(Editor's note: This article is adapted from a chapter in Will the Last Reporter Please Turn out the Lights: The Collapse of Journalism and What Can Be Done To Fix It, published by The New Press in 2011.)

Most journalists are familiar with the arch observation, made famous by Winston Churchill, that history tends to be written "by the victors." Less known and more cheeky was Churchill's prediction (mostly accurate, it turned out) that "History will be kind to me, for I intend to write it."

To make even preliminary sense of the hotly disputed and remarkably fluid landscape of modern media, it helps to recall Churchill's axioms about historiography, and recognize that something closer to the inverse is warping our basic view of journalism. It's the losers, not the winners, who are writing the early historical drafts of this transformational media moment, while those actually making that history—the people formerly known as the audience, in critic Jay Rosen's apt phrase—are treating their legacy interpreters not with kindness but contempt. So much misunderstanding and breathtakingly wrong-headed analysis tumbles forth from this one paradox.

Imagine for a moment that the hurly-burly history of American retail was chronicled not by reporters and academics but by life-long employees of A&P, a largely forgotten supermarket chain that enjoyed a 75 percent market share as recently as the 1950s. How do you suppose an A&P Organization Man might portray the rise of discount super-retailer Wal-Mart, or organic foods-popularizer Whole Foods, let alone such newfangled Internet ventures as Peapod.com? Life looks a hell of a lot different from the perspective of a dinosaur slowly leaking power than it does to a fickle consumer happily gobbling up innovation wherever it shoots up.

That is largely where we find ourselves in the journalism conversation of 2012, with a dreary roll call of depressive statistics invariably from the behemoth's point of view: newspaper job losses, ad-spending cutbacks, shuttered bureaus, plummeting stock prices, major-media bankruptcies. Never has there been more journalism produced or consumed, never has it been easier to find or create or curate news items, and yet this moment is being portrayed by self-interested insiders as a tale of decline and despair.

It is no insult to the hard work and good faith of either newspaper reporters or media-beat writers (and I've been both) to acknowledge that their conflict of interest in this story far exceeds that of, say, academic researchers who occasionally take corporate money, or politicians who pocket campaign donations from entities they help regulate, to name two perennial targets of newspaper editorial boards. We should not expect anything like impartial analysis from people whose very livelihoods—and those of their close friends—are directly threatened by their subject matter.

This goes a long way toward explaining a persistent media-criticism dissonance that has been puzzling observers since at least the mid-1990s: Successful, established journalism insiders tend to be the most dour about the future of the craft, while marginalized and even unpaid aspirants are almost giddy about what might come next. More kids than ever go to journalism school; more commencement speeches than ever warn graduates that, sadly, there's no more gold in them thar hills. Consumers are having palpable fun finding, sharing, packaging, supplementing, and dreaming up pieces of editorial content; newsroom veterans are consistently among the most depressed of all modern professionals.

Every year, like a pack of crows announcing the arrival of winter, at least one and usually several anxious new tomes from big-media lifers pronounce journalism to be on death's door. In 1999, writing in the introduction to Bill Kovach's and Tom Rosenstiel's Warp Speed, legendary author David Halberstam declared that, "The past year has been, I think, the worst year for American journalism since I entered the profession forty-four years ago." Since then, obviously, things have only gotten worse.

Journalism "may face its greatest threat yet" and could well "disappear," Kovach and Rosenstiel warned in 2001's The Elements of Journalism. "The news about the news," according the subtitle of a 2002 book of the same name by life-long Washington Post editors Leonard Downie Jr. and Robert G. Kaiser, is that "American journalism" is "in peril." In 2009, Downie one-upped himself, co-writing in a white paper titled "The Reconstruction of American Journalism" that not only is accountability journalism "at risk," but that "American society must now take some collective responsibility for supporting news reporting."

How did we move so quickly from bemoaning the size and profitability of media companies (Downie 2002) to advocating government subsidies for those same weakened giants (Downie 2009)? Only by mistaking the fate of journalism's biggest manufacturers with the fate of the industry as a whole—by conflating A&P with the retail business—and then further muddying the waters by confusing the fortunes of big media companies with the health of democracy itself.

Within the Möbius strip of media criticism produced, digested, and praised by current and former mainstream journalists, the most impactful woe-is-media book in 2009 was Pulitzer-winner Alex S. Jones' Losing the News, where the gravity was right there in the subtitle: "The Future of the News That Feeds Democracy." Jones' potent operating metaphor was that the "iron core" of news—not crime blotter sensationalism or infotainment fluff, but foreign coverage, political watchdoggery, and statehouse news—was shrinking, and with it our ability to function as a republic.

But what if the iron core isn't shrinking?

I debated Jones about his book on Bloggingheads.tv (itself an outlet not remotely thinkable as recently as 1996, the year of James Fallows' Breaking the News: How the Media Undermine American Democracy). Challenging the iron core premise, I pointed out that in terms of statehouse coverage, just that morning I had written a blog post for Reason linking to a flurry of last-minute California bills signed into law by then-Gov. Arnold Schwarzenegger, which I had gathered through a Google News search taking me to (in addition to more than a half-dozen regional newspapers I wouldn't normally read) MTV.com, Hip Hop Press, and a boating newsletter. Since there's no way the Los Angeles Times or Sacramento Bee was going to cover all these laws, I argued, wasn't this a demonstration of the iron core expanding? Shouldn't we be happy that it's easier than ever to find out and publicize what our elected representatives are doing in the wee small hours?

Jones' response was telling.

"See, I think that's scandalous. I think that's appalling," he said. "Maybe Hip Hop News is a site that inspires you with confidence, but it would seem to me that you're giving away your confidence pretty cheaply." The exponential proliferation of news producers—and of our ability to access their product—is no consolation for the fact that the biggest hitters have been taken down a peg. What matters is not that there are more outlets than ever willing to dig up information on and criticize, say, the Catholic Church's sex abuse scandals, Jones argues, what matters is that the Church-dogging Boston Globe is weaker than it used to be.

This is analysis as edifice complex, not a clearheaded look at the evolving future of news. And unfortunately, this superpower-focused view is not limited to people whose careers were made inside the fortress walls. Like a Ralph Nader unable to avert his gaze from General Motors, or a Parents Television Council staring transfixed at another season of South Park, outside critics who have spent decades analyzing the mainstream media's corporate biases (from the left) and political agendas (from the right) have ended up reinforcing industrial journalism's vastly inflated sense of self-importance. Nothing adds more urgency to a critique than asserting that the target entity has nefarious power over the rest of us, even over the very ship of state.

So it is that 2003 could produce both Bernard Goldberg's Arrogance: Rescuing America From the Media Elite, and Our Media, Not Theirs: The Democratic Struggle Against Corporate Media by Robert W. McChesney and John Nichols. "Media bias" on 2004 bookshelves was both shackling President George W. Bush's foreign policy (in Bill Sammon's Misunderestimated) and enabling it (Amy Goodman's Exception to the Rulers). Focus here not on the incompatible political takes, but on the shared fear of Big Journalism's malodorous omnipotence. Time and again, citizens have been portrayed as under the sway, even the thumb, of giant media corporations. And time and again this description has turned out to be false.

When AOL bought Time Warner in 2000, for example, lefty critics who for years had been warning about an alleged "media monopoly" (consisting, somehow, of more than a half-dozen companies) reacted with positively millenarian forecasts of doom. Norman Solomon heralded a "new theocracy," and dusted off the old Aldous Huxley quote about how there is "no reason why the new totalitarianisms should resemble the old." Robert Scheer proclaimed that the new "Big Brother" would portend the end of the Internet "as a wild zone of libertarian freedom." And McChesney, arguably the most currently influential of the bunch, declared back then that "the eventual course of the Internet—the central nervous system of our era—will be determined by where the most money can be made, regardless of the social and political implications."

A decade later we can see that this telescopic focus on the elephant in the room missed out on history's biggest mouse party. The most important fact of our modern media world, the engine of such unprecedented creativity and anxiety-inducing destruction, is that the customer is no longer captive. People create their own media, for the sheer bloody hell of it, and no longer adhere permanently to one of a handful of legacy brands.

That all of this should be self-evident to anyone who can open a Web browser makes it no less relevant to our assessment of media—or, more precisely, to the prevailing assessment of media, which serves as the misplaced starting line for most discussion. Too many media critics are still obsessed with mergers, with ownership percentages, with whatever political slant they think establishment newsrooms are force-feeding down our throats, instead of recognizing that the threats to good journalism in 1972 are vastly different than the threats to good journalism in 2012. For heaven's sake, we still have a "Project Censored" churning out annual collections, in an era of Wikileaks, ubiquitous camera phones, and homeless guys publishing popular blogs.

To those of us whose career prospects did not depend on media behemoths or academic institutions, whose view was not colored by an over-arching fear of economic and political power concentrated in the hands of would-be 21st century media barons, the AOL-Time Warner merger, like all supposedly frightening media consolidations, was only as relevant as our comparatively minor consumption of the new conglomerate's products. (I would invite every Ben Bagdikian fan reading this to keep a detailed diary of your media consumption for a full day, count up how many different corporations and human beings compiled the stuff you consumed, note which entities did not even exist in the 20th century, and then try ever again to say or write with a straight face the phrase "media monopoly.") As I wrote when the merger was announced, "If this is the 'new totalitarianism'…then we're the freest slaves in the history of tyranny."

Audience empowerment (to rescue a debased term) is not just about the ability for humans to send text messages or create ad hoc social networks free from government sanction, though both of those developments are revolutionary on their own. Nor is it chiefly about individuals creatively re-packaging the journalistic spade-work of deep-pocketed media institutions, though that, too, has been a remarkably beneficial, not detrimental, innovation (any newspaper journalists who claim otherwise should estimate their number of visits to sites edited by Jim Romenesko). No, the reality rarely broached in the media's own drumbeat of doom is that members of the formerly captive audience are, on a daily basis, beating the professionals at their own game, in the process rendering hollow the claim that our democracy is imperiled when newspapers tremble.

Take public opinion research. From within the newsroom fraternity, the media story about political polling is that, sadly, operations such as the L.A. Times Poll are scaling back, firing employees, shutting down. The view from the outside, however, looks a good deal more wonderful—and damning.

In 2008, a 30-year-old baseball stat nerd looked at the reams of public research product churned out by the nation's 1,500-plus daily newspapers, and concluded that, though "there is nearly as much data as there is for first basemen," the "understanding has lagged behind." So Nate Silver launched 538.com (named after the number of votes in the Electoral College), and through sheer intellectual rigor and superior numeracy went on to outperform all comers in the political prediction business that year. As Silver later explained in The New York Post, too often "polls are cherry-picked based on their brand name or shock value rather than their track record of accuracy," and "demographic variables are misrepresented or misunderstood."

Silver, who was later hired by The New York Times (a blogger-to-riches story that would have made headlines a decade ago but is no big deal nowadays), is a living refutation of the Labor Theory of Value. All those thousands of big-media reporters and commentators and pollsters, paid full time to analyze and interpret political information, got their clocks cleaned by a sports geek blowing off steam after hours.

It's fitting that Silver made his initial mark through Baseball Prospectus, itself the flowering of an alternative-media uprising in a field—baseball analysis—that for decades was dominated by daily newspapers and sports weeklies. As they did with political research, mainstream news organizations took their overwhelming first-mover advantage in experience and resources on the baseball beat and just squandered it. Starting with a pork-and-beans factory night watchman named Bill James in the mid-1970s, an increasingly restive audience, unsatisfied with the quality and quantity of news they cared about most, invented an entire field of research (called sabermetrics) that slowly but surely upended the very way people now see and run the sport. Bill James went from being the butt of newspaper columnists' jokes to a best-selling author whose in-house analysis helped the Boston Red Sox win two World Championships.

And yet what was the most interesting media story about baseball journalism in 2009, from the old guard point of view? "As Newspapers Cut Back, Press Boxes Grow Lonelier; How a Venerable Institution Lost Its Way," The Wall Street Journal lamented that spring. Only 29 newspapers covered that year's World Series, complained New York sportswriting legend Murray Chass. "Baseball fans are suffering" as a result, chimed in ESPN.com columnist Jim Caple.

But is the iron core of baseball news and analysis remotely shrinking? I'm an avid baseball consumer, and when I compare my media diet today to the dawn of the 21st century, when the dot-com boom was near its initial apex, it isn't even close. Back then, more than 90 percent of my baseball-related intake, for example, was whatever appeared in the print edition of that morning's L.A. Times. The Times (which I would go on to work for from 2006-07), had by acclamation the best sports section in the country for much of the 1970s and '80s, producing not just legendary wordsmiths like columnist Jim Murray, but also terrific beat writers such as longtime California Angels chronicler (and Baseball Hall of Fame member) Ross Newhan. Already by 2000, however, the Times' sports page had been steadily shrunken down, with a disproportionate share of the remaining news hole taken up not by inside information you couldn't get elsewhere, but by windbaggy columnists whose views and expertise were indistinguishable from that of your local bartender. Still, that (plus game broadcasts) was about the only daily game in town for us Angels fans.

Now let's fast forward to 2012. Instead of cable and radio, I watch games live on my computer by subscribing to MLB.tv. I choose Yahoo.com from a crowded field for live box scores and AP game recaps. An extraordinary website called Baseball-Reference.com—again, launched by a motivated outsider—gives me and millions of others the best baseball encyclopedia ever created, for free, updated with fresh information every morning. For links to and smart discussion about sabermetric-related material, I check out Baseball Think Factory; for similar original writing I'll also consult The Hardball Times and The Baseball Analysts (each of these, too, started by "amateurs"; I've contributed to both). The team's hometown Orange County Register, despite suffering through rounds of layoffs and bankruptcy, has the last few years drastically ramped up the quality of its round-the-clock online coverage. I follow the Twitter feeds of various Angels-related people (ranging from stars to broadcasters to minor league wives); look at the team's own news-filled website, and most enjoyably of all, spend a lot of time on a community website called Halos Heaven, where fans argue with one another about personnel, link to relevant commentary from all over the globe, commiserate in game threads, and contribute a damn impressive amount of actual journalism—from insightful interviews with the team's scouting director (the kind of thing you would never see in the newspaper), to heavily sophisticated scouting analyses of minor leaguers, to trashy testimonials of running into players drunk at a bar. The L.A. Times, even before its introducing a reader-repelling paywall, had become an afterthought in a competition it once dominated.

Counting it up, that's 10 media entities where I once consumed three, four journalistic spaces I contribute to where there once was zero, and none of them are owned by one of "Big Six" companies that allegedly dominate our mediaverse. And for those journalism futurists fixated on consumers' allegedly punitive unwillingness to pay for content, note that I shell out much more money than I used to: $125 a year for MLB.tv, plus a couple hundred bucks in page-sponsorships on Baseball-Reference.com in gratitude for the service it provides. What's more, the "free" online providers out there are growing rapdily in revenue, reach, and investment money. Halos Heaven, for example, is owned by SB Nation, a network of more than 300 sports websites co-founded by Markos Moulitsas, better known as the "net roots" impresario of the wildly successful and materially influential lefty political group blog Daily Kos. The sports-news business isn't shrinking at all, it's ballooning, with consumer-producers at the forefront of the action.

Does it matter that most people telling us about the state of the media are, either through their professional conflicts of interest or career-long fixations, missing or severely underplaying the liberatory effects of the formerly captive audience becoming sophisticated and productive journalism consumers and creators? Unfortunately, yes. If Steven Brill wants to convince newspapers to throw their content behind paywalls, that's his (and their) business. (And, as an editor of a magazine that puts all its content up for free, it's my business, too—hurry up, Brill!) Ditto for newspaper columnists who want to further alienate their dwindling readerships by accusing them of undermining democracy when they read stuff for free. If nothing else, this blame-the-consumer routine is some of the best evidence yet for how an entitled, monopolist-style mentality crept into the worldview of a profession once noted for its cutthroat sense of competition. Instead of begging the audience to stay, the old guard is trying to charge them a steep exit fee.

But the problem here is that the legacy-centric view is bleeding into the sausage-making of public policy. The A&P Organization Men aren't just spinning their own industrial decline and confusing it with the fate of democracy, they're actively advising the Federal Trade Commission on how laws might be rewritten to punish news aggregators—from Google to individual bloggers—whose work is perceived to hurt them. Dollars from every single taxpaying American may be redistributed to an industry that until very recently was among the most profitable in U.S. history. And like the last round of newspaper protectionism—the Newspaper Protection Act of 1970—any rulemaking or legislation that comes out of this process will almost axiomatically reward deep-pocketed incumbents at the direct expense of new entrants, all in an effort to delay the inevitable.

In 2006, remarking on the suddenly troubled fates of the formerly indestructible duopolist film processor Eastman Kodak, The Wall Street Journal's William M. Bulkeley put the problem succinctly: "Photography and publishing companies shouldn't be surprised when digital technology upends their industries. After all, their business success relied on forcing customers to buy things they didn't want." The customers have moved away from yesterday's news bundle, and from the mentality that fetishizes it, but instead of abandoning news they've dived into the production process with both feet. Instead of blaming them for ruining the past, we should be thanking them for inventing the future. And above all, we should do nothing to get in their way.

Matt Welch (matt.welch@reason.com) is editor in chief of Reason magazine.