Many people on Twitter pointed to a Monday blog posting by scientist Michael Neilsen about how entire industries fail and what it might mean to scientific publishing.

He analyzes what's happening to the newspaper industry. On first read, I think his analysis is spot-on.

From MichaelNeilsen.org: (posted June 29)

Why online news is killing the newspapers

To make our discussion of disruption concrete, let’s think about why many blogs are thriving financially, while the newspapers are dying. This subject has been discussed extensively in many recent articles, but my discussion is different because it focuses on identifying general structural features that don’t just explain the disruption of newspapers, but can also help explain other disruptions, like the collapse of the minicomputer and music industries, and the impending disruption of scientific publishing.

Some people explain the slow death of newspapers by saying that blogs and other online sources [1] are news parasites, feeding off the original reporting done by the newspapers. That’s false. While it’s true that many blogs don’t do original reporting, it’s equally true that many of the top blogs do excellent original reporting. A good example is the popular technology blog TechCrunch, by most measures one of the top 100 blogs in the world. Started by Michael Arrington in 2005, TechCrunch has rapidly grown, and now employs a large staff. Part of the reason it’s grown is because TechCrunch’s reporting is some of the best in the technology industry, comparable to, say, the technology reporting in the New York Times. Yet whereas the New York Times is wilting financially [2], TechCrunch is thriving, because TechCrunch’s operating costs are far lower, per word, than the New York Times. The result is that not only is the audience for technology news moving away from the technology section of newspapers and toward blogs like TechCrunch, the blogs can undercut the newspaper’s advertising rates. This depresses the price of advertising and causes the advertisers to move away from the newspapers.

Unfortunately for the newspapers, there’s little they can do to make themselves cheaper to run. To see why that is, let’s zoom in on just one aspect of newspapers: photography. If you’ve ever been interviewed for a story in the newspaper, chances are a photographer accompanied the reporter. You get interviewed, the photographer takes some snaps, and the photo may or may not show up in the paper. Between the money paid to the photographer and all the other costs, that photo probably costs the newspaper on the order of a thousand dollars. When TechCrunch or a similar blog needs a photo for a post, they’ll use a stock photo, or ask their subject to send them a snap, or whatever. The average cost is probably tens of dollars. Voila! An order of magnitude or more decrease in costs for the photo.

Here’s the kicker. TechCrunch isn’t being any smarter than the newspapers. It’s not as though no-one at the newspapers ever thought “Hey, why don’t we ask interviewees to send us a polaroid, and save some money?” Newspapers employ photographers for an excellent business reason: good quality photography is a distinguishing feature that can help establish a superior newspaper brand. For a high-end paper, it’s probably historically been worth millions of dollars to get stunning, Pulitzer Prizewinning photography. It makes complete business sense to spend a thousand dollars per photo.

What can you do, as a newspaper editor? You could fire your staff photographers. But if you do that, you’ll destroy the morale not just of the photographers, but of all your staff. You’ll stir up the Unions. You’ll give a competitive advantage to your newspaper competitors. And, at the end of the day, you’ll still be paying far more per word for news than TechCrunch, and the quality of your product will be no more competitive.

The problem is that your newspaper has an organizational architecture which is, to use the physicists’ phrase, a local optimum. Relatively small changes to that architecture - like firing your photographers - don’t make your situation better, they make it worse. So you’re stuck gazing over at TechCrunch, who is at an even better local optimum, a local optimum that could not have existed twenty years ago:

Unfortunately for you, there’s no way you can get to that new optimum without attempting passage through a deep and unfriendly valley. The incremental actions needed to get there would be hell on the newspaper. There’s a good chance they’d lead the Board to fire you.

The result is that the newspapers are locked into producing a product that’s of comparable quality (from an advertisers point of view) to the top blogs, but at far greater cost. And yet all their decisions - like the decision to spend a lot on photography - are entirely sensible business decisions. Even if they’re smart and good, they’re caught on the horns of a cruel dilemma.

There's lots more. Read the whole thing.