The US newspaper business is in dire straits. Recent death rattles have included Sam Zell’s Tribune group filing for bankruptcy protection and its LA Times title whoring itself ever more shamelessly to advertisers; the Boston Globe, who is owned by the same company that own the New York Times, is scraping together its existence – its unions have just approved cost-cutting measures, like pay cuts and the scrapping of lifetime job guarantees to try and make enough savings to warrant the paper’s ongoing existence.

Now the WSJ is poised to try and fill the gaps in content created by these cost-cutting papers: “We’re going to move in on each of the big cities”, said managing editor Robert Thomson. The paper currently allows free access to certain articles, but has a subscription plan for its premium financial content as well as a fair chunk of its other stories. Now it’s looking to make that more sophisticated, and allow, for instance, a reader interested in today’s Clearnet bid to buy just that story without having to fork out for a whole subscription. They’re also going to create premium subscriptions for their truly niche, high-quality business content, in areas like “energy, commodities, wealth management”.

It comes as the New York Times Co.’s chairman Arthur Sulzberger Jr. hinted a couple of week ago that the NYT might install a micropayment model: ”We continue to take a fresh, hard and deep look at various subscription, purchase and micropayment models”. Ariana Huffington is a fan too – in an interview with German paper Die Welt, she said the following:

“The idea that you can go back to a pre-Internet world where you can create walled gardens around content, and charge for admission, is simply futile. Those who try that are going to fail. Today we live in the linked economy, not a walled-off content economy. The challenge is to find different ways to monetize links among media through advertising or micropayment or whatever, not subscription for exclusive content.”

Well, it’s going to be a bit more sophisticated than that. Micropayments make sense for the WSJ, given their specialised content for specialised readers – you can maximise the profitability of a niche through micropayment, when a businessperson finds they absolutely need its individual bits of information. But a more casual reader will find the barrier of individual payment pretty offputting – a subscription model makes more sense for them, because after one payment they can go back to the browsing style they’re used to.

Micropayment probably needs to be not at the truly micro level of individual stories, but payment for a week’s worth of, say, green tech stories. Bundling a story from elsewhere on the site for free along with the paid package could work well too, both as an incentive to purchase and a means of drawing readers to other parts of the site. The beauty of online means that there is this freedom to offer these different payment structures at once – Huffington et al should be thinking of all of the possible ways to monetise their product.

In a seminal piece in this month’s Atlantic Monthly

A little context: like most American newspaper companies, the New York Times Company, which is owned by the Ochs-Sulzberger family, is getting creamed right now by the worst recession since the Wall Street Crash, declining print circulations, and the slow growth of online advertising revenue at a time when print advertising revenues are falling through the floor. Much of the money from these ad budgets has migrated into the maw of ’search’, which is dominated by Google, and unlikely to come back anytime soon.

Ok, so the climate isn’t great for newspapers right now, but surely a title that has existed for over 150 years should be able to weather the storm? Hirschorn says no, as earnings reports released in October show that the New York Times Company will default on US $400 million of debt in May unless they perform a massive reconstructive surgery on their finances. The company is already carrying US $1 billion of debt, and only had $46 million cash reserves as of October.

“At some point soon – sooner than most of us think – the print edition, and with it The Times as we know it, will no longer exist,” says Hirschorn. “And it will likely have plenty of company. In December, the Fitch Ratings service, which monitors the health of media companies, predicted a widespread newspaper die-off: ‘Fitch believes more newspapers and news – paper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.’”

(As we reported recently, American mogul Sam Zell’s recent travails with the Tribune company further illustrate this apocalyptic trend in the American newspaper industry.)

Options for the Ochs-Sulzbergers are to sell some of their other assets – such as the Boston Globe and the Boston Redsox baseball team – to raise cash, or they could sell their headquarters, expensively built for $600 million, in a diving property market and buy themselves some time to turn things around. Another option is to sell the company altogether, and hope that a liberal billionaire like Carlos Slim or Michael Bloomberg will take it on as a trophy asset. Failing that, they could sell out to Murdoch (assuming he’s interested), or even a company like Google or Microsoft, who might “strip it for parts, and turn it into a content mill to goose its own page views,” as Hirschorn has it.

In any case, he sees the future of the New York Times as being web-only, and not very far away, with up to 80% of the company’s journalists being laid off and the rest focusing on domestic reporting, while tapping into other journalistic networks to outsource foreign coverage.

Hirschorn’s overall outlook is optimistic though: that the newspaper will get back to the kind of hard reporting it’s good at, and ditch the fluff lifestyle features that previously underwrote the Pulitzers.

“In this scenario, nytimes.com would begin to resemble a bigger, better, and less partisan version of the Huffington Post, which, until someone smarter or more deep-pocketed comes along, is the prototype for the future of journalism: a healthy dose of aggregation, a wide range of contributors, and a growing offering of original reporting.”

Ah, yes – the Huffington Post, who of course raised multiple millions from American venture capitalists last month by pushing themselves as ‘The Internet Newspaper’. However, in the Observer yesterday, grizzled commentator Peter Preston poured scorn on the HuffPost’s projections as new media hype, pointing out that despite a supposed $100 million evaluation, the company only took $302,000 in advertising revenue between January and August last year according to a TNS Media Intelligence analysis published in Advertising Age;

“Maybe $2m would be a better guess… Take a closer look at where the lifeblood news on which they comment comes from. Huffington Post provides a long source list, including an impressive roll call of bloggers, but the basic facts and developments arrive far more conventionally: from 40-plus newspapers and broadcasting station newsrooms catalogued as providers (including the Guardian, Times and Indy over here). Dig a little deeper among individual strands, moreover, and you wonder how on earth either Huff or Beast could get by without the Associated Press and New York Times.”

And therein lies the crux of the problem, a conundrum that will likely come back to bite Internet news aggregators: the HuffPost currently pays it’s contributors nothing but will surely be forced to amend this business model in the face of its massive injection of capital. If that happens, and their online advertising revenues don’t increase markedly in accord, this will cease to be a laughing matter and their investors could even pull out. Meanwhile, unless someone conceives a genius new business model to save print dinosaurs like the New York Times, the prospects for most newspapers in the US, and also Britain, look dire.