Don't stop the presses yet

It's been rough going for newspapers, as readers and ad dollars fly to the Internet. In 2005, circulation continued to decline and layoffs rocked newsrooms. Revenue made miniscule gains, putting Wall Street in a foul mood and depressing newspaper stocks by an average 20 percent.

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It was one such unhappy major investor who demanded the sale of Knight Ridder, which runs 32 papers from Miami to California's Silicon Valley.

But the respected chain is not being sold, as feared, to a private-equity group perfectly willing to sacrifice public service reporting to squeeze out greater profits. It's being bought by the smaller McClatchy chain of newspapers, headed by Gary Pruitt. "I understand the conventional wisdom that we are in a bad business," Mr. Pruitt told the Los Angeles Times this week, "but I also think the conventional wisdom is wrong."

Phew. No one appreciates a contrarian more than when he's countering doomsayers. But is Pruitt right?

He is, in that he thinks of the newspaper business as a combination print-online enterprise. When looked at that way, McClatchy's total audience is growing, and so is the potential reach of newspapers - though it's taken a while for the industry to fully embrace this view. Only last year did newspapers shift from shoveling print content onto their websites to developing such sites in their own right - with their own blogs, updates, video, audio, and citizen input.

At the same time, Pruitt recognizes the core value of newspaper-style journalism. The idea of independent, in-depth reporting that informs, enlightens, and serves as a check on abusive power still has legs.

Notice, however, that publicly owned McClatchy wants to sell 12 of the Knight Ridder newspapers, including such industry flagships as the Philadelphia Inquirer and the San Jose Mercury News. That's because these papers are not in McClatchy-defined "growth" markets. The lion's share are also more costly union shops.

This divesting is also a commentary on Wall Street. Estimated profit margins in the McClatchy cast-offs hover around 10 percent, but also go into the high teens. Wall Street demands a return in the 20s. It would be well if these papers sold to individuals or others satisfied with a respectable return in exchange for maintaining a community service.

That such mature papers can still turn profits is one reason why the Project for Excellence in Journalism concludes in its annual media report that newspapers have not begun "a sudden death spiral."

For now. The Internet still poses a huge challenge. Web advertising commands far fewer dollars and Web users are accustomed to free access. But now alert newspapers are working to find the right business model.

They'll be encouraged if they recall the Pony Express. That's an imperfect metaphor, because the telegraph made pony delivery obsolete - and that's not likely to happen to newspapers soon. The point is that people wanted what was in those pony pouches. And creating that content is what newspapers still do best.