In a surprise announcement on Wednesday morning, Reuters announced that it was shutting the doors on its massive and ambitious “Reuters Next” project—a two-year, multimillion-dollar effort that was supposed to reinvent the news service’s web strategy and bring it into the 21st century and beyond. New CEO Andrew Rashbass said in a memo that the project was chronically over budget and nowhere near being ready to launch, so he killed it. But the bigger picture behind his decision is that Reuters is fighting the same kind of battle against the future that newspapers are, only it’s happening in slow motion.

According to a number of insiders at the news service, the fact that Reuters Next was over-budget definitely hurt its chances of survival, considering the Reuters news unit (which is part of Thomson Reuters) lost $59 million in the most recent quarter and the new CEO is presumably looking for things to cut. But the web-facing aspect of Reuters has also been in conflict with the business-to-business side of the service for some time—as former social-media editor Anthony De Rosa mentioned in a tweet—and the decision to kill Reuters Next likely had more to do with that conflict than it did with any financial investment.

Business customers are the most important

Like its competitor Bloomberg, the main business at Reuters—that is, the one that actually makes money—is the part that sells news from the service’s own correspondents and media partners to banks, investment houses and other corporate customers, including other news publishers, content companies and web portals like Yahoo. Both inside and outside the company, the decision to kill the reinvention of the consumer-facing side of Reuters was seen as a clear indication that the service sees its terminal and agency business as the most important thing rather than the internet.

In case the message wasn’t clear enough, Rashbass said that the current version of Reuters’ web operation was just fine for now—despite the fact that staff say it is a ridiculously time-consuming exercise to even insert a hyperlink in a Reuters story online, and the service routinely suffers technical issues that take down its blogs and other content, in some cases for days at a time.

In some ways, this decision makes perfect business sense: the terminal and agency business generates real cash, which Reuters clearly needs, while the web side of the service likely generates very little. So why not cripple it or even kill it outright? This is fundamentally the same choice that newspapers have been going through, and continue to go through—their online versions are making peanuts when it comes to advertising, and print ads are also in decline, so why not just put up a paywall and charge readers? For many, that is the only option they can see to remain in business or return to profitability.

Reuters web becomes a storefront window

The inevitable result of this, however, is a much smaller business—perhaps a profitable one, but smaller and likely less influential as well. Since only a fraction of existing readers of a publication will ever subscribe, relying solely on them means shrinking your reach dramatically. That’s why outlets like the New York Times have a metered wall sprinkled liberally with social-media holes and workarounds: because they want to retain as much of their reach and influence as possible, while still pushing the subscription model.

In a sense, Reuters has made the same decision. Instead of a paywall, it keeps the best version of its news and other content for its paying customers, and leaves the web as a kind of freemium version—a storefront window filled with things like Felix Salmon and Jack Shafer, to try and entice potential customers into paying, and to try and spread the image of Reuters as a place where smart writing appears so as to attract more potential corporate clients.

As with newspapers, however, the problem for Reuters and Bloomberg is that the high-paying customers they rely on for their livelihood are also gradually realizing that much of the information they get from those services is available elsewhere, and if not for free then much more cheaply. Reuters can still charge huge sums for as little as two second’s worth of advance notice when it comes to certain market moving information, but the days when that was the norm are gone forever.

Top photo of Reuters' building uploaded by Eternalsleeper via Wikimedia Commons