It was another dismal week for the daily newspaper industry. Here in Minneapolis, the Star Tribune could only muster 6 pages of employment classifieds on Sunday for thye 2nd week in a row (actually it was about 4 with 2 pages of filler). At that level, the paper has got to be inching ever closer to bankruptcy (they stopped making debt service payments on their unsecured debt in June and their secured debt in October). At this point, the only thing keeping them out of bankruptcy has to be the fact that Credit Suisse wants to own a daily newspaper even less than Avista Capital Partners.

Other headlines from the past week or so include:

• The American Press Institute, during a closed-door “summit” conference, concluded that the daily newspaper industry is reaching “full-blown crisis” stage and will most likely be unable to turn things around without outside help.

• A Morningstar analyst reported that McClatchy’s stock “could be worthless.”

• Not surprising to anyone, Sam Zell’s purchase of the Tribune is proving to be among the worst investments in the history of media (maybe 2nd behind Time Warner’s ridiculous purchase of AOL). Revenue in Q3 was down 10% and nothing the company has tried has had even the slightest impact on plummeting readership. Even the Cubs & Wrigley Field, maybe the only two decent assets in the company, are proving hard to unload in the current enviornment. If Zell cannot sell the franchise as expected, he’ll have a tough time with a $500 million debt payment next Summer.

• Businessweek makes the case that a share of the bailout funds should be earmarked for the daily newspaper industry.

• In Rupert Murdoch’s mind, the cause for the decline/death/demise of the dailies can be pinned entirely upon a culture of “complacency and condescension” (thanks Nick for the article). Murdoch states that:

“The complacency stems from having enjoyed a monopoly–and now finding they have to compete for an audience they once took for granted. The condescension that many show their readers is an even bigger problem. It takes no special genius to point out that if you are contemptuous of your customers, you are going to have a hard time getting them to buy your product. Newspapers are no exception.”

• E.W. Scripps slashed its workforce by 400 people, and the Boston Globe did the same by 42 people.

• Phil Mushnik, in a piece in The New York Post, argues that if the dailies fold, they’ll take local TV news with them. I actually think that there’s a lot more to lose than that, perhaps even a healthy, fully-functioning democracy, but the editorial provides an alarming look at how far one has to stretch the definition of journalism to include local TV news these days.

….Just another busy week in the ongoing saga that is the daily newspaper industry.

The pace of news about the decimation of the daily newspaper industry is accelerating, and the picture is getting uglier and uglier every week. Among the recent stories, McClatchy is freezing wages, Gannett is reducing headcount by 1,000, and JCPenney and Kohl’s both announced plans to drastically cut back their newspaper circular advertising. Cox Enterprises announced that it plans to sell the Austin American-Statesman and all of its stand-alone community newspapers in North Carolina, Colorado and Texas as well as its direct mail business ad business Valpak. This news comes on top of announcements that dailies in San Diego and Newark are up for sale. (No news yet either, by the way, on Landmark Communication’s efforts to unload all of its dailies and weeklies). For newspapers, the capital market mantra appears to be: buy high, sell low – but sell now because it’s going lower in a hurry.

Many have been pointing to rapid growth in newspaper web site ad revenue and readership as the only bright spot in the newspaper business, but that, too, has shown recent signs of weakness. Not only is the rate of ad revenue growth slowing to a crawl, but newspaper web traffic stats are being mocked around the industry. Newspapers who looked desperately to a lopsidedly unfavorable deal with Yahoo for traffic growth are just now beginning to realize that their hopes and aspirations were, at best, misplaced.

The poster child for daily newspaper industry carnage, Tribune Company, marched a step closer to bankruptcy and Sam Zell openly called his acquaition of the media behemoth “the deal from hell.” There is no conceivable way he can possibly turn that abomination around, even if the Cubs do win the series, but I’d still keep my money on Minneapolis to lose its daily first.

Steven Smith, Editor of Spokane’s Spokesman Review, has written perhaps, at least to this point in time, the definitive eulogy (or is it an elegy?) on the death of the newspaperman. Without a doubt, we’ll be seeing more of these in the months ahead.

Avista Capital Partners, owners of the Star Tribune, announced this morning that they did not make their quarterly interest payment on the $96 million in junior debt that accompanied the roughly $330 million in senior debt used to finance the $530 million purchase of the daily newspaper. While CEO Chris Harte reported that the company has sufficient cash to make the interest payment, he stated that they chose not to make the payments as the company works through renegotiations on the terms and structure of the debt and the entire balance sheet. While Harte’s comments may or may not be accurate, the daily is most certainly now in default on a meangful portion of its debt and is one step closer to insolvency.

In the race with Chicago to see which metro market loses its daily first, Minneapolis has clearly taken a sizeable lead. Interestingly, just as Tribune’s fate might depend on the success of the Cubs and the value that that franchise might fetch in the market with cash proceeds being used to pay down debt, the Star Tribune’s fate is similarly tied to the Minnesota Vikings who are eyeing the paper’s land holdings in downtown Minneapolis on which they are exploring building a new stadium. Who would have thought that the demise of two prominent dailies could be such a ’sporting’ event.