Diversify or die - that is the harsh reality for media firms

All advertising revenue in paid-for titles is hard to come by, especially the lucrative classifieds charged by the line. In addition, circulation revenue is imperilled by falling sales. Meanwhile, investment is required to fund digital experimentation in order to enlarge internet audiences.

But it is clear that online advertising will never produce the levels of income achieved by newsprint. So it means that those newspaper owners and managers who remain eager to publish news in future must seek new ways of funding journalism. For at least one British newspaper owner, the Guardian Media Group (GMG), the new way has taken it in a direction that diverges sharply from the customary editorial agendas of its flagship papers, The Guardian and The Observer. To ensure the group's financial security it has gone into partnership with a venture capital firm, Apax Partners, in two key deals.

First, GMG sold 49% of its profitable Auto Trader business to Apax. Second, the odd couple got together to acquire the business publisher, Emap Communications, for £1.1 billion.

Yet Apax is the kind of private-equity company that has had many a Guardian journalist breaking out in spots. I must declare an interest here, since I run a blog for The Guardian. But I am free of acne because I have come to terms with the fact that it is a necessity for papers, including liberal and left-of-centre papers, to get into bed with capitalists.

GMG may be owned by the Scott Trust, a non-profit-making entity set up to preserve the editorial independence of The Guardian. But there would be nothing left to preserve if the loss-making paper was unable to benefit from the cross-subsidy of other commercial enterprises.

However painful it may be for old Marxists like me to admit it, there is no way to buck the market. If we want to preserve journalism and, most importantly, ensure diverse media ownership and a consequent plurality of viewpoints, there is no alternative.

The other lesson is the importance of diversification. For years, City analysts have demanded that companies divest themselves of non-core businesses. In fact, for newspapers at least, being owned by conglomerates with non-newsprint businesses that do not rely on advertising is a boon. The newspaper companies facing the greatest problems - whether it be Trinity Mirror and Johnston Press in Britain or the New York Times Company in the US - are those that have all their eggs in the newsprint basket.

By contrast, those groups that have been smart enough, or lucky enough, to diversify can now cross-subsidise their journalism. In the difficult years for the Financial Times, its owner, Pearson, has steady income from its many other activities, notably in education and book publishing. The Washington Post Company has a thriving educational business. Rupert Murdoch's News Corporation has its tentacles in movies, TV, book publishing and a sports division.

Several newspaper companies are coming to rely on allied businesses that once were merely marginal add-ons, such as the staging of exhibitions or organising events. This may offend some journalists, especially those who hail from an age when newspapers appeared to fund themselves.

I say "appeared" because too many of us affected to believe our journalism was free from commerce, averting our gaze from the reality of our papers being funded by advertising. Naturally enough, I do not want to see journalism tainted by its association with other businesses. I would hope The Guardian's Polly Toynbee will continue raging against private equity and would expect Apax's entertaining boss, Stephen Grabiner, to shake his head and smile.

It would be an inhibition of press freedom if he were to pick up a phone and complain to GMG's chief executive, Carolyn McCall, about Guardian editorial content. Their shared concern should be about bottom lines, not headlines.

There is no reason why diversification cannot give journalism a wonderful new lease of life free from the continual worry about advertising.