What does it take for a newspaper to survive?

As newspapers report on the world’s economic problems, they face tough times of their own. Photo by Sandy Suh.

With the rise of web portals, blogs and Twitter, who needs newspapers?

The evidence seems to point increasingly toward one answer: no one.

Newspapers across the country are watching revenues plunge as technology cuts the newspaper industry’s demand. According to the Newspaper Association of America, 2011 total ad revenue for the newspaper industry was down 7.3 percent. As revenues fall, cutbacks and layoffs increase.

In early July, the Anniston Star announced its plans to shut down its Monday print edition, and on June 12 Advance Publications announced the slashing of about 600 jobs from four of its newspapers. On February 9, Gannett offered buyouts for 665 newspaper employees.

Even larger papers are far from invulnerable. News Corp’s newspaper business is suffering as well, causing the company to consider splitting its failing publishing segment from its more profitable entertainment division.

The New York Times Company reported that 2011 total revenues fell 3 percent. In its annual reports, the company warns investors, “The increasing popularity of digital media and the shift in consumer habits and advertising expenditures from traditional to digital media has adversely affected and may continue to adversely affect our print advertising revenues.”

All of this amounts to one conclusion: newspapers aren’t making money.

Even becoming digital might not save newspapers. According to a study by the Project for Excellence in Journalism, newspapers are losing $7 in print revenue for every $1 collected in digital revenue.

Furthermore, newspapers’ strategies to become digital may hurt print revenues even more. There is no reason to shell out money for a paper at a newsstand if the same paper is available online for free.

To solve this problem, many papers are erecting paywalls on their websites. However, this could cause further drops in newspaper revenues as readers avoid sites with paywalls and instead turn to competitors offering free content.

There seems to be only one person who keeps hope for newspapers alive: the Oracle of Omaha himself, Warren Buffett.

Buffett’s Berkshire Hathaway owns the Buffalo News and has stakes in the Washington Post Company and a variety of smaller papers. He also bought 63 small-market newspapers from Media General for $142 million in May. At least Buffett seems to have faith in the newspaper industry even if nobody else does.

So why is Buffett so optimistic about newspapers?

Buffett believes people will continue to read local papers even as larger, metropolitan papers struggle.

The papers Buffett bought from Media General attract readers in small towns where Buffett says there is “more of a feeling of community.” That feeling of community is what makes people want to read about the city council or the local high school baseball team. Since only local papers cover these topics, such papers enjoy some monopolistic power.

In the end, smaller newspapers will be able to appeal to small, tight-knit communities by being the sole provider of local news.

But other papers are doomed.

Newspapers such as The Los Angeles Times and The Tampa Tribune are not focused on tight-knit communities, so people are less interested in local news. “It’s really hard in L.A. to have a sense of community,” Buffett told the Daily Beast’s Howard Kurtz. Consequently, fewer people want to read about the high school basketball team’s new player or the upstanding citizen honored in the obituaries.

For these reasons, Buffett has called his ownership of The Buffalo News “not totally rational.” The Washington Post is no more focused on local news than The Buffalo News, but some speculate that Buffett still has a stake in the Post for its more profitable cable television, broadcasting and Kaplan education divisions.

In the end, there is only one way for newspapers to survive: by providing information not available anywhere else. And with the rise of web portals, blogs and Twitter, many newspapers just cannot do that anymore.