Although this sounds like it goes against all conventional wisdom, it is worth considering. There are several key factors to consider:

• The competition is broken.


• A start up would be free of the legacy costs weighing down current papers.


• Talent, could be lured away from their current failing employer.


• Technology and innovation will change the business model.

Broken Competition
Newspapers across the country are struggling. Burdened by debt and an unsustainable business model, they are either folding, scrapping the print edition, or scrambling to adapt. This is the best time to enter a market.

Legacy free
Similar to what Southwest did in the 80's, a start up could set up operations without incurring the burdensome and unnecessary costs that most newspapers carry. The costs of running a printing plant and a distribution network are massive and not easily shed. In 15 years, these operations will be non-existent, but unwinding them will prove complicated and costly.

Luring talent
The most talented editors and writers are working for ships that are either sinking slowly or going nowhere. The opportunity to be at the helm of something new and relevant (not to mention equity in a potential growth vehicle) will be compelling enough in many cases to lure top talent. In addition to being great writers and reporters, the best talent brings with it a built in audience who will follow him/her. If Tom Friedman were to leave the NYT, a significant portion of his readership would follow him to his next destination.

Technology and Innovation
It is just a matter of time before physical papers as we know them will no longer exist. But people are not going to give up the enjoyment of reading a physical paper. Rather the physical paper will just be in a different form. If you could walk into your den and pull a complete paper off your printer as opposed to walking out onto the front porch to get it, is that not a reasonable if not preferable option? Why no one has introduced this feature (similar to Mr Coffee) is surprising but surely to change. Doing so completely eliminates the need for the traditional and wasteful distribution model that exists today.

Additionally, newsstands across the country will follow suit. The notion of being at an airport in the early morning before the papers were delivered is archaic. So is buying a paper without sports results that ended after 10PM. Soon you will be able to walk into your airport newsstand and buy a paper fresh off the printer.

Another innovation is the Kindle. While electronic readers won't save the newspaper business, they will help. The idea of paying for content is reasonable and will become more prevalent over the next period of Internet evolution.

Moreover, Cable and Telco companies currently charge you $60 for cable television and redistribute 35% of that to the cable channels that create the content. They charge you a similar amount for high speed web access and don't share a dime with the content creators. This iniquity is sure to change over time. The ramifications for this are far greater than for just newspapers, but newspapers will factor in.

Digital newspapers are digital content, not any different from the other entertainment and information you consume over your high speed connection. The unwillingness for consumers to pay for newspapers is largely tied to their unwillingness to pay for content ala carte. The same spending pattern would be true for cable television if ala carte were ever to be offered. But when a great sum of content is bundled and offered as an up-sell on a bill that they are already paying, one's likelihood to pay for that content goes up dramatically.

If every newspaper started charging $10/mo for digital access to their site; and if your ISP offered you $40 for basic web access but $45 for access plus access to every newspaper you wanted, it would seem like a great deal. And that is where things are heading, so long as the consortium of newspapers can collectively decide to charge and they can convince the ISPs (Comcast, Verizon etc) to find a pricing model that works.

The fact that the number of parties controlling newspapers has been narrowed to a select few makes this possible. Perhaps it would be seen as collusion, but that wouldn't stop it from happening. And if there are a few holdouts, it is no different than today where several papers are free.

Finally, as interactivity on the web is better adopted and understood by advertisers, the cpms paid by the advertisers will increase dramatically, further increasing the revenue potential.

Sure there will be naysayers. Warren Buffet recently declared he wouldn't touch newspapers. But keep in mind he was talking about buying a paper, not starting one.

The golden age of the cable network is over. It was a fantastic run, but a downturn in core economics is looming.

The heyday began in the 1990's when the cable network finally overcame a negative bias relative to its cousin, the broadcast network. Thereafter, cable networks trailblazed new content offerings and stepped forward as the revenue and profit driver in many companies’ media arsenals.

But the maturation of the Internet as a video delivery vehicle will have profound effects on the business model of content delivery, most notably for cable networks. While a dramatic downshift in the importance of cable programming is unlikely, in the months ahead, events will play out that will significantly pinch the lofty margins that leading cable networks now enjoy.

To understand that, let’s first look at the evolution of the cable networks’ underlying business model.

Evolving from an affiliate process put into place by ESPN in the late 70's, cable networks receive subscriber fees from cable operators for every home that receives them. They also receive advertising revenue, which like affiliate revenue, is tied directly to the number of homes that receive their programming.

As the cable and satellite industries competed and thrived, and the subscriber base grew from 50 to 100 million households, the cable networks benefited handsomely. The costs to program the networks remained relatively constant but the revenue pie kept getting bigger. While a good portion of increased profits were invested back into the networks in the form of original programming, a steadily increasing amount was still left over to fall to the bottom line.

The rise of online video is going to change that trend.

The catalyst is not from families who receive cable today ultimately deciding they don’t need cable anymore. Habits are hard to break. The issue at hand is today’s youth. Today’s college students spend a tremendous amount of time online. And the majority is well aware of the glut of entertainment choices that are available.

From news to user generated content to new entertainment portals like Hulu, there is an inexhaustible amount of content available free on the Internet. When this generation of users become heads of households in a few years, why would these individuals pay $75/month for basic cable?

Of course, there are a few reasons commonly given:

• Because they will want to watch programming on their 42 inch plasmas…
  
  Don’t forget, this generation was raised on their computers. Watching video on a laptop is natural. Plus, undoubtedly, in two or three years, a myriad of seamless solutions will exist that bring online content onto one's plasma or LCD. Misfires from Apple, Akimbo, Vudu and others will soon be forgotten.


• Because they will miss out on water cooler programming…
  
  A tremendous amount of top tier content is already available online and the inability to receive one or two shows will not make a difference. For the last 15 years, a full seventy percent of the country opted out of HBO to save $10/month rather than be able to chime in about Tony Soprano's latest whacking or Carrie Bradshaw's dating flaws.


• Because of live sports…
  
  There's always the option to visit the local pub or sports bar, not to mention the amount of live sports that is being offered on line, including MLB, the NCAA tournament, the Olympics and the NFL's recent decision to simulcast Sunday night games online.

So what does this mean? It means that the number of multichannel homes (cable plus satellite plus telco), after steadily increasing for 40 years, is peaking. And when, inevitably, the number of households begins to decline, so will the revenue pie for cable networks.

MSO's like Comcast will have to adapt, and that will have significant reverberations. As households decline, the fixed costs for these operators will be amortized across a smaller base, pressuring margins. Cable operators are going to be forced to selectively drop channels in order to make the point that affiliate fees must come down.

The most exposed are cable networks with limited corporate backing, the so-called Independents. (While the majority of cable networks are part of network groups owned by major media companies, there are still some that have chosen to go it alone.) These Independents will find themselves in the weakest negotiating position, and thus first to face the changing landscape.

But soon after, even the big network groups will have to face the reality that in a world of infinite choice, and in a world where most programming is available online, the threat of pulling a network from a cable operator will not have the strength that it once did.

As cable succeeds in lowering costs by negotiating lower affiliate fees, they will also try to compensate for lower cable revenues by monetizing video accessed over broadband. There are two ways cable can achieve this. They can create packages based on levels of usage, whereby those who consume more data over the Internet pay more. Or they can create premium packages of content that is exclusive to their walled garden.

There is a third way, which is to charge the companies that are pushing out the content (e.g. YouTube) rather than those who are consuming it. Doing so, however, conflicts with a principle entitled Net Neutrality, a topic that is already being scrutinized on Capitol hill, and is clearly the most thorny.

If cable succeeds in creating a revenue model for Internet delivered video, they will inevitably be compelled to share that revenue with the content creators, which will lead to an increase in the quantity and quality of video produced specifically for broadband distribution. Cable television as we know it will no longer be the only game in town. This increase in competition will put additional pressure on cable networks' ability to charge high fees.

So what does all this mean? Today cable operators benefit greatly from video content on cable but find Internet video costly. In a few years this gap will narrow, as the economics shift. And as thousands of new content choices populate the world wide web, and cable designs an optimal way to harness some of these economics, the days of cable networks as pillar of predictable revenue growth for media companies will be a thing of the past.