Here’s the money quote:

Analog has physical costs which lead to scarcity driven business models. Digital has zero marginal cost (or near zero) which leads to ubiquity driven business models.

It’s a model that the Christian Science Monitor and U.S. News & World Report have recognized. More recently, it’s a model that PC Magazine intends to follow.

While traditional advertising models based on scarcity are still currently more lucrative, they are unsustainable. And while the downturn in the economy has accelerated the industry’s reluctant switch to digital, I think that it’s a necessary switch. In fact, I think many of the big players will have to finally come to terms with getting smaller before they can get bigger again. Getting bigger depends on leveraging the scale of the digital advertising market. Fred explains

…you can buy online inventory for a fraction of the cost of analog inventory, you can target it, you can measure it, and you can even create your own media if you want. And you can do this at a scale that traditional media can never create with its scarcity driven orientation.

The transition won’t happen overnight, and it won’t be before the industry sheds its traditional architecture. But as old analog models crumble, new digital models will emerge. In the meantime, start looking for pennies. They’re everywhere. You just have to take your eye off the dollar for a second.

Intel shut down its memory chip business before setting its sites on the future and focusing on the microprocessor business. Photo Credit: David Cornejo.

I came across a couple comments recently from technology pundits about how they would handle the print-digital turning point facing traditional newspaper publishing.

First, tech evangelist Robert Scoble, who begins his post by pledging never to buy another physical newspaper again, suggests that traditional publishers take a tech-style, iterative approach to innovating the newspaper business.

There are no silver bullets, but why doesn’t the newspaper business take a lesson from the tech world? Start iterating — fast. “This is essentially research, and in research the dead ends are valuable, too,” says Scott Rosenberg, cofounder of the online magazine Salon. “The most important thing to do right now is launch as many possible experiments in as many possible directions.”

Meanwhile, Netscape and Ning co-founder, Marc Andreessen thinks newspaper should just shut down the presses and become online businesses. In an interview in Portfolio.com he says:

If you were running the New York Times, what would you do?
Shut off the print edition right now. You’ve got to play offense. You’ve got to do what Intel did in ’85 when it was getting killed by the Japanese in memory chips, which was its dominant business. And it famously killed the business—shut it off and focused on its much smaller business, microprocessors, because that was going to be the market of the future. And the minute Intel got out of playing defense and into playing offense, its future was secure. The newspaper companies have to do exactly the same thing.

The financial markets have discounted forward to the terminal conclusion for newspapers, which is basically bankruptcy. So at this point, if you’re one of these major newspapers and you shut off the printing press, your stock price would probably go up, despite the fact that you would lose 90 percent of your revenue. Then you play offense. And guess what? You’re an internet company

Which, of course, is exactly what the Christian Science Monitor did this week — it picked online over print. The 100-year-old daily paper shut down it’s daily print edition in favour of its CSMonitor.com Web site for daily coverage, supplemented with a weekly print edition. It’s the first major daily newspaper to opt for a predominantly online solution.

Will the move work? Only time will tell. But at least it’s one iteration more than before.

Oprah Winfrey with the Amazon Kindle, her new favourite gadget.

With all the recent commotion about Oprah choosing the Amazon Kindle as her favourite gadget, it’s worth looking at the origins of idea of digitizing books

Picked up on this post on the history of Project Gutenberg from TeleRead. The essay, originally in French by Marie Lebert, examines the founding of Project Gutenberg in 1971 by Michael Hart. Lebert then chronicles the digitization of books on Project Gutenberg through to the benchmark 25,000th book digitized in 2008.

Here’s an excerpt.

37 years after its birth, Project Gutenberg is running at full capacity. It had 5,000 books online in April 2002, 10,000 books in October 2003, 15,000 books in January 2005, 20,000 books in December 2006 and 25,000 books in April 2008, with 340 new books available per month, 40 mirror sites in a number of countries, books downloaded by the tens of thousands every day, and tens of thousands of volunteers in various teams.

Whether they were digitized 30 years ago or they are digitized now, all the books are captured in Plain Vanilla ASCII (the original 7-bit ASCII), with the same formatting rules, so they can be read easily by any machine, operating system or software, including on a PDA, a cell phone or an eBook reader. Any individual or organization is free to convert them to different formats, without any restriction except respect for copyright laws in the country involved.

“Many consumers, with minor exceptions, view these as essential utilities, like water or electricity,” says the report, which was compiled from interviews with 800 consumers last week, and is expected to be released today.

The article notes that this consumer trend plays well for telecoms and cable, but it should also be a sign for media companies. While the companies struggle to find new business models for their transition to digital media, it’s clear what their direction should be.

Meanwhile, Folio ran a storyin which Arthur Sulzberger, Jr., chairman and publisher of New York Times Company, echoed this notion recently at Webbyconnect, a conference on the Internet & Emerging Media.

“Let’s start with the fact that the heart of the answer must be we can’t care. We do care; I care very much. But we must be where people want us for our information.”

NYTimes.com offers reader the option to receive news via mobile device.

Some magazines are experimenting with using Twitter as a tool to connect with readers.

Canadian Magazines picked up on a Folio story about how Make magazine, the tech DIY quarterly, is using Twitter to connect with readers.

It’s a great example of how social media tools can benefit publishers. Make readers can subscribe to the Make Twitter feed. The micro-posts allow Make to, for example, announce when they post a new story. More importantly, though, it’s an opportunity for readers to interact with the magazine and each other as well. It’s a way of building a community.

Scrolling through the feed I came across a tweet from digitalboy, a reader in China, asking for content about Maker Faire, a gathering for tech DIY enthusiast, so that he could translate it for his Chinese friends. Talk about building an audience and opening up potential for growth.

Social media tools and magazines are such a natural pairing because they both cater to developing and forming groups. Like-minded readers can share thoughts, ideas and opinions given the right networking tools. When you think about it, interacting in a social media environment is really just a extension of what magazine fans do in their real-world interactions. So why not spread the love?