The Tribune Company, purchased by real-estate mogul Sam Zell, kicked off the bad news with its announcement of first-quarter earnings of $.08 cents a share, versus $.32 in the same period last year. Overall operating revenues slipped 4% to $1.2 billion. Operating profit was down 16% to $181 million. Tribune's publishing operations took the hardest hits, with total revenue falling 5% to $931 million, while profit tumbled 18% to $140 million. Ad revenue in particular fell 6%, or $47 million.

Dennis FitzSimons, Tribune's chairman, president and CEO, explained that "the print advertising environment was challenging in the first quarter due to softness in classified categories," accompanied by declines in national advertising. As has become routine, FitzSimons pointed to the continued growth of Tribune's digital operations -- but in a sense, these were the gloomiest figures of all.

Although interactive revenues rose 17% to $60 million, this is a climb-down from 29% average annual growth in 2006, compared to 2005: 30% in the first quarter, 27% second quarter, 28% third quarter, and 31% fourth quarter. As the total revenue base remains fairly small in absolute terms -- about 5% of Tribune's total revenue -- the slowdown may point to a quicker tapering off of online revenue growth than previously anticipated, according to Ken Doctor, a newspaper analyst with Outsell, Inc. And that's bad news.

"Online growth is slowing at the time the print revenue decline is deepening," Doctor notes. "Those revenues are declining fairly rapidly, and newspaper executives have been hoping the pace of online growth would pick up, rather than slow down." What does the future hold in this gloomy scenario? "As newspaper companies emerge from the transformation, they will emerge as significantly smaller companies," he says.

Doctor points to the first-quarter results announced by the New York Times Company on Thursday, indicating the trouble isn't confined to Tribune. In the first quarter of 2006, the company saw print ad revenue decline 3.4%, compared to the same period last year, as total profit fell 9.9% to $54.5 million. As with Tribune, execs were quick to note that Internet revenue rose 21.6%, accounting for about 10% of the company's total revenue. That's double Tribune's proportion, but Doctor again emphasized the year-to-year slowdown from total annual growth of 39% in 2006, compared to 2005: 72.3% in the first quarter, 34.8% in the second quarter, 25.6% third quarter, and 35.3% fourth quarter.

The company's About.com property has seen its own slowdown, Doctor added: 21% growth in the first quarter of 2007 is down markedly from an annual growth rate of 50% in 2006 compared to 2005: 98% in the first quarter, 63% second quarter, 29.3% third quarter, 44.8% fourth quarter. Indeed, the first-quarter results suggest the company may have a hard time delivering on CEO Janet Robinson's prediction that in 2007 "digital revenues will grow approximately 30 percent to about $350 million, mainly through organic growth."

While newspapers' online properties may continue enjoying double-digit growth throughout 2007, it's increasingly unlikely to offset the big drops in print ad revenue.

For the first time, Doctor says, national ad revenue and all three classified sectors -- housing, recruitment and auto listings -- are all falling by double-digits. "It looks like the major inflection point came during the end of 2006-2007, and we're seeing significant declines across the board now." For example, NYTCO's classified revenues fell 8.2% in January, 14.5% in February and 8.2% in March. Tribune's classified revenues fell 14% in the first quarter, according to the company.

Joining Tribune and NYTCO in releasing results Thursday was Gannett, the national chain that saw total revenues decline slightly from $1.88 billion in 2006 to $1.87 billion in 2007. Net income fell from $235.3 million in first quarter 2006 to $210.6 million in 2007, a roughly 10.5% drop. Total ad revenues fell 1.9% to $1.24 billion, with national ads down 4% and classifieds falling 3%.

Going forward, Doctor sees little choice for the industry, forecasting "more clustering of newspapers, a lot more cost reduction in production costs and as many cuts in circulation costs as they can manage. Then, they'll have to circle the wagons around the newsroom and the advertisers and hunker down."

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