Warren Buffett loves newspapers. Indeed, Buffett has regularly claimed that newspapers are in his blood. He has had a fascination with them ever since he started his first job as a newspaper boy. Many other investment managers have sniffed at this, disregarding the printed news industry as a dying breed. However, I'm of the opinion that Buffett has a point.

You see, one thing that stands out about the newspaper industry is that although the circulation of national and international printed papers is declining, local papers are still in demand. This is according to the 2011 Community Newspaper Readership Study, conducted by The Reynolds Journalism Institute, or RJI, on behalf of National Newspaper Association, or NNA, in August and October 2011.

Within the United States, three-quarters of residents in small cities and towns read a local newspaper from one to seven days a week. Moreover, 81% of these readers rely on the publications for local news and information. What's more, around 52% of residents selected "newspaper" as their primary news source in small towns and cities 

Falling out of favor
Lee Enterprises (LEE -0.39%) has been shunned by many investors for its exposure to the printed news industry. The company produces 46 daily newspapers and nearly 300 specialty publications in 23 states. However, Lee is in the middle of a transition. The company is trying to move its customers to the online space as physical readership declines.

It would appear that this plan is working, as Lee's total digital revenue expanded 5% year-over-year during the third quarter. This helped cushion Lee's overall year-over-year revenue decline to only 2.8%. That said, digging deeper into the numbers an interesting trend emerges which seems to support the idea that within local markets printed news readership remains high.

On a divisional basis during the fiscal third quarter sales of Lee's National papers declined by just under 15%. However, revenue from Lee's niche publications expanded 9%, impressive growth that reiterates my point made above .

All in all, the demand is definitely there and Lee should not be written off anytime soon.

Paparazzi
Daily Mail & General (NASDAQOTH: DMTGY) has also moved from the print to online market. Actually, Daily Mail & General has completely reinvented itself during this transition online. The company has realigned itself away from news and toward The Kardashians through its MailOnline platform, which has sent readership numbers through the roof.

In particular, the company reported earlier this year that while national newspaper sales declined 7%, underlying advertising revenue was up 2%. This was led by the MailOnline, which saw a 41% rise in advertising revenue. Average daily unique browsers were 8.2 million, with year-over-year growth of 38 %!

Branching out
The Washington Post (GHC -0.20%) is one of the best known newspapers in the United States and possibly the world. However, The Washington Post no longer owns its own flagship publication. That said, the flagship publication long ago stopped being the company's only revenue stream.

The Washington Post Company owns Kaplan, the education business, which could eventually be responsible for two-thirds of the company's revenue. Beyond this, the rest of the company's revenue will now come from Phoenix-based Cable One, which provides cable services. Furthermore, The Washington Post has acquired many other businesses within different sectors recently which has allowed the company to branch out and reduce its dependence on traditional print.

Actually, the company has become somewhat of a mini-Berkshire recently, as it acquired a parts supplier to boiler manufacturers and a small stake in Celtic Healthcare, a small hospice company .

Foolish summary
Warren Buffett has a point when it comes to newspapers and newspaper companies. Readership of printed news is declining but on a local and niche scale readership numbers are not falling but rising. What's more, many traditional newspaper companies are now branching out from their original print offerings and into the online space where margins are higher. In the case of The Washington Post, the company has branched out into other businesses, and even without its flagship publication the company continues to function extremely well.