Newspapers – healthy or not?

I was reading today about some guy who is a wizard at buying up undervalued businesses and making them profitable. (Of course, who doesn’t specialize in this anymore?) Anyway, he’s got a bid in on the Tribune Company and it’s looking like it’ll be accepted.

Of course, the wizard says that this is a good investment, that there’s money to be made in the newspaper business, etc. Meanwhile, I’m also hearing that February 2006 was the worst month ever for the newspaper business, with ad pages vanishing like gremlins in sunlight.

At least there’s some some good news: Revenue is up for newspaper websites. But print newspapers are still far ahead of their websites when it comes to total revenue, something to the tune of 87:1.

The real question is will these companies ever be able to get enough revenue out of their websites to cover the operating costs of their entire news-gathering organization? Sure, they’ll be able to shed a lot of the costs associated with printing up papers and delivering them, but web advertisers expect a very low price point compared to traditional media and I’m not optimistic that will change anytime soon, given the questionable effectiveness of standard online ad units. What’s more, a lot of people want to get their online news through blogs and other middlemen, which don’t have to support a news-gathering operation any more advanced than an internet connection and Firefox.

I’m not sure what the answer is, but the newspaper industry needs to figure it out quickly if they want the first-mover advantage.