Alan Mutter writes perceptively on the recent plunge in newspaper revenues on his outstanding Reflections of a Newsosaur blog.

“Print advertising sales for newspapers appear to be on track to plunge by $2 billion this year, which would make for the worst performance in a decade other than the disastrous period following 9/11,” he writes, noting that this will be the first time newspaper revenues have ever declined in a time of economic prosperity.

First quarter revenues for classified advertising – the most profitable part of the newspaper business – were off a staggering 13.2% in the first quarter, Mutter notes. Automotive advertising, which is newspapers’ Rock of Gibraltar, was off nearly 13% last year. Nearly all of this business is going online and it’s not coming back.

I’ve characterized the scenario facing major metro dailies as a “death spiral” in my own writing on this topic. Alan Mutter’s statistics and analysis bear this out. In a spiral, the speed of descent increases as the object hurtles toward the ground. The numbers indicate that a spiral could be developing. According to Mutter, print advertising revenues were off .5% in 2005, 4.6% in 2006 and are on track to decline 6.4% in 2007. It’s too early to call this a pattern, but in an industry that Mutter notes “has been masterful at increasing its revenues in good times and bad,” this twist of fortune is unprecedented and alarming.

Desperate acts like the San Francisco Chronicle’s recent decision to eviscerate its newroom staff indicate that the industry is in panic mode. The Chron is basically committing hara-kiri rather than continuing the fight. I suspect it’s only the first of many to do so.

Mutter, a newspaper-editor-turned-entrepreneur, offers some historical context:

“In retrospect, it is clear that newspaper publishers were lulled into complacence in the early years of the Internet by their prior skill in achieving consistent sales growth in even negative economic conditions. But the growth was not achieved as much by recruiting new customers – or even selling more advertising to existing ones – as by using their monopoly-like positions to force hefty annual rate increases on advertisers who essentially had nowhere else to go.”

Monopolies thrive in the absence of competition, but they tend to let atrophy the skills needed to compete. Newspapers have almost no weapons with which to fight the online hordes that are devastating their business.

“Tribune Co. April Ad Revenue Plunges 10.3%” says Editor & Publisher, noting that classified ad revenues fell 14.9%, real estate ad sales plummeted 20%, help wanted declined 13%, and automotive ad revenues were off 12%.

This kind of drop-off is dramatic in an industry that’s usually so predictable. Most worrisome was the decline in classified advertising, the most profitable business newspapers have.

This brought to mind Sam Zell’s acquisition of the Tribune Co. back in early April and the Trib’s interview with its new owner, in which the word “Internet” appeared only once. My views on that rather curious omission are stated here.

Newspapers’ web traffic is growing at a faster rate than overall Internet traffic, MediaPost reports. That’s a glimmer of good news in the darkening skies, but only a glimmer. The fact that 88% of online newspaper readers made a purchase online in the last six months vs. 80% overall isn’t enough of an advantage to compensate for the huge fixed cost problems that plague the major metro dailies.

The Washington Post has been more aggressive and innovative in its online strategy than any other American newspaper, but even it can’t escape the vortex that’s sucking down the major metro dailies. Print revenue was off 16% in the first quarter and that’s what you call a disaster.

The publisher of the Arkansas Democrat-Gazette argues passionately in the WSJ that newspapers are sealing their own doom by giving news away for free. He notes that the American newspaper industry collectively spends $7 billion a year on editorial operations.

He has some good points and great statistics, but the horse has already left the barn. Once you start giving something away, it’s very hard to reverse course and charge for it again. With a few notable exceptions, the paid content model is pretty much dead in the area of general news. Special-interest publications, of course, will still be able to charge fees.

The Philadelphia Inquirer, once one of the finest newspapers in America, has started running sponsor logos around its editorial content. The paper’s editorial staff has been cut in half since its peak in the early 90s, when it consistently won Pulitzer Prizes.