'In 15 years, we might be selling a much smaller paper for £2.50'

So it was entirely predictable that when Alan Rusbridger, editor of The Guardian, announced a big shake-up of senior roles at the paper last week - 13 people are moving on, up, down or out - the quality of debate did not rise very much above that regularly detailed by Private Eye's reports of "Grey Man/Woman in Suit Gets New Job".

But perhaps it should have. For the bigger story lies deeper, argues Rusbridger. He has very deliberately started "detaching some very talented senior people" from the main paper and moving them over to the Guardian's websites. Georgina Henry, formerly deputy editor, will henceforth work solely on Guardian Unlimited; she will head a senior team who will lead a "step change" in new investment. The days are gone when a paper's web presence could be delegated to "beginners and deadbeats", as he claims some of his rivals have done in the past.

The Guardian was the first British newspaper to take the internet seriously and has thrown millions of pounds at its virtual world. For a long while, rivals sneered and pointed gleefully at the money Rusbridger was "wasting".

Now many of them are coming around to his way of thinking. A few days ago Rupert Murdoch - who "believed in it, then he didn't believe in it, and now he believes in it again", according to Rusbridger - said the internet promised a new golden age for journalism.

Guardian Unlimited was just about to break even before Rusbridger's latest spending spree. So is he a visionary who has seen the future of the newspaper industry, or a romantic who has got carried away by the lure of whizz-bang technology?

And - crucially - if he is so sure that the future of journalism is not on paper, why have The Guardian and its sister paper The Observer just spent £80m on all-singing, all-dancing (and all-colour) Berliner presses? So what's the long-term strategy? When his brand new printing machinery is old and tired - in, say, 15 years - is it possible that his newspaper company might not be printing a newspaper at all?

"Well that might be true. Or we might still be printing it and charging £2.50 for a much smaller paper - for people who really want that. I really don't think anybody in the world knows. So all you can do is be ready for whatever it is. It'll be completely out of our hands because the readers will choose."

Rusbridger leans over the table and draws a graph. There are two lines on it: one, representing newspaper sales, sweeps downwards; the other, internet audiences, bounds upwards.

Where once many newspaper owners saw the internet as a nasty smell in the room, or an expensive irrelevance, now they are having to embrace it. "You'd have to be a lemming not to. So the question is how people will map this next phase. I don't want to be arrogant and claim I've got the monopoly on wisdom. But I do believe you've got to put the smartest people into [the digital] world because otherwise you won't make that journey."

Advertisers have already begun the switchover, taking their lead from the public. "Even the people who were sceptical about the migration of advertising now accept it is happening. If you don't believe it, look at the American newspaper industry. Look at the Daily Mail's decision to put Northcliffe up for sale."

This leads to an interesting dilemma. Does The Guardian consider all of its readers equal? Is Rusbridger just as keen to see someone click on to Guardian Unlimited as on his neighbour who spends 70p at the newsagent?

His answer will surprise many: "Yes." But how will he get any money out of that former reader in order to finance the journalism he is now swallowing up for nothing?

Rusbridger does not have an immediate answer. All he knows is that his readers are moving over to the web, and he needs to meet them there. He reaches over to the bookshelf. "Press coverage of Google often glosses over the fact that ... the company lacked a viable plan for making money until 2001," he quotes approvingly from a Google history.

He goes through the money-making options open to his company: "Advertising, sponsorship, ad words, subscription" - whatever it is, we have to find an economic model." Though he does not know for sure, he feels that most of his digital income will come from advertising. Guardian Unlimited reaches more than 12 million people across the world every month. "Well, the idea of many millions of young, professional, bright ABC1 people looking at your site eight hours a day - I think that's a better route than a very small audience paying a subscription fee."

And here's the crunch. The 12 million figure is extraordinary. The hundreds of thousands who buy the paper is less impressive (and bound to fall). The problem is that it is the people at the newsagents who bring in the vast majority of the revenue - and to whom advertisers and City analysts still turn when gauging the success of a paper. The industry has to wake up to the point, he says, that the ABC circulation figures do not tell the whole story about a paper's value to readers and advertisers.

The "media commentariat" is too interested in old-fashioned statistics. "And the more people obsess about print ABC figures and spend squillions on DVDs and other giveaways in order to keep [sales up], the more you are going to be in trouble."

Critics will point out that Rusbridger's dislike of the ABCs may be related to the numbers telling a less than joyful story. The headline circulation of the Berliner Guardian in December 2005 was 380,000. Just four years ago, the paper was selling a few copies short of the 400,000 mark.

But other titles are doing worse: The Daily Telegraph now sells 100,000 fewer copies every day than it did in December 2001. Rusbridger - perhaps overlooking the recent success of, for example, The Times and The Independent on Sunday, argues that that this is an unstoppable phenomenon across the sector.

"If on becoming editor in 1995, somebody had said to me: 'Your task is to keep the circulation of The Guardian at 400,000 for the next 10 years, but in the interim we will be giving it away free on a medium that many people will prefer ahead of publication' ..." He tails off. "So sometimes I think it's miraculous that circulation has stayed as high as it has."

But if "dead tree technology", as it has been labelled by one proprietor, is so outmoded, why the £80m printing presses? The Scott Trust, owner of The Guardian, is protected from the demands of profit-driven shareholders. But even taking that into account, Rusbridger has spent a great deal of its money. How satisfied can he, and they, be with a headline circulation figure just 5 per cent higher than a year ago?

However exciting the digital world proves, it is too early to scrap paper and ink just yet, says Rusbridger: "You have to go on publishing newspapers for the time being because that's where the revenue is - that's where lots of readers are.

"We would have had to build new presses within three years anyway," he continues. "That's just the cost of being in business." Berliner presses were no more costly than tabloid or broadsheet ones.

And the returns? Well, says Rusbridger, the headline figure is confusing. The paper has stopped delivering 12,000-odd "bulks" - free copies placed on aeroplanes and so on - and therefore the true underlying circulation is almost 10 per cent up. The post-Berliner figures are "very respectable - we're very happy with them".

But there we go again, obsessing about ABCs. "Anyone standing back from this industry is asking: is it sensible to spend a great deal of money on DVDs because you desperately want to keep the 'old world' print figure high? Or should you be investing that money in the 'new world'?"

MEDIA DIARY

Pauline conversion

First, Allison Pearson. Then, Amanda Platell. Now, Liz Jones. The Evening Standard writer, who has specialised in revealing the innermost secrets of her decidedly curious marriage, is leaving the London paper to join Paul Dacre at the Daily Mail, just one floor up at Associated Newspapers, to write about fashion. (She will also do interviews for The Mail on Sunday.) It should be pointed out that Jones handed in her resignation some weeks ago, apparently to go freelance, so no one need feel proprietorial.

Time runs out for Sands

Channel 4 News did well with its Thursday evening exclusive on Philippe Sands' new findings about the Prime Minister's enthusiasm for supporting George Bush in going to war with Iraq. Despite the story making several front pages the next morning, the Ten O'Clock News ignored it. "It was a busy news day, with the BNP story, the Muslim cartoons and Shell," pleads a BBC spokesman. Newsnight made amends with a late interview with Sands.

The bombastic Benns

Hilary Benn is an avid reader of the Guardian Unlimited website. Speaking at the Royal African Society conference last week, the International Development Secretary advised his audience to do the same. "You should visit Guardian Unlimited - on there you'll find a message from Jonny Boy saying that Hilary Benn is as pompous and useless as his father was when he was a minister. I've certainly provoked!" A rather edited version of the facts. Jonny Boy actually wrote: "Hilary Benn has as much chance of making a positive difference to Africa as his father did to the standard of living in the UK. Both are just full of pompous, outdated, impractical rhetoric."

Max and his motor

Spotted: Max Clifford hanging around outside the absurd Cobden Club - which does so much to help Notting Hill's trustafarians stave off ennui - on Thursday night. It was good to see the man who strikes terror into the hearts of many on the run himself. Royal Borough of Kensington & Chelsea parking wardens were encircling his silver Bentley, which was parked jauntily, half on the pavement and across some double yellow lines. Warned by the club's doorman, Clifford scurried back to his beloved motor faster than a rat in a sewer.

Designs on 'The Times'?

Rumours abound that Neville Brody, the design guru behind The Face, is about to redesign The Times. He was in charge of the revamp of Times2 last September, and The Times confirms it still has him on its books, but does not elaborate. "He continues to work with us on a number of ongoing projects at the paper," says a spokesman.

The caravan man

Not everyone at the decidedly grand Country Life magazine has hailed the replacement of editor Clive Aslet (who becomes editor at large) with Mark Hedges. Mark was editor in chief for the group's country and leisure media portfolio, where he was credited with turning many a troubled publication around. "He was really successful with our caravanning titles," snipes one mag employee. "It's certainly one way of enjoying the country."