For the past year or so, Stanton’s been the paper’s Innovations editor, charged with overseeing the paper’s Web site and more generally, bringing it into the digital age. For Sam Zell, the paper’s new owner, and the David Hiller, the current publisher, to tap a Web guy for the top job over the other finalist, a veteran Times editor whose rise through the ranks was took a more traditional trajectory, says a lot about the direction they want the paper to take. If they use this opportunity to continue beefing up their online news presence – and make money and save newsroom jobs doing it – they could create a template for newsroom innovation other papers would eagerly follow.

But none of this is happening in a vacuum. In the past three years, the Times has seen three editors come and go, all of them quitting to protest budget cuts that lowered newsroom headcount and morale. Revenue from advertising continues to drop at the Times and throughout the newspaper industry. On Feb. 14, the New York Times said it was cutting 100 newsroom jobs due to declining ad revenue. Nice Valentine.

Stanton will have his work cut out for him. For starters, he has to deal with the 100 news job cuts across the entire Los Angeles Times Media Group announced Feb. 13. In addition to the daily paper, the group includes community papers, a Spanish-language paper and an entertainment guide. But he appears up to the challenge. In a newsroom speech after his promotion, Stanton said: “”I have grown tired and am now hopping mad over this seemingly endless ‘Groundhog Day’ nightmare.” He also said The Times would have “to figure out how to break this self-defeating cycle before it does indeed result in our defeat.”

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.

It’s the worst of times at the Los Angeles Times. James O’Shea, the paper’s editor in chief resigned last week after a budget dispute with publisher David Hiller. This comes a month after real estate mogul Sam Zell took control of the paper and the rest of the Tribune Co. It’s the latest skirmish in a long and losing battle to keep the paper’s newsroom in tact in the face of changing ownership, economic woes and the evolution of the news business.

One possible bright spot: a report out this week that one of the two top candidates to replace O’Shea is Russ Stanton, a long-time business editor and reporter who’s been the paper’s Innovations editor for the past year. This is exciting for a couple reasons. First, Stanton is great. I worked with him in the early 1990s at the Orange County Register. He’s a smart, stand up guy. Second, the very fact that the powers that be would consider the editor of LATimes.com as a candidate for the paper’s top job means they get how important the online news biz is to the long-term health of the paper.

On the other hand, the LA Times has had four editors – and three publishers – since Tribune Co. acquired it from the Chandler family in 2000. With another new owner, declining revenues and abysmal staff morale, who’d want to be in charge?

Whatever happens, it’s putting Stanton and the paper’s Internet business in the spotlight, and that’s a good thing.