The Titanic reports on the iceberg

New York Times:

In just the last few weeks, The San Diego Union-Tribune eliminated more than 100 jobs, one-tenth of its work force. The Chicago Sun-Times began a major round of newsroom layoffs, then put itself up for sale, and publishers in Minneapolis and Philadelphia warned that tough economics could force cuts there.

Not long ago, news like that would have drawn much commentary and hand-wringing in the newspaper business, but in the last few months, reductions have become so routine that they barely make a ripple outside each paper’s hometown. Since mid-2007, major downsizing — often coupled with grim financial reports — has been imposed at The San Francisco Chronicle, The Seattle Times, The San Jose Mercury News, USA Today and many others.

The talk of newspapers’ demise is older than some of the reporters who write about it, but what is happening now is something new, something more serious than anyone has experienced in generations. Last year started badly and ended worse, with shrinking profits and tumbling stock prices, and 2008 is shaping up as more of the same, prompting louder talk about a dark turning point.

“I’m an optimist, but it is very hard to be positive about what’s going on,” said Brian P. Tierney, publisher of The Philadelphia Inquirer and The Philadelphia Daily News. “The next few years are transitional, and I think some papers aren’t going to make it.”

Advertising, the source of more than 80 percent of newspaper revenue, traditionally rose and fell with the overall economy. But in the last 12 to 18 months, that link has been broken, and executives do not expect to be able to repair it completely anytime soon.

In 2007, combined print and online ad revenue fell about 7 percent. In the last six decades, only one other year — 2001, when there was a recession — had a steeper decline, according to the Newspaper Association of America. Adjusted for inflation, 2007 ad revenue was more than 20 percent below its peak in 2000.

Circulation revenue has declined steadily since 2003, and the number of copies sold has been slipping about 2 percent a year. Some of the largest papers — including The San Francisco Chronicle, The Boston Globe and The Los Angeles Times — have lost 30 to 40 percent of their circulation in just a few years.

The long-term shift of advertising to the Internet — especially classified ads for things like jobs, cars and houses — accelerated last year. The real estate downturn hit the newspaper business hard, especially in California and Florida, where real estate ads fell more than 20 percent at some newspapers…

Critics of the industry — including many executives within it [and the occasional blogger] — say that newspapers have done a poor job adapting to the Internet and working creatively and aggressively to sell ads.

Mr. Tierney agrees, “but you could change that and still be sliding,” he said. “When everyone’s taking on water, you can’t expect to stay dry — only less wet.”

That is in sharp contrast to his tone in 2006, when he led a group of investors who paid $515 million for the two Philadelphia papers. Back then, Mr. Tierney dismissed the industry’s gloomy talk, expressing confidence that it could win back paying readers and advertisers…

Falling stock prices made newspapers look like tempting targets to some buyers in 2006 and early 2007, but even then, the prices of the transactions that did take place were seen as inflated, and there was little interest from other potential bidders. McClatchy bought the Knight Ridder chain, and the News Corporation bought Dow Jones & Company, publisher of The Wall Street Journal. Many papers were sold in smaller deals, including the Philadelphia dailies, The San Jose Mercury News and The Star Tribune of Minneapolis.

Share prices have continued to fall since then, and analysts think they will go lower still. But since last spring, the supply of buyers seems to have dried up…