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The current recession that is scything through the global economy is landing devastating blows on the newspaper industry. At least 120 newspapers in the US have shut down since January, according to Paper Cuts, a website that tracks the newspaper industry in the country. In other parts of the world the industry is also facing dire times, with revenue dropping dramatically and different media scrambling for dwindling advertisement revenue.

In an age in which the Internet and mobile phones are delivering news as quickly as it happens, newspapers look like dinosaurs, printing yesterday’s news on dead trees and delivering them the next day. Clearly the technology is leaving newspapers far behind.

But the growing number of television channels and profusion of websites and blogs is not what is threatening the newspapers; it is the economic model they have evolved themselves into.

The cost of making of a newspaper continues to rise, with the price of newsprint, printing costs and the cost of physically delivering the paper going up steadily while ad revenue tumbles – in double-digit figures in most countries over the past few years.

Studies show that more than 50 per cent of a newspaper’s cost is constituted by newsprint and delivery overheads, while at the same time newspapers belong to the rare commodities that still command a price far below actual production cost. But newspapers can become an economic viability if they can change the mode of delivery from the old practice of printing on newsprint (not to mention the environmental impact).

But newspaper websites and other news blogs have not evolved into great income-generating models that would allow large newspapers to change their form and format. Many newspapers are now caught in the middle, with ad revenue from the print editions declining and the comparatively smaller revenue from online editions not being enough to support a large-scale news operation. Moreover with the Internet morphing into a free gateway for news, it will be hard for newspapers to get large numbers of readers to pay for the content.

The arrival of iPod and iPhone has already changed the reading and surfing habits of many. But two technologies that became available in recent months may provide a clearer pointer to the future direction for newspapers. One is Kindle 2 released by Amazon and the other is the e-Reader unveiled by Plastic Logic, a spin-off firm from a Cambridge University laboratory.

Amazon’s Kindle 2, released earlier this year, makes buying books a cheaper affair, with most costing less than US$10 – and Kindle Store now carries 230,000 titles. The manufacturer claims the device can hold around 1,500 books, and the new version also has cut down the glare from the screen, making reading easier on the eye. Amazon has not released any sales figure but a Citibank estimate puts the number of Kindles sold at half a million already.

A study by Business Insider website claims that even if the New York Times gave away a Kindle 2 (worth $359) to every subscriber, it would still be less expensive than the cost of delivering newspapers for a year.

Plastic Logic’s e-Reader is more tuned towards the needs of newspapers and journals. With a flexible plastic screen that is larger than Kindle’s, this lightweight reader’s 8.5 x 11-inch screen has the ability to display ads and deliver newspapers in PDF format. Like the e-newspapers that some newspapers already have on their websites, readers will have to electronically turn the pages, giving the publisher the same amount of ad space a normal newsprint edition provides.

“You would have it in your house. It would be set to download the newspaper from midnight till 2am. It would match every download, and when you sit down to your morning coffee, you have your newspaper,” Joe Eschbach, marketing VP of Plastic Logic, told ABC TV recently.

According to reports, the company has already entered into contracts with leading newspapers like the Financial Times and USA Today, though the details remain sketchy as the company is scheduled to release the product to the market only later this year.

But the possibilities look tantalising. Like the TV box that every home has now, it is plausible the technology will evolve into a form where newspapers can deliver the news electronically to an e-reader through a similar device. This will enable newspapers to update stories more frequently and, who knows, even include video footage.

True, the technology for all this is still a few years away. But before you dismiss this as a geek’s pipedream, consider this: Detroit News and Detroit Free Press have limited home delivery of their newspapers to three days a week. Now they have entered into a deal to rent out 100 e-Readers to selected subscribers and to distribute the papers through the e-Reader as an experiment. The company hopes to distribute about 20-30,000 e-Readers by early next year if the trial proves successful.

But with grey screens and a nascent technology, these e-Readers may not be the products that will rescue the newspaper industry. However, one thing this economic crisis is making clear is that newspapers in their current state can not survive as viable economic models.