Michael Schroeder has an unusual take on the newspaper business. He wants in and he's willing to pay for it.

Whether that makes him crazy, reckless or prescient has yet to be determined. In January, Schroeder, who owns Central Connecticut Communications with an unnamed partner, agreed to acquire Connecticut daily newspapers Bristol Press, the Herald of New Britain and the jointly published Sunday Herald Press, plus three weeklies from Journal Register Co., which had marked them, each in print for more than 130 years, for closure by Jan. 16 if a buyer failed to surface.

The biggest changes Schroeder plans are to manage the papers locally, and to integrate them more deeply into the community. "There are two things that have really hurt the newspaper industry," says Schroeder, who owned the erstwhile free daily BostonNOW and once held editorial and management positions at Long Island's Newsday, owned by the Tribune Co. before its sale last year to Cablevision Systems Corp. "The Internet always gets the blame," he says. "Debt loads and lack of local control are two major things that have brought us to this point."

-- See related story: The Times grabs a lifeline --

Newspaper publishers may be eager to turn the page on 2008, although 2009 so far looks even worse. In addition to debilitating leverage, online competition -- particularly for the former cash cow classified -- and a deepening recession that's particularly killing advertising, newspaper publishers face a conundrum. While businesses have increasingly been willing to pay for digital content through subscriptions, that concept remains a hard sell to consumers. Meanwhile, print advertising, which long subsidized newspaper prices, has cratered. If advertisers won't pay and readers won't pay, who will support the leverage so many publishers shouldered to either buy their rivals or to go private through leveraged buyouts?

The pain is widespread. Star Tribune Co., the owner of the Star Tribune in Minneapolis, sought bankruptcy protection in January, less than two years after buyout shop Avista Capital Partners bought the company. It took Tribune Co. less than a year to land in bankruptcy court following Sam Zell's take-private. Hearst Corp. put the Seattle Post-Intelligencer up for sale Jan. 9, and said if it did not find a buyer within 60 days it would consider going digital only or halting publication. The Detroit Free Press and The Detroit News now only deliver papers on Thursdays, Fridays and Sundays, though it will still sell papers on newsstands seven days a week. E.W. Scripps Co. had hoped to unload the money-losing Rocky Mountain News by mid-January and will not say what it will do if it cannot find a buyer. The Chicago Sun-Times has proposed outsourcing copyediting jobs to India or Canada and sprawling Gannett Co. is requiring employees to take a week off, unpaid, this quarter.

Even the New York Times Co. finds itself caught between its leverage and its rapidly declining advertising sales, and is trying to shed 12% of the Boston Globe's newsroom. Just recently, Mexican billionaire Carlos Slim agreed to invest $250 million into the Times Co.

The life expectancy of some papers may be measured not in years or decades, but in months or quarters. "It gives new meaning to the old joke, 'What's black and white and red all over?' " says Andrew Lipman, a media and telecom lawyer at Bingham McCutchen LLP.

R-E-D, as in ink or maybe bloodshed, not R-E-A-D.

Defunct may be too strong a word for the newspaper industry in the U.S., but dire probably is not. This year or next there may well be large cities in the U.S. without a daily print newspaper.

"As presently structured, most local newspaper groups we believe are unsustainable over the intermediate term," says Mike Simonton of Fitch Ratings Inc. "The product, the revenue, the cost structure and the capital structure for most newspaper companies are not viable for what we see the future of that business looking like."

Everyone seems to have an answer. In some circles, particularly among the Web-centric, the death of print and of newspapers has long been gospel. In November, Marc Andreessen, co-founder of Netscape Communications Corp., suggested at a Silicon Valley gathering that newspapers should shut down printing plants and become Internet companies. And P.J. O'Rourke recently urged the government to bail out papers in a column in, well, a non-U.S. newspaper, The Australian.

What real choices do newspaper companies have? Can they simply cut costs to prosperity, or at least reduce costs to hang on until online revenues begin to support the load? Or will those reductions in newsroom staff, coverage and delivery accelerate the downward spiral? Is it as simple as returning to their roots as local purveyers of news, as Schroeder argues? The fate of the newspaper industry is larger than just a business story. For as long as there has been a U.S., newspapers have been key elements in the diffusion of news and information. Going without them is a big leap into the unknown.

Not long ago, newspaper executives exuded confidence about their industry. McClatchy Co. chairman and CEO Gary Pruitt proposed a formula for running a strong newspaper group after his company agreed to buy Knight-Ridder Inc. in 2006. Flip the well-known Philadelphia Inquirer and San Jose Mercury News in favor of papers with cash-flow margins above 30% in markets with household growth of more than 11%. Pruitt noted that more people read the Sunday paper than watched the Pittsburgh Steelers beat the Seattle Seahawks in Super Bowl XL.

Sam Zell's belief that he could revive Tribune Co. seemed to derive from his recognition that he knew nothing about the industry, and did not come to the company with the presumptions a newspaper insider might have. When he took Tribune private in late 2007, he defied projections of newspapers' death, vowing, "They ain't ended, and they're not gonna end."

GateHouse Media Inc., backed by hedge fund Fortress Investment Group LLC, touted a different strategy in the registration statement for its 2006 initial public offering. GateHouse bought "hyper-local" publications in small communities, which account for about 36% of the entire U.S. advertising market and face limited competition.

Since Pruitt's announcement, McClatchy's stock has fallen from more than $50 when it acquired Knight-Ridder in 2006 to 71 cents.

Tribune, of course, is bankrupt.

GateHouse, which priced at $18 in its October 2006 IPO, trades at 7 cents per share.

Once the dominion of iconic plutocrats, newspapers are increasingly a club of penny stockholders. Unless you are Rupert Murdoch, James Dolan (whose Cablevision bought Newsday) or Sam Zell, optimism about the industry looks like a prohibitively expensive gamble -- and Zell may want to return to just talking to reporters, not managing them.

In recent months, doubts about the viability of newspapers have mounted. The news from Detroit, Seattle, Denver, Milwaukee and other cities illustrates the difficulty and expense of printing and delivering a newspaper seven days a week, even in a major city.

One option that many papers have to seriously consider is to print fewer days a week. "The battle to win new readers for newspapers for Monday to Thursday is lost," declares John Duncan, a former managing editor of the Observer in London and now a consultant with Garcia Media Group Inc., advising newspapers on strategy and redesigns. "That's gone."

Newspapers that are "doing OK and have found life," he says, focus on the weekend, when readers are willing to pay more for a product they can spend some time with. "People imagine that magazines can cost several dollars," he says. "Therefore they attach a higher value to a magazine than a newspaper, which the industry here has educated its readers to believe is only worth a quarter."

One of the questions publishers should ask is how to get consumers to pay $3 for a newspaper. In other words, how can publishers move from a newspaper model to a magazine model? "Once a week we make money, a lot of money. The rest of the time is a struggle," says Art Howe, chief executive of Verve Wireless Inc. "Monday many would prefer not to print. Tuesday is possibly even worse. Wednesday used to make money with food advertising. Thursday a lot of them would choose to forget. Friday maybe makes money if you have entertainment. Saturday's a bust."

Howe co-founded Verve in 2005 to help newspapers deliver local content to mobile phones. The startup says it has roughly 150 local media partners, which average about 1 million wireless page views per day. As a reporter for the Philadelphia Inquirer in 1986, Howe won a Pulitzer Prize for "enterprising and indefatigable reporting on massive deficiencies" in the processing of tax returns by the Internal Revenue Service. He was later part of newspaper ownership groups.

In 1908, he says, the average newspaper cost a nickel. Adjusted for inflation, that comes to about $2.67.

Publishers lowered prices to build circulation so they could sell advertising. "That's gotten them into this fix that they're in," he says. "They spend a lot of money chasing what I call fringe readers. It's costly. The only reason they did it before was to appease the big-box advertisers, Macy's and the department stores."

Some of the declines in circulation reflect voluntary cuts by newspapers, which are reducing advertising-driven comps and raising prices. He also argues that newspapers are not presenting readership statistics effectively. "They have done a perfectly awful job of telling the public that the combination of the number of people who read a print copy and who read online is an impressive number," he says. "It's a number they should be able to market."

The changes go beyond the product and the marketing. Newspapers still operate on a manufacturing and distribution model that involves printing plants, trucks and expenses that do not burden their online competitors.

"It used to be a luxury that every publisher demanded the ability to turn your print press on at 2:30 in the morning," Howe says. Now publishers share plants. "They're looking hard at the whole manufacturing and distribution strategy. This is the first time I have ever seen them do that."

Still, for all the pain, panic and palliatives, Garcia Media's Duncan believes newspaper companies have yet to hit the desperation levels needed to take truly bold actions. "What passes for bold in the newspaper industry wouldn't pass as conservative in the kinds of businesses the newspaper is competing with," he says.

Traditionally, management's approach has involved "unimaginative" steps such as slashing staff and other overhead costs just to survive from quarter to quarter rather than to think of ways to creatively destroy and rebuild their companies before others did. "I am not for a second saying there is no fat that can be cut from the average American newsroom," he says, adding that they are still substantially larger than British newsrooms. "Tell me what product I've got to produce for readers to pay $3," rather than waiting for the day when online advertising can cover editorial costs, a day that might never come for some publications.

"I can't think of a single successful company that has thrived by cutting without having an actual vision of what the post-cutting future is like," he says. "Once you take away the claim that we're the best and most authoritative voice, there is not a whole lot left for newspapers."

Newspapers taking drastic steps such as cutting home delivery are forced to the brink, with no other options. "Not one change alone will do it. I don't think doing one or two of them ad hoc will work," says Dave Morgan, a newspaper lawyer in the 1990s who founded Real Media Inc., which is now part of WPP Group plc, and Tacoda Inc., which Time Warner Inc.'s AOL LLC purchased in 2007. At both Real Media and Tacoda, he worked with newspaper Web sites. He is now chairman of Tennis Co., which owns Tennis magazine and www.tennis.com, and sits on the board of directors of A.H. Belo Corp., publisher of The Dallas Morning News. Morgan prescribes a combination of increasing subscription fees, decreasing distribution, printing fewer days and requiring payment for online information. "I don't think putting content behind a pay wall will save the seven-day-a-week paper," he says. Only printing on Sunday while running a 24/7 Web site would be dramatic change. "That alone would take out 50 to 60% of the cost -- maybe more."

On the other hand, revenues would certainly decline, which would result in smaller newsrooms.

The Sunday paper would carry fewer wire and national news stories, because readers would presumably get them online or elsewhere. There would be more stories about local government, sports and more "citizen journalism," drawn from people in the community.

It will be difficult for newspapers to seize the high ground. With revenues expected to drop 15% to 20% from already eroded levels, Fitch's Simonton says, even newspaper companies without debt could have trouble supporting their costs. Online advertising had been a consistent source of growth, but in the second and third quarters it, too, turned negative. The first half of the year will be more challenging for public companies, because they will compare quarterly results with periods before the economic crisis assumed its full dimensions.

There are already examples of papers faced with extinction. Many more are burdened by debt and sapped by declining revenues. It is hardly a stretch to predict more auctions of distressed newspaper companies. Some papers might only be profitable for a nearby publisher or broadcaster.

Journal Register, which is selling the Connecticut papers to Schroeder, has been in protracted talks with lenders and has been considering asset sales and other strategic options.

What if the owner of the Philadelphia Inquirer and The Philadelphia Daily News, Philadelphia Media Holdings LLC, proposed a buyout of Journal Register Co.'s papers in the suburbs of Philadelphia? "The Inquirer would probably be wise to purchase their suburban competitors," says Murray Schwartz of law firm Sonnenschein Nath & Rosenthal LLP. The Journal Register's papers have penned in the Inquirer and limited its ad base. Granted, that ad base is not what it once was.

Schwartz suggests Philadelphia Media Holdings, run by local marketing executive Brian Tierney and housing tycoon Bruce Toll, could finance the deal. Journal Register has been under pressure because of its debt. Like many chains, it took on leverage to acquire other papers. In particular, its $415 million purchase of 21st Century Newspapers Inc. in 2004 caused its balance sheet to bulge but did not provide corresponding benefits to its profitability.

Schwartz says Journal Register also has papers in Cleveland, New York and Detroit that could attract local buyers.

Some of these deals may need help from the government, posing a dilemma for the incoming Obama administration. As senators, Barack Obama and Joe Biden were champions of diverse media ownership. They joined other congressmen signing a letter to Federal Communications Chairman Kevin Martin that warned of the dangers of lifting prohibitions against owning a television station and newspaper in the same market. "Barack Obama believes that the nation's rules ensuring diversity of media ownership are critical to the public interest," says the Web site BarackObama.com. "Unfortunately, over the past several years, the Federal Communications Commission has promoted the concept of consolidation over diversity. As president, Obama will encourage diversity in the ownership of broadcast media, promote the development of new media outlets for expression of diverse viewpoints, and clarify the public interest obligations of broadcasters who occupy the nation's spectrum."

But Bingham McCutchen's Lipman, who handles media regulatory matters in the firm's Washington office, believes the government might be more willing to consider deals that would consolidate media ownership but preserve jobs. "Given the economic climate today some of the nostrums and antitrust views voiced as recently as six to 12 months ago may have to be tweaked, in order to focus on job preservation in the short term rather than some larger antitrust theories," he says. The Obama regime might find itself "taking actions that normally they wouldn't have dreamt of taking but for the lesser of two evils."

So is there any good news for newspapers?

"Journalists hate the word, but newspapers have great brand," Duncan says. "It's not fake. It's not a lie. Newspapers have an incredible relationship and substantial amount of trust with readers."

The problem has been applying that brand online. No less an authority than Google Inc. CEO Eric Schmidt has called the Internet a "cesspool" of misinformation, and has said the imprimatur of trusted "brands" is needed to help people sort the good data from the bad.

If brands do in fact have such value, newspapers may use their credibility with readers to get into new types of content, such as diet clubs or other areas that lie outside of news but appeal to popular interest. When the Detroit Free Press and Detroit News announced they would not deliver the paper seven days a week, the papers touted new digital efforts they hoped to expand, in addition to online news. These included Web sites www.MomsLikeMe.com, a social networking site for mothers, and www.Highschoolsports.net, a nationwide venture that combines news coverage by journalists, high school coaches and players.

"It's not just editing on high anymore," Tennis Co.'s Morgan says about the online formats that newspapers need to develop. "A lot of the work is curating local content."

This curatorship could include giving cameras to local citizens attending a school board meeting rather than sending a reporter who would pound out a few lines for the paper.

Alongside citizen video, podcasts and tie-ins to social networking, the product itself will change. It might not appeal to the weathered, Hemingway-esque model of the reporter. Morgan says veterans of the old newspaper newsroom would not necessarily make it in the new, online newsroom.

"It's a very different kind of writing," he says. "It's a very different kind of publication cycle. It's a very different way of interacting with your readers. It's a very different way of publishing photos."

The focus is not so much on column inches as on readers' attention, time and clicks. A common question is whether long-form, investigative journalism will survive. Verve Wireless co-founder Howe argues that the ability to deliver news immediately over the Internet and mobile phone networks is a return to the roots of the business.

"In the golden era of newspapers the early part of the last century the presses ran all day long and breaking news was highly prized," he says, with newsboys on street corners. "It was valuable then. It is still valuable. Now we have a different platform."

Breaking news drives about 30% of Verve's traffic, Howe says. Stories about Sarah Palin -- Troopergate, the Alaskan oil business, the clothes bill -- caused traffic to spike during the election. Eliot Spitzer's travails with a prostitute were also hits. Local content is second to breaking news, accounting for about 25% of content. Then come subjects such as movies, events and restaurants.

Morgan suggests newspapers invest heavily in investigative journalism. "One of the ways you justify the higher subscription price is the noble purpose of the newspaper," he says, with stories about local government.

Duncan agrees there will be a home for long-form, investigative work that compels readers. Investigative journalism that "isn't interesting or conscious or relevant to people's lives," and takes months to produce, would not be a great loss.

The notion that democracy is imperiled if newspapers "aren't allowed to continue producing reams and reams of newsprint," Duncan says, is a "fig-leaf argument." If it's interesting and important to readers, newspapers "ought to be able to sell it to them."

If anything can save newspapers, it's the relationship with advertisers and readers. GateHouse shareholders, however, know firsthand that focusing on local ties is not enough.

Schroeder had never been to Bristol or New Britain before the papers went up for sale. He decided to buy after visiting just weeks ago, he says, because of his impressions of the community, including the staff of the papers and the mayors of the two towns.

In some press accounts, he has been called the "savior" of the papers, which he denies. "I'm not here to save the papers. I'm here to buy some time for the communities to buy the papers," he says. The new owner plans to keep publishing daily and expects advertisers and readers to support the papers through the recession if they are run locally and give the community what it wants. "Managing by phone is just not workable," he says. These days, that's what goes for optimism in the newspaper business.