In the latest sign of an industry that is headed for oblivion, a new study released by the Pew Research Center concludes that 64% of American newspapers publish less foreign news than they did three years ago citing editor’s opinions that foreign news is not “essential” to their business any more. And, right behind the pull back in reporting foreign news were cuts in national and business news reporting. Reporters’ blogs aren’t edited and long-time journalists are being sacked in favor of young, less experienced reporters who are able to work fast. The traditional industry seems to be raising the white flag to national news web sites and cable TV with national and regional papers morphing into local outlets for news. The big unknown is whether the obvious embrace of the strategy to downsize the paper’s content will translate into an embrace of the downsizing of their ad revenue. Local papers with local advertisers just won’t carry the same bounty as national news outlets do – or shall I say did.

The industry, however, could learn something from the French. This morning’s New York Times described France Telecom’s experiment to deliver the news digitally via a black box (think of the Kindle) with advertising embedded into the paper. Now this is big news for many reasons even though the technology is not all that new (The New York Times can be downloaded onto the Kindle, for example). First, the paper is ad-supported. That’s not so new but France Telecom’s plan to split the ad revenue with the publication is. Second, the paper is interactive. Thanks to the internet-enablement of the paper, advertisements can be linked directly to the advertisers web site, capturing the impulse instinct much more effectively than their low tech paper brethren.

The goal is to revive the newspaper industry in France; a market where readership is even lower than it is here in the U.S. This is all a trial right now and the devices are given to subscribers for free to get them to give it a try. If successful, one can imagine them rolling out the same model that they use now with mobile phones, subsidize the cost of the device in exchange for a modest charge for the service (which of course runs over their wireless network).

When we wrote the piece last year on how to “save” the industry, we actually started the piece with a scenario that sounds much like the French Telecom experiment, thinking that it was a longshot given the malaise within the industry. The idea, it seems, is doable, but the innovation didn’t come from Le Monde or La Pais, but rather an outsider. That is perhaps the ultimate catalyst cautionary tale. Catalysts must understand and map the entire industry ecosystem – not just those who are direct competitors today. It’s why payment companies want to better understand the implications of mobile to their business and why mobile carriers worry about Google becoming a phone company. Thinking (and looking) outside of the box in these businesses is more than a cliché, it has to be priority number one.