After initially spurning Murdoch’s offer to buy Dow Jones the family that controls the publisher of the Wall Street Journal has faced the cold hard reality that new thinking is required to preserve the future of the empire they’ve built.

Whether Murdoch’s NewsCorp can do that or some other bidder remains to be seen. But what isn’t open to debate is that the traditional newspaper indudstry is in a death spiral.

This industry is driven by positive feedback effects. Better content attracts more readers which attracts more advertisers who ultimately provide most of the profits for newspapers. Positive feedback effects are great when they are working in forward motion.

Many media companies have become fat and rich as a result. They are lousy in reverse as we see from readers, advertisers, and journalists deserting newspapers like rats from a sinking ship. Readers and advertisers have both headed to the internet. And then more advertisers have left just because there are fewer readers.

With less revenue coming in newspapers have laid off journalists—as the San Francisco Chronicle did just yesterday. But then with less content even fewer readers come.

This downward spiral isn’t going to be solved by simple tweaks of the newspaper model. The rag is fundamentally a lousy technology for disseminating advertising which is where profits come from, and readers who can get free content on the internet aren’t going to make up the difference.

My guess is that Murdoch and others see the real value in newspaper properties as their ability to collect and process information and create compelling content. And Dow Jones is one of the premier newspaper assets in this regard.

We’ll have to see how well he, or others, can leverage this asset.