On Monday, judges awarded the nonprofit ProPublica, in collaboration with The New York Times Magazine, a Pulitzer in investigative reporting for a 13,000-word story on the life-and-death decisions made by New Orleans doctors during Hurricane Katrina.

“It is a validation,” said Stephen Engelberg, managing editor for the more than two-year-old ProPublica thats based in Manhattan and has only 32 employees. “To be recognized by your peers is an honor and it sort of says to the rest of the group: “Yes, theyre here. Theyre real. They are doing very serious journalism.”

ProPublica is bankrolled by charitable foundations, staffed by veteran journalists, and devoted to doing the kind of investigative journalism projects many newspapers have found too expensive. It offers many of its stories to traditional news organizations, free of charge.

Also representing a new model was the prize for editorial cartooning, which was won by the self-syndicated Mark Fiore. His work appears on the San Francisco Chronicle Web site SFGate.com. Matt Wuerker of Politico was a finalist for the cartooning award.

Roy Peter Clark, a senior scholar at the St. Petersburg, Fla.-based Poynter Institute, a journalism school, said those organizations dont need a Pulitzer to somehow feel that their work is more validated.

“But its a neat thing to have,” he said.

The Pulitzers are regarded as the most prestigious awards in U.S. journalism and are given out annually by Columbia University on the recommendation of a board of distinguished journalists and others. Each Pulitzer carries a $10,000 prize, except for the public service award, which is a gold medal.

The Bristol Herald Courier, a small paper in the coalfields of Appalachia, beat out journalisms powerhouses to win the Pulitzer Prize for public service for uncovering a scandal in which Virginia landowners were deprived of millions in natural gas royalties.

The Washington Post received four Pulitzers - for international reporting on Iraq, feature writing, commentary and criticism. The New York Times won three - for national reporting, for explanatory reporting and for investigative reporting. The paper collaborated with ProPublica on the Hurricane Katrina story which was published in the magazine.

The Pulitzer Board also recognized the way newspapers are branching out with new media. The Seattle Times employed Twitter and e-mail alerts to help inform readers about a deadly shooting, and used the social media tool Google Wave to encourage reader participation.

A prize for investigative reporting also went to the Philadelphia Daily News for exposing a rogue police narcotics squad. The reporting led to an FBI investigation and the re-examination of hundreds of criminal cases.

The Pulitzer for local reporting went to the Milwaukee Journal Sentinel for a series of stories on fraud and abuse in a child-care program for poor working parents.

The Dallas Morning News won for editorial writing.

The Des Moines Register won for breaking-news photography for capturing a rescuer trying to save a woman trapped beneath a dam, and the Denver Post was honored for feature photography for a portrait of a teenager who joined the Army at the height of insurgent violence in Iraq.

“Next to Normal,” a musical about the complexity and heartbreak of a womans mental illness and its effect on her family, has won the 2010 Pulitzer Prize for drama.

Paul Hardings “Tinkers,” a debut novel released by the tiny Bellevue Literary Press, was the surprise fiction winner.

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The projects report contained an extensive look at habits of the estimated six in 10 Americans who say they get at least some news online during a typical day. On average, each person spends three minutes and four seconds per visit to a news site.

About 35 percent of online news consumers said they have a favorite site that they check each day. The others are essentially free agents, the project said. Even among those who have their favorites, only 19 percent said they would be willing to pay for news online - including those who already do.

Theres little brand loyalty: 82 percent of people with preferred news sites said theyd look elsewhere if their favorites start demanding payment.

“If we move to some pay system, that shift is going to have to surmount significant consumer resistance,” said Tom Rosenstiel, director of the project, part of the Pew Research Center.

Last year, online advertising saw its first decline since 2002, according to the research firm eMarketer. Four of five Americans surveyed told the project that they never or hardly ever click on ads.

Despite a lot of choices, traffic on news sites tends to be concentrated on the biggest - Yahoo, MSNBC, CNN, AOL and The New York Times.

“There was this view that were retreating into our own world of niche sites and thats not true,” Rosenstiel said.

That offers a glimmer of hope for establishing a pay system if operators of the biggest sites could somehow agree on how to do it, he said. The survey found that if forced to make a choice, consumers prefer some kind of subscription service to a pay-as-you-go plan.

The Wall Street Journal requires readers to pay for content and The New York Times recently announced plans to charge for full access to its Web site. Starting next year under a metered system, Times readers will be allowed to click on a certain number of stories for free each month, with fees kicking in for readers who exceed that level.

In addition to attempts to reach back and charge readers for content they have become accustomed to getting for free, news executives hope that advances in technology and changes in consumer habits will provide future revenue opportunities.

The Associated Press last month announced a new business unit, AP Gateway, designed to develop and promote products that will help the cooperative, newspapers and broadcasters create revenue-producing products. The AP, for instance, will charge for an application it is developing for use on the iPad, Apples tablet computer.

“Im more hopeful now than I ever have been,” Seagrave said. “There seems to be a broad understanding that there is a value to professional journalism that is at risk right now.”

Pews survey also noted how news habits are changing rapidly. Blogging is declining in frequency, one quarter of Americans now say they get some news on their mobile phones and people are looking for news more frequently on social Web sites, the survey found.

For the online survey, the project interviewed 2,259 people from Dec. 28, 2009, to Jan. 19, 2010. The margin of error is plus or minus five percentage points.

Beyond the online activity, the study found that cable news, led by Fox News Channel, seemed to be the only sector of the news industry thriving.

Newspaper advertising revenue fell 26 percent in 2009 compared to the year before, the study said. Local TV and radio ad revenue were both off 22 percent. Network television ad revenue was down 8 percent.

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An ABC News broadcast in February featuring Gilbert was misleading, and Toyota should have had an opportunity to observe and analyze the test before it was broadcast, Mike Michels, vice president of corporate communications for the Toyota City, Japan-based companys U.S. sales unit, said in an interview.

“In our view, ABC and Gilbert made a rush to judgment,” Michels said.

The accelerator circuit in Gilberts test was “rewired and reengineered in multiple ways that is impossible in the real world,” Michels, said during the demonstration yesterday in Torrance, California. Toyota isnt planning legal action against ABC News at this time, Michels said.

Gilberts Techniques

Toyota, the worlds largest automaker, has recalled about 8 million cars and trucks worldwide including its top-selling Camry and Corolla cars for defects that may cause unintended acceleration.

Gilbert testified before a House panel on Feb. 23 that he was able to isolate weaknesses in Toyotas electronic throttle system not found in units from other automakers.

Toyota engineers and those from Exponent Inc., a firm hired by Toyota to assess its system, used Gilberts techniques to induce engine-revving in non-Toyota vehicles, including a General Motors Co. Chevrolet Malibu, a Daimler AG Mercedes Benz E350 and a Chrysler Group LLC Town & Country minivan, Michels said.

Gilbert said yesterday that he watched Toyotas presentation and will visit Exponent next week to discuss their methods and procedures.

“I am committed to working with industry, government and other interested parties and hope to provide more conclusive opinions and input as more research and analysis is completed,” Gilbert said in a statement.

Congressional Hearings

Speakers at the Toyota event also raised questions about the editing of the ABC News broadcast featuring Gilbert. A video showing Gilberts demonstration on the ABC Web site wasnt identical to the broadcast version, said Matthew Schwall, managing engineer of Exponent, the Menlo Park, California-based engineering company hired by Toyota.

A tachometer showing the engine revving while Gilbert tried to induce sudden acceleration had different readings in the two reports, Schwall said.

A two-second shot taped while the car was rolling wasnt originally used because it is “extremely shaky,” said an ABC News spokeswoman, Emily Lenzner. The clip on the Web was changed after a question was raised by Gawker.com, according to an editors note on the ABC Web site.

Sticky Pedal

Toyota fell 10 yen to 3,505 yen as of 9:24 a.m. in Tokyo. The companys American depositary receipts yesterday rose $1, or 1.3 percent, to $77.94 in New York Stock Exchange composite trading.

Toyota has blamed sticky accelerators and floor mats for the episodes of unintended acceleration, which the U.S. government said March 2 have been linked in consumer complaints to 43 crashes that caused 52 deaths and 38 injuries.

Safety Research & Strategies Inc., which funded Gilberts test, said the findings prove that Toyotas assertion that its electronics are infallible is incorrect. Further study of potential electronic failures is needed, the Rehoboth, Massachusetts-based group said in a statement on its Web site.

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“The reality of it is, finding a buyer in this kind of economic environment is going to be difficult and thats an understatement,” said Gerald Kato, a University of Hawaii journalism professor.

Kato said a “vibrant marketplace calls for many and diverse voices. Less voices is an injustice to the community.”

Newspaper analyst Ken Doctor of Outsell Inc. said finding a buyer was “highly unlikely.”

“The biggest problem is the loss of reporters … and everybodys getting a lot less community news,” Doctor said.

Advertiser employees were hanging onto hopes that the paper and their jobs could be saved. The Advertiser has about 600 employees, with 120 in the newsroom. Oahu Publications Inc., which owns the Star-Bulletin, has about half as many employees with about 75 journalists.

“I just know the next few months, theres going to be a whole lot of uncertainty,” Advertiser reporter Rob Perez said. “Unfortunately, I dont think the outcome is going to be good for most of the people here and its not going to be good for the community because were eventually going to end up a one-newspaper town.”

The Star-Bulletin, with a daily circulation of about 55,000, is being put up for sale as part of an agreement with the Justice Department.

“Unfortunately, our community can no longer support two daily newspapers,” said Oahu Publications chairman David Black, who saved the Star-Bulletin with his purchase in 2001 and is now buying the Advertiser. “Even significant operating cost cuts could not stem the financial bleeding.”

Mayor Mufi Hannemann said Honolulu has long been well served by the two dailies and alternative voices.

“The economy, however, has not been kind to the newspaper business,” he said. “Many papers all across the country have had to close their doors. Its a sign of the times and it shows no one is immune.”

The possible end of one of the Honolulu newspapers comes just as a new Hawaii online news service called Peer News is being launched by eBay founder Pierre Omidyar.

Temple said Peer News was not interested in buying the Star-Bulletin.

He knows firsthand about the loss of a daily newspaper. Temple was editor and publisher of the Rocky Mountain News, which ceased publications a year ago - Feb. 27, 2009 - just months before the Denver newspapers 150th anniversary.

“I hate to see the potential contraction of news coverage and the loss of jobs that comes with it,” Temple said.

Under the Honolulu sale, Oahu Publications will acquire the Advertiser, which has a daily circulation of 130,000. It was founded in 1856 and purchased by Gannett in 1993.

“When you look at look at (Gannett) across the board, they are struggling with the newspaper model like everybody else,” he said. “In this deal … they get some cash, they reduce their exposure to newspapers and they call it a day.”

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Zhu Zhu Pets, the furry mechanical hamsters that zoom around, were the runaway hit of the holiday season. One key to their success: a price tag under $10.

The American International Toy Fair begins Sunday. This is the annual event where toy makers show off new offerings that will make their way into next years stockings. Previews from toymakers and interviews with analysts make clear that the focus is on innovation and price. Few toys will retail for more than $100, and most will be priced below $30.

“Theres still going to be some hesitancy to raise prices too much,” said Needham & Co. analyst Sean McGowan. “Last year the feeling was under $30 is where you needed to be. This year there may be more willingness to be $30 to $50. But I dont think well see a wave of $300 stuffed horses again.”

The toy industry performed a bit better during the holidays than it did in 2008, but the season was far from a bonanza. The NPD Group, which does market research, said toy revenue was flat because of discounts during the fourth quarter, but the industry sold 4 percent more toys. For the year, sales edged down 1 percent to $21.47 billion.

Tough times can spawn creativity.

“Ive seen some really innovative products,” said Jim Silver, an analyst at Timetoplaymag.com. He pointed to radio-control vehicles as combining innovation and low prices. One reason theyre cheap: The cars themselves have shrunk, Silver said.

“What the industry has learned is that kids dont necessarily want bigger. Its about the features, not the size of the vehicles,” he said.

For $24.99, Mattel is offering tiny Hot Wheels radio-control Stealth Rides cars that fit in a case that doubles as the remote control. Spin Master has several radio-controlled offerings, including the Air Hogs Vectron Wave UFO flying saucer that can sense objects below it and hover above them. That also costs $24.99.

“Consumers like radio control, they just didnt want to spend $70,” Silver said.

Prices have fallen as technology has advanced, much like the price drops in flat-screen TVs or laptops.

Some other technology-infused toys planned for 2010:

- Hasbro developed Scrabble Flash Cubes. The word game uses cubes that each display one letter digitally. When players fit cubes together, the game can recognize whether they form valid words. And it can keep score.

- Hasbro also expands its Furreal Friends line with smaller Snuggimals that wag their tails and move when you pet them, retailing for about $7.99.

- Jakks Pacific is offering some high-tech spying gear for kids in its Spy Net line, including a video spy watch for $54.99 and a Pen Audio Bug for $24.99. Yes, theyre just what they sound like - miniature video and audio recorders.

- Wowwee has developed a line of guitars and drum sets that are only about 1 inch thick called Paper Jamz. Theyre also $24.99.

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The TV appearances will be the first for a U.S. audience after the automaker ran an informational ad in newspapers today and President Akio Toyoda gave a 75-second apology last week in Davos, Switzerland, in contrast with other Japanese companies that have held news conferences after recalls.

“They have wasted too much time without doing anything,” said Tatsuya Mizuno, director of Mizuno Credit Advisory. “Toyota used to be a company with foresight, always ready to take action, but now they have fallen very far behind the curve.”

The companys stock plummeted 14 percent last week, the worst five-day performance since October 2008, wiping out 1.9 trillion yen ($21 billion) in market value.

Toyodas remarks contrast with press conferences by Mitsubishi Motors Corp. and Panasonic Corp. where executives bowed deeply to express contrition for recalls. Toyota has caused “anxiety” in drivers and investors as top management hasnt been more forthcoming, Mizuno said before the U.S. television appearances were announced.

Week Late

“This has been the problem: There really hasnt been a face of Toyota for the consumer,” said Rebecca Lindland, a forecaster at IHS Global Insight Inc. in Lexington, Massachusetts. “Its great that they are doing the Today show this week, but last week would have been better.”

The automaker last month recalled 2.3 million vehicles in the U.S. over a pedal defect linked to sudden acceleration. That action, coinciding with other recalls related to sudden acceleration covering about 5.4 million vehicles, led to the halting of U.S. sales and North American production of eight models and prompted Congress to schedule hearings on the matter.

The automaker has said at least 1.7 million U.S. vehicles are being recalled for both issues.

In Europe, it will recall as many as 1.8 million of its cars and PSA Peugeot Citroen will recall 90,000 of its cars made at a factory managed by Toyota. In China, the company will recall 75,600 cars.

Announcement Close

“I am deeply sorry that were giving cause for concern to customers,” Toyoda said in an unscheduled interview on Jan. 29 with Japans NHK television network in Davos, posted to U.S. broadcaster ABC News Web site. “Were preparing to explain the facts to our customers as soon as we can so that we can remove that anxiety.”

The House Energy and Commerce Committee will hold a hearing Feb. 25, in part to examine the response to reports of sudden acceleration by National Highway Traffic Safety Administration involving the companys models.

“Incidents of sticking accelerators have been ongoing with Toyota vehicles for up to a decade, and have led to a disproportionately high number of deaths,” said Representative Bart Stupak of Michigan, the Democratic chairman of the subcommittee on oversight and investigations.

The House Committee on Oversight and Government Reform plans its own hearing on Feb. 10.

Safety Talks

The U.S. government didnt balk at Toyotas approach during a meeting last week, according to a Transportation Department official, who declined to be identified discussing the session with company representatives. The departments NHTSA unit, which oversees recalls, doesnt formally approve specific remedies, the official said.

The carmakers suspension of sales of eight models probably helped General Motors Co., Ford Motor Co. and Chrysler Group LLC gain market share in the U.S. last month. Toyota stopped sales of the Camry and Corolla, its two best-selling models, leaving it the smallest share of the U.S. market since March 2006, researcher Edmunds.com projected.

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Valassis accused News America of threatening customers with price hikes for not offering exclusivity in marketing deals.

Meanwhile, News America argued that Valassis tried to force higher marketing rates by publicly announcing price changes.

In a statement Saturday, News Corp. said it did not want to risk presenting the case to a jury in Michigan federal court, where it was scheduled for trial Tuesday. Citing unspecified concerns over the venue in U.S. District Court for the Eastern District of Michigan Chief Operating Officer Chase Carey said News Corp. decided “it was in the best interests of the company and its stockholders to agree to a settlement.”

Valassis said the deal also includes a 10-year shared mail distribution agreement with News America.

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Newspapers and their Web sites provided 61 percent of the original reporting or fresh information on six major news stories that unfolded during the week of July 19-25, the study found. Local television stations and their Web sites accounted for 28 percent of the new information, followed by radio stations and their sites at 7 percent and Internet-only “new media” at 4 percent.

The conclusions bolster the arguments of newspaper publishers and editors who trumpet their publications as indispensable sources of information about their communities.

J. Montgomery Cook, editor of The Baltimore Sun, wishes the study would have examined more than just a one-week window. A longer look “would have more clearly proven how dominant and comprehensive The Sun is compared to other media,” Cook wrote in an e-mail.

Yet The Sun and other big newspapers are getting smaller as their print editions lose readers and advertisers to the Internet.

Part of the problem, according to the most outspoken media executives, is that the newspaper industry has been losing hundreds of millions in revenue annually to Google, blogs and other Web sites that crib from their stories to help attract more readers and sell more advertising. The contingent making this argument include News Corp. Chairman Rupert Murdoch, whose company owns The Wall Street Journal, and Tom Curley, chief executive of The Associated Press, a not-for-profit cooperative owned by newspapers.

“This study does suggest that if newspapers were to disappear, what would be left to aggregate?” said Tom Rosenstiel, director of the Project for Excellence in Journalism.

Media blogger Jeff Jarvis, who wrote a book hailing Googles business practices, thinks its premature to pose that question. He is teaching a City University of New York graduate journalism class on the future of digital reporting, partly because be believes printed newspapers are doomed.

“We can improve the (Internets) ecosystem for covering local news,” Jarvis said. “Were still in the pre-dawn era of this transformation.”

Television news coverage also has been reduced in recent years. In reaction to declining ratings in the evening, TV stations are programming more newscasts in the early morning and other hours, Rosenstiel said, a trend thats taxing their staffs because they usually arent hiring more workers. To save money, TV newscasts are relying more on narrative accounts read in the studio instead of sending reporters to news scenes, Rosenstiel said.

Local TV stations churned out slightly more content, either on the air or on their Web sites, than newspapers, according to the study. Fewer of the stories, though, contained original reporting, with TV stations often pulling information from other media, primarily newspapers.

Overall, more than 80 percent of the coverage published and broadcast during the study period contained old information wrapped in a different package. “Much of the news people receive contains no original reporting,” the study found.

Newspapers often updated their stories with more information later in the day or published a more thorough report in the print publication, Rosenstiel said. But the first versions on the Web tended to attract a lot of traffic, partly because of the way links to news are increasingly distributed on Twitters short messaging system and social networks such as Facebook, according to the study. In some cases, the stripped-down news reports initially posted on the Web werent updated, leaving an incomplete picture.

Whats more, the report contends newspapers arent digging as deeply into local stories or producing as much coverage as they did before the Internets less expensive advertising alternatives and the recent recession ravaged their revenue.

Print ad sales, the main source of newspaper income, have plunged by more than 40 percent - siphoning more than $20 billion in annual revenue - since 2005.

Those financial pressures triggered layoffs that have collectively reduced the size of U.S. newspaper staffs by about 25 percent since 2001, based on estimates from the American Society of News Editors. That translates into the loss of at least 14,000 newspaper reporters, editors and photographers in eight years. The final count on 2009 job losses hasnt been completed.

Large dailies such as The Sun have been particularly hard hit. Its owner, the Tribune Co., has been operating in bankruptcy protection for the past 13 months. The Sun endured a nearly 30 percent staff cut last April that left its newsroom with about 150 employees.

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The paper will publish a new weekday print edition starting Monday. It will focus on the newspapers core strengths, including politics and cultural issues, President and Publisher Jonathan Slevin said Wednesday in a statement.

“Our market-based, forward-looking plan is both a response to the recessionary economy, continued downward financial pressures on the news industry and our transition into a 21st century multimedia enterprise,” Slevin said.

The layoffs hit some high-profile beats, including journalists covering the Justice Department, Congress and foreign affairs.

The newspaper announced several management changes, though its not clear who will oversee the newsroom operation. Christopher Dolan was appointed Wednesday as national politics editor and Brett Decker as editorial page editor. Jeffrey Birnbaum, the managing editor for digital operations, resigned that post but will continue as a columnist.

During his last day at the office, Jones said Thursday that his staff had been working under a cloud of uncertainty for about two months.

“In spite of that, theyve been very professional,” he said. “Theyve come in every day and broken big stories. … Theyve put out a product that Im really proud of, and Im proud of them.”

The Times did not break down the cuts, but laid-off staffers described what they learned from colleagues.

Several departments at the newspaper are being all but eliminated, said photographer Allison Shelley. All nine staff photographers were cut, along with the assistant managing editor of photography, she said. Only two photo editors will remain.

The graphics and Web department staffs were cut nearly in half, and nearly all metro reporters were laid off, Shelley said. Only six copy desk editors would remain, she said.

While newsroom cuts had been expected for weeks, the photography layoffs came as a surprise.

“I dont think anyone expected the entire staff of shooters would be laid off,” said photographer Katie Falkenberg, who worked at the Times for three years.

“We worked hard to put out what we thought was a really good section that stood up to (The Washington Post) and anyone else, despite our lack of staff,” said Mark Zuckerman, who covered baseballs Washington Nationals for the newspaper. “We were the No. 2 sports section that acted like a No. 1 sports section.”

Washington Redskins beat writer Ryan OHalloran announced the sections fate Wednesday on Twitter.

“Times sports section is kaput,” he wrote. “Make sure to call and cancel subscriptions after Friday.”

On Thursday, Redskins owner Dan Snyder and General Manager Bruce Allen made a rare appearance in the media room at the teams headquarters to present personalized jerseys to OHalloran and Times colleague Dave Elfin.

The Times is often viewed as the conservative alternative to the much larger Washington Post. It was founded in 1982 and funded by the Rev. Sun Myung Moon, leader of the Unification Church.

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That will play out in living rooms across the country. The changes could mean higher cable or satellite TV bills, as the networks and local stations squeeze more fees from pay-TV providers such as Comcast and DirecTV for the right to show broadcast TV channels in their lineups. The networks might even ditch free broadcast signals in the next few years. Instead, they could operate as cable channels - a move that could spell the end of free TV as Americans have known it since the 1940s.

“Good programing is expensive,” Rupert Murdoch, whose News Corp. owns Fox, told a shareholder meeting this fall. “It can no longer be supported solely by advertising revenues.”

Fox is pursuing its strategy in public, warning that its broadcasts - including college football bowl games - could go dark Friday for subscribers of Time Warner Cable, unless the pay-TV operator gives Fox higher fees. For its part, Time Warner Cable is asking customers whether it should “roll over” or “get tough” in negotiations.

The future of free TV also could be altered as the biggest pay-TV provider, Comcast Corp., prepares to take control of NBC. Comcast has not signaled plans to end NBCs free broadcasts. But Jeff Zucker, who runs NBC and its sister cable channels such as CNBC and Bravo, told investors this month that “the cable model is just superior to the broadcast model.”

The traditional broadcast model works like this: CBS, NBC, ABC and Fox distribute shows through a network of local stations. The networks own a few stations in big markets, but most are “affiliates,” owned by separate companies.

Traditionally the networks paid affiliates to broadcast their shows, though those fees have dwindled to near nothing as local stations have seen their audience shrink. What hasnt changed is where the money mainly comes from: advertising.

Cable channels make most of their money by charging pay-TV providers a monthly fee per subscriber for their programing. On average, the pay-TV providers pay about 26 cents for each channel they carry, according to research firm SNL Kagan. A channel as highly rated as ESPN can get close to $4, while some, such as MTV2, go for just a few pennies.

With both advertising and fees, ESPN has seen its revenue grow to $6.3 billion this year from $1.8 billion a decade ago, according to SNL Kagan estimates. It has been able to bid for premium events that networks had traditionally aired, such as football games. Cable channels also have been able to fund high-quality shows, such as AMCs “Mad Men,” rather than recycling movies and TV series.

That, plus a growing number of channels, has given cable a bigger share of the ad pie. In 1998, cable channels drew roughly $9.1 billion, or 24 percent of total TV ad spending, according to the Television Bureau of Advertising. By 2008, they were getting $21.6 billion, or 39 percent.

Having two revenue streams - advertising and fees from pay-TV providers - has insulated cable channels from the recession. In contrast, over-the-air stations have been forced to cut staff, and at least two broadcast groups sought bankruptcy protection this year.

Fox illustrates the trend: Its broadcast operations reported a 54 percent drop in operating income for the quarter that ended in September. Its cable channels, which include Fox News and FX, grew their operating income 41 percent.

A small chunk of the ad revenue is being recouped online, where the networks sell episodes for a few dollars each or run ads alongside shows on sites such as Hulu. Media economist Jack Myers projects online video advertising will grow into a $2 billion business by 2012, from just $350 million to $400 million this year.

But that is not significant enough to make up for the lost ad revenue on the airwaves. Advertisers spent $34 billion on broadcast commercials in 2008, down by $2.4 billion from two years earlier, according to the Television Bureau of Advertising.

So rather than wait for the Internet to become a bigger source of income, the networks and local stations are mimicking what cable channels do: Theyre charging pay-TV companies a monthly fee per subscriber to carry their programming.

Since 1994, the Federal Communications Commission has let networks and their affiliates seek payments for including their programming in the pay-TV lineup. Not everyone demanded payments at first. Instead they relied on the broader audience that cable and satellite gave them to increase what they could charge advertisers.

The big networks also were content to let their broadcast stations essentially be subsidized by higher fees for the cable channels that fell under the same corporate umbrella. A pay-TV company negotiating with the Walt Disney Co., which owns ABC, is likely paying more for the ABC Family channel than it otherwise would, with the extra assumed to help Disney cover its costs for the ABC network broadcasts.

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