nyt.png In early 2005, a researcher at the Poynter Institute published a column that was instantaneously read and—by many—misunderstood.

Rick Edmonds, who studies the financial side of the news business for Poynter’s website, speculated about how long it would take for online newspaper revenue to match the dollars brought in by the print side. He estimated that digital ads accounted for around 3 percent of the total revenue for an average U.S. paper. Edmonds assumed an optimistic online growth rate, around 33 percent a year, and what seemed then to be a reasonably sober estimate of print growth, around 4 percent.

Given how low online sales were at the time, Edmonds noted it would take fourteen years for digital revenue to catch up to that of print. As he wrote, these calculations provided “little cause for cheer.” He also noted “there isn’t any reason to believe any of these numbers will remain steady state over time.”

His disclaimers were lost on many readers. At several conferences later that year, participants pointed to the study and cheered one of the presumptions in the column—that digital revenue would grow by a third every year, as far as the eye could see.

For a few years, it seemed as if this scenario might be realistic. Newspapers’ online revenue grew by more than 30 percent in both 2005 and 2006. But growth slowed the next year, came to a halt during the recession, and still hasn’t fully returned to what it was in 2007. Meanwhile, print revenue hasn’t grown at 4 percent a year since 2005; indeed, newspapers’ print revenue in 2010 was less than half what it was in 2005.

Fifteen years after most news organizations went online, it is clear that old media business models have been irrevocably disrupted and that the new models are fundamentally different from what they once were. What made traditional media so vulnerable to the web? Or perhaps the better question is this: Why has digital technology, which has been such a powerful force for transmitting news, not yet provided the same energy for companies to maintain and increase profits?

Mainstream news organizations had already started losing audience before the Internet became popular. Broadcast network news programs have been sliding steadily since 1980 and now reach slightly over 20 million viewers a night, down more than half in three decades. Newspapers began to experience significant circulation declines decades ago. Total daily newspaper circulation has fallen by 30 percent in twenty years, from 62.3 million in 1990 to 43.4 million in 2010, as people found other sources, particularly local television news, to be an adequate substitute.

Revenue, however, held steady or increased for mainstream news outlets, even as audiences shrank. This was true in the early days of the web, too, thanks in part to an advertising bubble spawned by the Internet boom.

To begin to understand the disruptions of the digital transformation, it is important to appreciate the circumstances that made the news business—whether in broadcast, cable, magazines, or newspapers—so profitable for so long. The commercial heyday that buoyed the fortunes of American newsrooms in the last half-century had its roots in changes that began much earlier.

Through the nineteenth century, newspapers benefited from economic and demographic shifts that accompanied industrialization—in particular, rapid urbanization and the attendant rise of the big-city retail economy. The growing advertising market encouraged urban publishers, who had begun to loosen their ties to political parties and to think of themselves as independent businesspeople. In the process, they realized they could make most of their money from local retailers, rather than from people in the street paying a few pennies to buy their papers.

Historians of journalism argue that these economic and political shifts underpinned an increasingly professionalized and objective journalism that became the norm in the 1920s and 1930s. The move toward general-interest, advertising-supported newspapers aimed at broad audiences also drove a cycle of concentration and consolidation that would continue for decades.

With audiences and ad revenue growing even as competitors disappeared, newsrooms and newspapers swelled in size. An analysis of major metropolitan dailies by the American Journalism Review found that between 1965 and 1999, eight of the ten newspapers studied saw at least one competitor disappear. During the same period, on average, each of the surviving newspapers doubled the amount of news it produced. Even as new or expanded sections—sports, business, lifestyle—claimed a larger share of each edition, the total coverage of local, national, and international news continued to increase.

Bill Grueskin, Ava Seave, and Lucas Graves are the co-authors of "The Story so Far: What We Know About the Business of Digital Journalism." Grueskin is dean of academic affairs at the Columbia University Graduate School of Journalism. Seave is a principal of Quantum Media, a NYC-based consulting firm. Graves is a PhD candidate in communications at Columbia University. For further biographical details, click here.