“The magnitude of the recent declines is extraordinary for a non-recession period and provides concrete evidence, in our view, that the share shift from print to online in the publishing industry is accelerating,” says analyst Peter Appert in a research note that sharply reduced earnings estimates for the newspaper industry as a whole and singled out McClatchy and NYTimes Co. as stocks to sell. The story appears in Editor & Publisher.

The analyst forecast it’ll be at least five years before online revenue equals print revenue in the industry. On a more positive note, he predicts, “Ultimately, we believe newspaper publishers will re-emerge as very healthy and dominant players in the local media marketplace.”

Let’s hope so, but the transition could take longer than five years, and the eventual leveling of revenues will be due as much to declines in print as to growth in online. Whatever form the transition takes, it’s going to be ugly and very painful.

Doug Frantz quits for a job at The Wall Street Journal just months after urging staffers to stay the course when the paper’s editor was fired for refusing to cut more jobs. That can’t be good for morale. The LA Times is still fighting back from its efforts to become The New York Times of the west coast in the 80s and 90s, a campaign that caused it to run ponderous stories that were irrelevant to the Latino audience that should have been its source of growth. This is a paper in serious trouble, while the Journal at least stands a chance of surviving the industry meltdown.

Alan Mutter gathers up the dismal earnings reports of the major newspaper companies and asks the tough question: how long can these businesses survive?

He writes:

“While everyone in the newspaper business acknowledges that the good old days are gone, few people viscerally understand how rapidly the industry is coming to the point that it cannot sustain itself without farther-reaching – and likely more wrenching – structural changes than such relatively modest efforts to date as scrapping stock tables, outsourcing telephone ad-takers or even down-sizing newsrooms by 50%.

“Absent plans to pare entrenched bureaucracy, eliminate archaic work rules and speedily implement bold strategic initiatives to build significant and sustainable new revenue streams, the industry could find itself on a hopelessly irreversible trajectory. If it isn’t there already.”

I asked much the same question in my essay, “How the Coming Newspaper Industry Collapse Will Reinvent Journalism” earlier this year. The point is that the economics of newspapering – with its high fixed cost – doesn’t scale down very well. At some point, it becomes impossible to meet operating expenses, and when that happens, the whole model collapses very quickly. We will barely know what hit us.

The New York Times‘ David Carr writes of an experimental online publication called AssignmentZero.net that uses collaborative, iterative process to build a news story in real time and with contributors from all walks of life. A recent package on “crowdsourcing” is now live, which is appropriate, since crowdsourcing is essentially what AssignmentZero is doing.

The whole idea of having news reported by citizens and aggregated with work done by professional reporters gives a lot of journalists the willies, but I believe this is the future of journalism. Why would you want to ignore the observations, insight and feedback of knowledgeable sources just because they don’t know what an inverted pyramid is? Increasingly, the job of the editor will be to pull together information from many different sources and organize it into a coherent package that can be looked at from many different perspectives.

Most news stories online today are versions of print stories with a few hyperlinks. In the future, news packages will be constructed from the ground up with the links in mind. The reader should have many access and jumping-off points, and the narrative should permit the reader to dive down where he/she wants and resurface somewhere else. Check out the AssignmentZero package for an example of how this might look.

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.