zridling, I think you've hit on a key point: control. It's not just about profits, it's about control, and of course the profits that such control allows. But the key is the control. Even if you were to show newspapers, or other big media, a way to make as much or more money from their products than ever before, they wouldn't be likely to accept it unless they could exercise the same amount of control they've always had. And I grant that, from a business perspective, a revenue source without control is less attractive than one with control, even given the same amount of revenue. The problem is their control is now illusory and that's exactly why they're losing market, profit, and relevancy. The revolutionary changes that digital anything makes to the world are pretty well uncontrollable by any one entity, at least not for long. So they'll need to find a way to work *with* it not against it. So far organizations that are doing that well seem to be succeeding...
As for ad pricing, etc. being different from newspapers, TV, etc yes that's true. But TV has widespread ad blocking now too with TiVo, etc. And the ad model on the Internet is based on a young market. It may mature into something similar to what newspapers had. In fact some of the most successful sites are not the "throw any PPC ad up there" type, rather they are like newspapers in that they select the ads that go up, and position them semi-carefully within their content. Look at www.penny-arcade.com
for a prime example of an effective new model for online advertising. For example the PA guys frequently draw art and write copy for the ads on their site, making them more interesting to their visitors. And hey, isn't advertising online more trackable than print or TV ever *really* were? The viewership/readership stats of newspapers and TV were illusory, mere extrapolations at best, but advertisers bought into it because they had no other choice. Now they have choice, the value per-ad is diminished, but the ability to serve relevant and contextual ads and a lot more variety of ads is improved. So I think things will stabilize over time. The best thing people like Murdoch could do is work towards a more stable online advertising market I think.
The bottom line is I think the flagging success of major media can be demonstrably tied to their lack of embrace of changing times. This is all the more compelling because it's happened many, many times before, and it's always virtually the same story. Life goes on, the big titans of the day die off, and new titans replace them. Maybe Google is one of those titans, who knows. But unless Murdoch and company change their approach, they won't be, that's for sure.
Above all it's important to remember it is not some new and uniquely pernicious thing, this interwebs and its series of tubes. Technology has always challenged the status-quo, and upset the establishment. That's a good thing. Without it we would still be listening to live piano players in movie houses with silent movies, there would be no record sales because recording music is the devil's work, and etc, etc.
P.S. Can you imagine how the lamp lighting industry suffered when electric lights came along? Youch!