[Here’s another excerpt from Ken Doctor‘s new book, Newsonomics: Twelve New Trends That Will Shape the News You Get. Today, Ken’s Q&A with Rafat Ali, who runs media-world must-read paidContent. —Josh]

Rafat Ali is founder, publisher and editor of ContentNext Media. Reuters described its success well: “ContentNext’s flagship paidContent, founded in 2002, has quickly established itself as a must-read among executives in the media and digital media sector.” PaidContent has indeed a daily stop for those involved in the business of news, media, and entertainment industries. In addition, the company runs parallel sites for the United Kingdom and India and around mobile content.

Q: PaidContent filled a niche no one had previously seen as clearly as you did. How did you see the niche, define it, and make sure you got it as focused as you could?

A: This was the depths of Internet recession in 2002 in New York City, and I was looking for a way to raise my profile, and this seemed like a good way to showcase my skills as an online journalist covering online media and the Internet. I was aiming for a new job with the likes of WSJ and CNET then. Of course, no one was hiring in those days, much less hiring an online journalist covering online media.

I was working for what then was Silicon Alley Daily, the online and email remnant of the magazine Silicon Alley Reporter. I joined it right after the print magazine closed, and online and the email newsletter remained. There, after a few months of working, I was the last man standing, sort of, as the company started to lay off other journalists, and I learned to do a lot more with a lot less, including editing my own stories.

The daily coverage meant I saw the trend: Online advertising had tanked, and a definite trend toward premium and subscription content online, with sites such as NYTimes.com, TheStreet.com, Salon.com and others experimenting with it. The idea — even then — was that this wasn’t the only way in a downturn, but that it was essential to experiment with all sorts of revenue models, and having multiple legs meant overall some would work better than others as economic cycles came through.

As the economy came back, so did advertising online, and the paid content trend went on the backburner for most of the online publishers. The key for us was focus: covering the money flow for online media, where it went in and how it came out. As long as we were at the intersection of technology and how it affected the business models and financing of digital media, we were safe as a viable business. PaidContent began covering all the ways in which content gets paid for, and covering it across all sectors and geographies. That also meant defining “content” in as broad a manner as possible, across tradition and new media, entertainment and information sectors, with the focus being on content aimed at and generated by individual consumers.

Q: You’ve combined business coverage of entertainment and journalism businesses. What major idea should news publishers take away about the relevance of the entertainment business to their own business models?

A: Entertainment was the lowest-hanging fruit, and the first to be affected by the changes in digital media, as consumer consumption patterns changed. I saw and covered firsthand the decimation of the music industry with the advent of Napster and realized that this was going to happen to the news business very soon. Both these legacy businesses were built on the economics of scarcity, something that digital media did away with. Also, packaging as defined top-down didn’t matter anymore in entertainment, as the remix culture took hold, and the same became true very soon for the journalism and news businesses as well. What is different is that great investigative journalism has a lot more civic value than great entertainment, and funding that requires a lot more creativity than publishers have displayed till now.

Q: What’s the moment when the lightbulb went off on how the economics of this new digital business would be radically different from legacy publishing?

A: It would be clichéd to say it was the advent of blogging, but, for me, it was when Blogger.com launched in late nineties. That showed how easy it was to publish, and how it could be used to deliver news, opinion, and aggregation in a very efficient way. Also, a few years later, it was the advent of RSS feeds and newsreaders, and how news packaging as defined by publishers went away. It really defined how personalized interest areas defined by users would be the way going forward. Monetizing this age of dispersed media was very different, and was on a very different scale and margins, than legacy. The cost of experimenting with any of these innovations came down dramatically, and publishers had to learn how to do a lot more with a lot less, and at the same time, competing with a lot more sources online.

Q: What lesson in digital publishing do you wished you’d learned faster?

A: I underestimated the value of comments when I was building the business, back in 2002–2003, and adding community later became a lot more difficult for us down the line. For us, it was about giving the news as accurately and efficiently as we could, and my contention was that our expert readers could form their own conclusions and opinions on it. We did have pithy analysis and opinion occasionally, and continue to have it, but later on we learned that a heavy mix of all of it is what the users wanted. In some senses, we were top-down too, and that we should have rectified sooner. Also, blogging in a specific trade vertical means you will hit a scaling issue (getting big enough, fast enough) sooner or later, and that means building replicable models in other verticals (content niches) too. We also should have learned that lesson sooner.

From Newsonomics by Ken Doctor. Copyright 2010 by the author and reprinted by permission of St. Martin’s Press, LLC.