Newspapers Aren't Read All Over

I love newspapers -- I really do. My first job out of college was at a small suburban daily, and even though I spent much of my time there gnashing my teeth in underpaid, overworked angst, I still showed up every day, rain or shine, to cover whatever was newsworthy in and around Manassas, Va. On my travels around the country, meanwhile, I rarely missed an opportunity to buy the local paper while passing through: I always found it comforting that, according to the Daily Whatsitsname, people were pretty much the same wherever I went.

Unfortunately, one thing that appears to be increasingly the same among Americans is that fewer now take a daily newspaper. Yesterday's New York Times (NYSE: NYT) includes an interesting story by Jacques Steinberg and Tom Torok examining the very common newspaper practice of delivering newspapers free to noncustomers in their circulation area. My former employer did the same, and I can confirm that not everyone who gets a free paper appreciates the practice.

But newspaper publishers are in an increasingly difficult position these days. Paid subscriptions are falling industrywide -- important not just because The Washington Post Co. (NYSE: WPO) needs your $0.35 each weekday but because fewer subscribers means fewer eyes to serve advertisers, not to mention a diminished account of customer information that can be used to target coverage and campaigns. Free editions might boost circulation figures, but advertisers and publishers alike understand that something that costs nothing is often considered to be worth about the same.

It's not difficult to understand why newspapers are challenged these days. Cable television and the Internet have done a heck of a job trumping newspapers for immediacy and relevance. The competition for ad dollars has been fierce, and each battle a newspaper loses for ad sales means lost money that might have gone toward developing its core product. Instead, newspaper companies have largely sought out new ways to use their funds: expanding (or buying) into the young professional and foreign-language markets, for example.

The fact that these markets have always been there and have been essentially underserved by the traditional newspaper powers would seem to say plenty about how strategically important they will likely be in the long term -- at least if newspapers are to look anything like what we're accustomed to in the decades to come. (A traditionalist might shudder upon reading the Post Co.'s commuter daily Express or the Metro in New York City, tabloids filled with cute captions and celebrity caprices.)

And then there's the Web -- but nobody, apart from Dow Jones (NYSE: DJ), publisher of The Wall Street Journal, seems to have made much money doing that so far. (MarketWatch (Nasdaq: MKTW) showed some hopeful signs on that account, and sure enough, Dow Jones moved to buy it.) The importance of success in online publishing for the newspaper companies can't be understated: Most of their other moves have looked "too little, too late." I'm rooting for the industry to pull through, but I have a hard time persuading myself to back my newsstand cents with my investing dollars.  

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.