• by Erik Sass  @eriksass1, December 14, 2007

A rare voice of optimism has sounded in the newspaper wilderness: John Klim, an analyst with Credit Suisse, released a positive report on some of America's largest newspaper companies on Tuesday.

Well, sort of positive. The good news was mostly reserved for the New York Times Company and Gannett, which are both predicted to outperform the rest of the industry. Of course, this means that other companies will be average performers, and most were: Klim is neutral on McClatchy, E.W. Scripps, Lee, Media General and Belo. But even these neutral ratings are more positive than expected. Many analysts see doom in the combination of a soft economy and the secular downturn in newspapers due to competition from the Internet.

Klim also conceded that newspapers are in for a rocky ride in the near- and medium-term, with revenues set to drop 5.8% in 2007 and 3.8% in 2008. Countering the Cassandras, however, Klim reminds investors that the economic woes affecting newspapers' classified business will eventually pass, holding out the possibility of recovery in the real estate category, which has suffered the most.

Klim is also positive about newspapers' basic advertising proposition, noting they still have wide reach and are building big audiences online.

A key component of newspapers' online strategies, analysts agree, is entering into partnerships with online classified networks or acquiring them outright. They point to the success of networks like CareerBuilder; the Yahoo Newspaper Consortium, which now has over 450 individual newspaper partners; and newspaper partnerships with Monster.com for job listings and Zillow.com, for real estate.