“I don’t want Rupert Murdoch to decide what belongs in the Wall Street Journal news pages. The essence of a great newspaper is independence, even from its proprietors and shareholders, and Murdoch, in the final analysis, hasn’t come down on that side.”

- Peter Osnos, the Century Foundation

“The Journal succeeds as a business property because readers trust it, and somebody as innately treacherous as Murdoch can be relied on only to destroy the thing he loves.”

- Jack Shafer, Slate magazine

“Tuesday [1 May] was a black day for journalism, and an even blacker one for financial journalism. When this is over, there will be no independent publisher of the nation’s foremost - really only - watchdog of the capital markets, corporate behavior, and regulators’ conduct. Who’s going to cover News Corp.?”

- Dean Starkman, Columbia Journalism Review

“Rupert Murdoch comes from a very different tradition of Australian-British media ownership and editorial practice in which he has for a long time expressed his personal, political, and business biases through his newspapers and television channels. We see this every day here in America in his New York Post, which regularly runs biased news stories and headlines supporting his friends, political candidates and public policies, and attacks people he personally opposes ... When Rupert Murdoch’s business and news interests conflict, his business interests usually prevail.”

- Jim Ottaway Jr of the Bancroft family, which controls 64% of the voting shares in Dow Jones, the publisher of the Wall Street Journal

“There is a higher calling to what the people of Dow Jones do each day. They are not merely producing and selling products like corn flakes or computer chips. Rather, they are producing - in many forms, times and places - essential publications, news services, and other content sets that inform, educate and enlighten our customers and, more broadly, empower the citizens of free societies.”

- Peter Kann, a former Dow Jones chairman, in a letter to the Bancroft family

In launching his takeover bid for the Wall Street Journal at the start of May, Rupert Murdoch didn't just enter America's debate about the role of serious journalism in a civilised society: he threw a drum of kerosene on it, and lit a match. The commentariat, supported by many of the Journal's owners, staff and readers, were aghast at the prospect of Murdoch wresting control for himself of one of the world's highest-quality newspapers. To them, this was the grimmest scenario yet for the future of journalism as a public trust.

It would be difficult to overstate the serious media's anxiety about the future of quality journalism. This anxiety stems from an old dilemma - is journalism a public trust or a business? - overlaid on a new dilemma: that as the internet matures into a successful commercial medium, the funding model for quality commercial journalism is collapsing. This is no longer simply a debate about the role of press barons like Murdoch. It is now about whether the owners of quality commercial journalism - predominantly the owners of the world's major newspapers - are prepared to accept lower profits and diminished share prices in order to continue funding costly but important journalism. There can only be one conclusion: in your dreams.

What's becoming clear is that public ownership and serious newspapers are an awkward, perhaps unworkable combination. There's an "irreconcilable conflict" between investor interests and the interests of journalism, says Gary Weiss in Salon.com - a conflict which journalism will always lose. "Quite simply, much of what newspapers do has no clear investment rationale," he argues. "Entire segments of the business - such as foreign bureaus and investigative reporting - are inimical to profitability, particularly when viewed on the quarter-by-quarter basis favored by Wall Street. Viewed from a shareholder-value perspective, the newspaper business is a dinosaur. And that is why the shareholder point of view needs to be eliminated from the newspaper business."

While newspapers and other big commercial media may not be growing as they once did, they still make handsome profits: the Sydney Morning Herald and the Age, for example, earn around $150 million a year between them. Their major revenue source, hundreds of pages of classified advertising every week, may be threatened by classified advertising on the internet, but the weekend newspapers are still fat with ads that are sold at extortionate prices. And although the circulation figures of major newspapers are flat or falling, they are still in the hundreds of thousands per day. Why then is there so much hand-wringing about a business that is so profitable and so powerful?

One reason is the rise of the internet, which requires long-term investment to replace the revenues that are being taken away from old media. The other is the demand of public-company shareholders for profit growth, which is akin to the alcoholic who always requires another drink.

 "What is really frightening is that newspapers appear to be dying so quickly that they may disappear, or at least disappear as a serious part of our lives, before we have a replacement for them," says the Pulitzer-winning Washington Post reporter David Maraniss. "We don't have another vehicle for journalism that picks up where newspapers leave off. That's what we should be worried about. Maybe newspapers can be replaced; probably newspapers can be replaced. But journalism can't be replaced - not if we're going to function as any kind of democracy."

When I started working as a junior reporter on the Age, in the 1970s, journalism felt like a great ride. You got paid to do something that you felt was important, and you did it with practically no corporate interference. It was an adventure inspired each day by street-smart, swashbuckling, boozy senior journalists who were smug but nevertheless believed in the public virtue of their work. I still remember the night that Ben Hills, who was then running the Age's legendary ‘Insight' investigation unit, jumped into his car at midnight, drove to the home of the boss of Melbourne's Board of Works and placed a freshly printed copy of the next day's paper - whose front page carried a thundering exposé of corruption at the Board of Works - on his doorstep. Hills then loudly tooted his car horn until the sleepy public servant stumbled into the darkness to find an early copy of the article which destroyed his career.

There's much less fun in journalism these days. The long lunches have disappeared. Emotional debates about the role of journalism have been replaced by gloomy discussions about the survival of journalism. And the smugness is long gone.

"Good old-fashioned journalism - news reporting, digging into questions of misconduct or the unlawful deeds of public officials - is still alive in the internet era, but only just," writes the Australian's media commentator Mark Day. "So many forces are working against this kind of journalism that its future is clearly threatened": government spin-doctors and corporate public-relations squads, courts imposing suppression orders, and the sheer cost of - and legal challenges to - investigative journalism. "Is it any wonder, then, as the demand grows for content to fill emerging services, the best journalism is the least likely to meet that demand?" asks Day. "If cheap material is plentiful and the public reaction to it is positive, why bother with the hard stuff?"

At Fairfax Media, historically the home of Australia's best commercial journalism, the mood is grim. Journalists at its flagship paper, the Sydney Morning Herald, recently launched industrial action over the company's decision to cut 35 jobs, following two earlier rounds of editorial redundancies. TV cameras filmed striking journalists as they picketed and abused their company's chief executive, David Kirk, while he was walking towards a hotel to give a speech about press freedom. A pugnacious former All Black captain with no previous experience in the media, Kirk finds himself a centrepiece in the war on quality journalism. While portraying himself as defender of journalism - he regularly delivers upbeat speeches containing lines about the "value of trusted, independent journalism" and how Fairfax is "concentrating on the editorial quality of our newspapers to deliver the best in news, commentary and opinion" - he is also leading a company that is offloading senior journalists, cutting the size of its newspapers and slicing its editorial costs.

There is, of course, a very good reason for the weasel words of David Kirk and the other executives who manage the economics of journalism in Australia. He and his board - none of whom have been journalists or worked in newspapers before joining Fairfax - are the servants of the company's shareholders. With their requirement for annual profit growth, Fairfax's shareholders are hardly likely to be inspired by talk of declining sales, even if that is the reality (independent figures show classified advertising volumes at the SMH and Age have been falling by as much as 7% a year for the past five years). What is Kirk supposed to say? That newspapers throughout the developed world have stopped growing and are in decline; that the only way of maintaining or growing the profits of major newspapers is to constantly cut costs, including the cost of journalism; that the internet is a superior medium for classified advertising; that revenues from classifieds on the internet will be 90% lower than classified revenues in newspapers; that Fairfax cannot afford to increase its investment in quality journalism?

Nowhere is the newspaper industry in more turmoil than in the US. Industry profitability - the profit earned from every dollar of revenue - has fallen from 22.6% in 2002 to 17.8% in 2006. Newspapers' share of media advertising has declined from 24.9% in 1990 to 15.8% in 2006. The number of adults regularly reading a newspaper on an average weekday slipped from 62.4% in 1990 to 46% in 2002 (the  industry body hasn't issued a comparable figure since then). And the picture is even worse when it comes to younger readers: only 35% of 18-34-year-old Americans read a daily newspaper last year. The figure was more than 70% in the early 1970s.

And nowhere is the dilemma of American journalism more visible than at the New York Times, which is arguably still the best newspaper in the world. In April this year, the Times' publisher, Arthur O Sulzberger Jr, told shareholders at his company's annual general meeting, "We are well aware of the tremendous dislocations and challenges the digital world has created for us and for all in our industry, most obviously in our financial performance. Even as we see strong digital-revenue growth, we continue to see declines in our print revenue. To address this, we have been dramatically reducing our cost structure, efforts that will be ongoing." And, he added, "All of these industry-wide changes are reflected in a stock price that makes none of us happy - not me, not our shareholders, not our board, not our management, not our employees and not the Ochs-Sulzberger family, which holds approximately 20% of our company's equity."

The New York Times is not alone. Many of the leading newspapers in the largest US cities have already "passed the point of opportunity" to save themselves, according to the authoritative Morton-Groves Newspaper Newsletter. Newspapers today "are diminishing assets", says the respected financial commentator Jim Cramer, of RealMoney.com: "They don't need to exist. Younger people rarely read them." The internet, says the publisher of Forbes magazine, Steve Forbes, "is eviscerating the newspaper business, undermining both circulation and advertising". Newspapers' classified advertising "is in free-fall and the internet will never help us compensate for what it was", says the president of News Corporation, Peter Chernin. "Reading is going to go completely online," says Bill Gates. "Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed," says the legendary investor Warren Buffett.

In the UK, the home of the modern newspaper, it's a similar story. In 1966, daily newspapers sold 15.5 million copies and the Sunday titles 23.4 million. In 2006, the dailies were down to 11.3 million and the Sundays to 12 million: reductions of 27% and 49% respectively. You can't look at the monthly circulation charts of British newspapers "without hearing the distant sound of a death knell", says Brian Cathcart, a professor of journalism at Kingston University, in the New Statesman. "As people get more used to reading news on the web it dawns on them that newsprint, whatever its virtues, is inferior to the internet," says the media pundit and former British newspaper editor Roy Greenslade. "No one is safe from the move from print to screen ... The race is on to find ways of raising screen revenue before the newsprint revenue runs out altogether."

While newspapers' markets are eroding, the internet is exploding. In Australia, the online-advertising market broke through the $1-billion barrier in 2006, and it is expected to be the country's third-ranked advertising medium, after newspapers and television, by the end of this year. In the US, internet advertising reached US$16.8 billion last year, an increase of 34% on 2005. And in the UK, internet advertising last year exceeded £2 billion and overtook national newspapers' share of the pie for the first time.

Impressive growth, to be sure, but is it impressive enough to replace the revenue that continues to slip away from newspapers? Well, there's the rub. The economic potential of a newspaper website is, as Warren Buffett puts it, "at best a small fraction of that existing in the past for a print newspaper facing no competition". In monetary terms, visitors to a newspaper website are worth less than 30% of the value of a print reader. So, while websites are cheaper to run than newspapers, they aren't attracting anywhere near enough revenue now, and aren't likely to in the foreseeable future, to cover the cost of running a serious journalism operation. Even at the Wall Street Journal, which has the world's largest base of internet subscribers for its online edition - some 900,000 subscribers paying US$99 a year - the economics wouldn't work without its substantial print-newspaper revenues.

The reason that the internet isn't - and in my view can't be - the saviour of quality journalism is the vast expense of running a serious-minded editorial operation. In the US, it has been estimated that the newspaper industry spends US$7 billion each year on news and editorial operations. Translate that into the cost of running the journalism of a serious daily like the Age, the Australian or the Sydney Morning Herald, and you come up with figures like these: 400 editorial staff (say, $45 million); travel and international coverage ($8 million); news services, contributors and other costs ($4 million); support staff and overheads ($10 million). That's more than $60 million on pure journalism which, on the internet, would need to be recouped by advertising revenue alone. Not a likely proposition.

"The next few years are going to be formidably expensive for us all, as we try to sustain our print editions while simultaneously investing in the new world," says the editor of the Guardian, Alan Rusbridger. "It's not clear that everyone is going to make it."

How can good journalism survive in any era of the decline of newspapers? The savvy New York investment banker and former New York Times reporter Steven Rattner is so pessimistic about the outlook for commercially funded journalism that he's considering new models for the news business. He proposes not-for-profit status for journalism: "Instead of having billionaire moguls as proprietors, we could try to turn them into philanthropists who found non-profit organizations to buy and operate their local papers," he suggests. Or, perhaps, a hybrid model involving public funding for important journalistic projects, partly supported by philanthropists. "We've had experience in the past - the New York City subways come to mind - with businesses that began as conventional, for-profit corporations, and, for one reason or another, were later rendered unprofitable while still being viewed as essential services," Rattner observes.

"Allowing charitable organisations to pay for the news might be risky," says Philip Meyer, the author of The Vanishing Newspaper: Saving Journalism in the Information Age (2004), "but it is probably no worse than a system in which advertisers pay for it." Quality journalism, he argues, should start looking for another home.

The suggestion that quality journalism could become charity rather than commerce is a sobering prospect for a business that has always been so self-confident in its demeanour and about its purpose. "For more than 200 years newspapers and their journalists were figures of authority," explains Alan Rusbridger. "We handed down truths - wrapped up, in the Guardian's case, in a certain ethos, culture and liberalism - to our readers. ‘Here,' we asked them to believe, ‘is the truth and nothing but the truth.' Readers could respond by writing a letter to the editor. The average daily postbag on the Guardian used to be 300 or 400 a day, of which we would print perhaps 15. It was what people now refer to as the Tablet of Stone model of newspapers. All that began to change with the internet."

A form of journalism will continue to exist, of course. But increasingly it is likely to be populist and simplistic, celebrity-focused and entertainment-based: the kind that attracts large audiences and doesn't need too much time, thought or money. What will fade away, or exist only in rare pockets, will be the deep, quality journalism which is heavily funded by those media owners who regard it as a public trust.

A form of newspapers will continue to exist, too: papers with fewer journalists and smaller editorial budgets, attempting to appeal to an ever broader audience. As the Australian blogger Tim Blair puts it: "I know people who yearn to once again hear the clip-clop of horses delivering the milk, but it's not going to happen. Technology is giving us the tools to bring about the death of a delivery system called print, but not for quite some time yet. I think newspapers will get smaller and more expensive. It won't be long before carrying a copy of a newspaper will be a symbol of enormous wealth."

In 1983, Rupert Murdoch told his biographer William Shawcross, "All newspapers are run to make profits. Full stop. I don't run anything for respectability. The moment I do, I hope someone will come and fire me and get me out of the place - because that's not what newspapers are meant to be about." As we are now becoming all too aware.

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