Online separation? Newspapers have been there and done that

I was reading Alan Mutter's spot-on Andreessen’s not-so-hot idea for publishers and once again ran across some comments of the "newspapers need to set up separate online operations and give them freedom" variety.

Here's the problem: It's been done, over and over. It's being done right now. It's happening in ways you don't see, and I promise you won't like the outcome.

Let's take the biggest, and least visible, part first.

For years, investors have been pulling their money out of newspaper stocks and putting it elsewhere. Much of it has gone into pure-play Internet companies like Google. That's about as separate and independent as you're going to get. Not what you meant? Like I said, you aren't liking that outcome if you find yourself working for the Bugville Daily Bugle and it's owned by a capital-starved corporation that's laying people off in order to survive. But it's how capitalism works. Money seeks returns.

The Hearst family heavily bankrolled the startup of cable broadband services back when hardly anybody believed in it. The Tribune Company, before it got itself taken over by a real estate flipper, was a key investor in America Online, which transformed online services from a niche business focused on geeks to an experience for everybody. About.com is owned by the New York Times. Cars.com, Apartments.com, HomeGain.com and HomeFinder.com are owned by a group of five newspaper companies. There are many other examples.

But if you're advocating a separate online department for the Bugville Daily Bugle, then of course that's not what you meant. It is, however, how investors and corporations look at the problem.

Then there were the separate "online division" efforts, some of them set up in vain hope of cashing in on the IPO craze. Cox Interactive, where I worked at the turn of the century, ran all the local operations for all of Cox's TV, radio, newspaper and cable Internet markets. Newhouse did something similar with Advance Internet. Knight-Ridder Digital took the local sites away from KR's newspapers.

Nobody at the Bugville Daily Bugle was happy about that. When these spinoff efforts failed and newspapers regained control of their Web operations, the usual result was a brief power struggle and a settling of vendettas, ending in the unemployment of most or all of the online staffers.

There were many cases in which local newspapers set up internal online groups that operated independently. Several years ago, a Borrell report showed a strong correlation between that organizational form and revenue performance. But it's not as simple as that. Correlation is not causation. I would argue that the organizations that used that structure had an intent that was missing from most of the newspaper industry at that time. They simply intended for their Web operations to succeed. The rest of the industry didn't really give a rat, and it showed.

But something very important has happened at most newspapers in the last few years. It started, I think, when investor Bruce Sherman kicked the legs out from under Knight-Ridder's chair. And it accelerated when the economy came crashing down. There's been a great awakening in America's newsrooms -- and a huge turnover in personnel who weren't willing or able to wake up. There are exceptions, but the newspapers I deal with are, on the whole, very different beasts than they were in the slumber years.

We don't have the luxury of hiring everyone we want, or even need. Local advertisers have radically cut their spending because they're in economic pain, too. This isn't about the "failure of newspapers." It's about the failure of banking. We have to live with the results of that.

For most U.S. daily newspapers today, confronting the world with everybody playing on the same team, using all the tools that are available makes far more sense than splitting what's left of the staff in two pieces, telling each team to ignore the other one, and then bitching about a lack of cooperation.