Newspapers see the future, and it’s digital. The latest evidence: earlier this week the New York Times Co. and three other investors sank $29.5 million into Automattic, the company that makes WordPress blogging software runs the WordPress.com free blogging Website. (Disclaimer: I use WordPress.com to create and host this blog.)

According to a news report, the Times was the smallest of the four investors – the others were venture capital firms. But the deal solidifies the paper’s existing relationship with Automattic, which the Times uses to host about 50 blogs, as well as About.com, the Internet information service it acquired in 2005.

As the Times investments illustrate, newspapers’ embrace of digital media has moved beyond erecting Web sites and asking reporters to write blogs. Consider:

• E.W. Scripps, the Cincinnati media conglomerate, is so jazzed about the prospects of its TV and online ventures the company is set to spin them off into a separate public company later this year.
• Ruport Murdoch, new owner of the Wall Street Journal, told the World Economic Forum in Davos, Switzerland, on Thursday that he will keep subscriptions for the paper’s online version, though prices will be higher and some “commodity” financial information will be free.
• I’ve already written about how the Los Angeles Times’ Innovations (read Web site) editor, Russ Stanton, is being mentioned as a front runner for the now vacant editor-in-chief gig.

At the same time, newspapers’ economic prospects are looking dim. The latest on that front: the Orange County Register, my old stomping grounds and the place I got started as a tech reporter, is killing its stand-alone Business section and folding it into the News section in one of several cost-cutting measures. When it does, it’ll be the only major daily in the country without a separate Business section. Ouch.

What does it mean for freelancers? Bone up on your coding skills. Seriously, as newspapers go through this transition to digital, it’s more important than ever to keep up with the times, and the Times. Maintaining a blog is one way. Seeking out Web-based work is another. If you don’t believe me, this blog post from Publishing 2.0 called The Only Way for Journalists to Understand the Web is Use It says it a lot more eloquently than I can.

That leads me back to Automattic. The investment is great news for the two-year-old start up, whose major competition includes Blogger, which Google bought in 2003. Other blogging software makers don’t have such deep pockets, but there are a lot of them, including Six Apart, which makes Movable Type and TypePad, plus a host of smaller proprietary and open-source blogging software makers. Automattic said it will use the investment to beef up projects like Akismet, a blog comment spam blocker.

 Updated on February 27, 2008: Thanks to the sharp-eyed reader who pointed out that WordPress is open source software. Automattic uses it to run the WordPress.com blogging Website.