every case study in his class is the same: stick to your competitive advantage. Do not seek to destroy your competitors by doing what they do, Greenwald repeatedly admonishes the MBAs. You could end up destroying your industry and yourself. “Remember New Coke!” he bellows throughout the semester. If Robert Thomson doesn’t guard closely his newsroom’s salient competitive advantage—deep reporting on business and economic news—it’s easy to imagine Murdoch’s Wall Street Journal ending up as a case study in this class. I asked Greenwald if the Journal is making the mistake he warns his students against, and he agreed without reservation that it was.

Barney Kilgore—who became the Journal’s managing editor in 1941 and ran the paper until his death in 1967—is responsible for creating the paper’s competitive advantage. He introduced the leder, which, as editorial-page editor Robert Bartley observed in a 1989 essay on the legendary newspaperman, forced reporters “to ask deeper questions, not merely about momentary events but about ongoing situations and trends—the kind of news a business reader could use.” Kilgore pioneered the whole idea—dominant at the paper for decades—that “[i]t doesn’t have to have happened today to be news.” He did all this not out of journalistic idealism, but to attract readers. Under his leadership, circulation soared—from 33,000 to 1.1 million—as did ad revenue.

Thomson’s challenge, then, is to translate the greatness of Kilgore’s Journal, and its financial success, to the realities of the twenty-first century. Given the way both reading habits and news delivery have changed since 1967, that won’t be easy. He’s following in Kilgore’s footsteps in one way: Kilgore advised John Hay Whitney, days before Whitney bought the New York Herald Tribune, that to survive in a competitive environment he needed to “make stories accessible to the average reader.” But if, as Thomson seems to suggest, accessibility today means stories that are short and ephemeral—the kind of news that is distinguished only by being ubiquitous—then the Journal is destined to become just another business-news service.

Thomson might want to consider another bit of advice that Kilgore gave Whitney: make your publication distinctive. Specifically, he wrote, editing it “with one eye on the Times was insufficient and ultimately self-defeating.” Funny that he mentioned The New York Times, as competition with the Times is a driving force at the Journal now, leading to an increasing focus on general-interest news. A recent story on gay marriage, for instance, took up more space than any of the business stories surrounding it. Three bylines appeared on a February weather story. The Journal has beefed up arts coverage, and even has a reporter covering metro New York. While the Money & Investing section remains mostly unchanged, fewer business stories run in the front section—and those that do are often unspectacular. Insiders agree—and it’s clear from reading the paper—that the Journal is investing less in business reporting because it is investing in news.

But this slapdash approach doesn’t always work so well—like now, for instance, during the current financial crisis. While the Journal has excelled in some areas—its coverage of Lehman Brothers and Bear Stearns comes to mind—it was caught short in others, notably the aig bailout and coverage of Henry Paulson’s Treasury department. Worse, the paper has failed to explicate the big questions—what happened and why—ceding the role of authoritative explainer and investigator to, ironically, The New York Times, which has a business staff one-seventh the size of the Journal’s. With all the focus on the factual scoop at the new Journal, says one reporter of his managers, “I don’t think they realize the value of the conceptual scoop, which is so important in business news. When you present a new idea and back it up with numbers and the reader says, ‘Holy crap, I didn’t know that before.’”

No one I interviewed suggests that before Murdoch the Journal was a journalistic Valhalla. Indeed, some of the reporters’ comments for this article echo complaints about the prior regime of Paul Steiger, who was editor from 1991 to 2007. Yet there’s no doubt that Murdoch has expedited unfortunate trends, and executed them with special ruthlessness. Perhaps more important, he has dismantled the newsroom culture that took pride in doing what no other outlet was doing: explaining modern capitalism, its triumphs and failures, its brilliance and cruelty, in ways that went beyond the data and the deals.

Many analysts were shocked by the $5.6 billion Murdoch paid to acquire the Journal, but any accountant knows that a company’s good name can be worth more than its assets. The quality of the journalism published in the Journal determines its value; it’s the reason people around the world pay for breaking news on its Web site when they can get free news elsewhere. Everyone who cares about newspapers should be pleased that readership at the Journal is up, and there’s no doubt some of Thomson’s changes have helped. But to sustain that success, it would be wise to protect some of the traditions that made the Journal great. Two thousand and nine is, of course, different from the days of Barney Kilgore, but is resurrecting the wire-service model really the answer?

In addition to squandering the Journal’s competitive advantage, News Corp. management is gambling with a critical national resource. It’s a loss to the public when no one is doing the kinds of stories that made the Journal great, whether it’s Susan Faludi on the human cost of the Safeway buyout, James Stewart on insider trading, or Alix Freedman on the tobacco industry. At a moment when capitalism is the most important story going, such work should find readers.

A young Journal reporter, over drinks in a Brooklyn bar, welcomed some of the recent changes at the paper. He enthused over the Web site. He’s glad the paper is reaching a global audience. But he’s not so sure that his new bosses are able stewards of the newspaper’s brand. He ordered another round: “I just hope these people are smart enough to know what not to change.”

* Correction: The original text said the party was in December 2007, four months after the purchase. It was in December 2008, one year after the purchase.

Liza Featherstone is a regular contributor to Slate's The Big Money Web site, and the author of Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart.