To illustrate what a poor situation that is, let’s go back to September, where media analyst John Morton told the Statesman’s Dan Zehr that “a rule of thumb for valuing a newspaper is $2,000 multiplied by the average daily circulation over a week. For the Statesman, that comes out to roughly $350 million.”

In that same September story, Zehr writes that “Five years ago, a newspaper typically sold at 12 or 13 times its earnings before taking out taxes, interest and other accounting-related items. That’s down in the 5- to 7-times range now. The Statesman likely would go at the upper end of that range.”

The Statesman is owned by a private company, Cox Enterprises, so we don’t know what its earnings before taxes are, but I would bet it’s a lot more than $8-10 million. And Morton’s rule of thumb would now be $300 per average daily circulation, down from $2000.

If that much has changed in the past six months, then the market for a profitable newspaper, with no other daily competition and a growing web presence, has bottomed out. The land that the Statesman sits on is worth $32 million on its own, according to Travis Central Appraisal District records.

So what does Cox do now? The company said it wouldn’t rule out selling the paper and the land separately. They can either sell one of their well-performing papers for one of these low-ball offers, or hold on to it and see what’s around the corner. It’s a depressing situation to be in for the newspaper’s owners, and for those who work there.

Among the unfortunate missteps (Newsday wants to charge for content; Hearst wants to build its own e-reader) and genuine misfortunes (Rocky Mountain News closes) in the publishing industry this week, there was this late-breaking glimmer of promise: the New York Times is expected to launch a local blog network on Monday.

As Jim Schachter, editor for digital initiatives at The New York Times, confirmed in the comments of the TechCrunch story, the two pilot sites will be staffed initially with full-time Times reporters and the paper will sell ads to local businesses. The neighborhood blogs will cover “cultural events, bar and restaurant openings, real estate, arts, fashion, health, social concerns and anything else that goes on in the ‘SoHo of Brooklyn.’”

The good news is that this could be the beginning of a local collaboration network that online news organizations can provide the platform for. It’s one of the rules that Jeff Jarvis lays out for newspapers in his excellent book, What Would Google Do? Newspapers can provide the tools and raw material for neighbors to gather and share news, and then sell ads to local merchants to support those efforts.

The bad news is that it’s still primarily an advertising-supported model, and in these harsh economic times, that’s a hard way to make a living. At BusinessWeek, Sarah Lacy reports that local interactive advertising is headed for a big slowdown this year, according to Borrell Associates, an online advertising researcher.

UPDATE: Schachter provides some more details in the comments below: “Our Brooklyn site will be collaborating with Jeff Jarvis and the CUNY Graduate School of Journalism. CUNY students will do outreach to residents of Fort Greene and Clinton Hill, extending them the tools and skills of journalism so they can cover their own community.”

Very promising stuff — I look forward to watching this grow — jb

FOR

• Alan Mutter: Mission possible? Charging for web content and How to charge for content. Theoretically.
• David Carr: Let’s Invent an iTunes for News
• Walter Isaacson: How to Save Your Newspaper
• Nicholas Carr: The writing is on the paywall

AGAINST

• Clay Shirky: Why Small Payments Won’t Save Publishers
• Michael Kinsley: You Can’t Sell News by the Slice

Photo by Infrogmation

EveryBlock was funded by a grant from the Knight Foundation, and the grant ends June 30. Under the terms of the grant, EveryBlock will make their publishing system available via open source for anyone to use. Founder Adrian Holovaty now poses the question: How do we sustain our project if our code is free to the world?

Most of the early ideas center around offering a hosted solution for customers, selling licenses, building a local advertising engine, or mobile advertising or iPhone applications.

Also, EveryBlock has begun working with the New York Times to supplement the paper’s coverage.

Good luck to the EveryBlock team!

There are much better choices for the Times than to cozy up even closer to the Mexican billionaire. Slim bought a stake in the New York Times Company back in September, and he’s already the company’s largest shareholder not related to the owning Sulzberger family.

The Journal points out that an additional investment by Slim would also cost them an additional dividend for a preferred sales plan, but the Times might find it tough to get a loan of that size in the current environment.

In such dire straits, the Times would be better off following the advice of venture capitalist John Thornton, who suggests they become a nonprofit organization running as a public trust. It’s probably not what Mr. Slim has in mind.

Thanks to Michael Barnes for the pointer to John’s blog. Michael also got John to share his reading list for media blogs.

Shortly thereafter I came across an article in the McKinsey Quarterly where the venerable consultancy laid out three ways companies can win “by adopting distributed cocreation”:

• Capture value from the cocreated product or service itself by merchandising good ideas gleaned from the network
• Capture value by providing a complementary product or service
• Benefit indirectly through an enhanced brand or strategic position

Then yesterday, Mike Arrington at TechCrunch proposed an open-source web tablet with a target price of $200. It’s arguable whether that price is realistic, but the larger point is that this simple proposal immediately captured the imagination of a large number of folks — there were more than 600 comments on the post last time I checked.

The success story is related in this week’s Economist, as Gelb transformed the stuffy, elitist image of the Met into something new and vital. How did he do it?

• Began an outreach program to a younger audience. (The average age of Met goers in about 65).
• Opened dress rehearsals to the public.
• Broadcast opening-night performances at Lincoln Center and Times Square
• Sold heavily discounted seats for weekday performances
• Increased the number of new productions in the season
• Brought in well-known directors
• Beamed high-definitions telecast of the Met’s live performances to cinemas across the world

All brilliant moves, and the last one especially so. More than 900,000 people watched last season, three times as many as in previous seasons. Now others are beginning to copy that strategy.

This method of reinvention can be applied to nearly any business. Umair Haque has been doing some terrific writing on this topic. And I also saw a good post on 37signals’ blog the other day about ways to branch out of your core business and diversify your income streams.

The move puts Allard in a key position regarding Microsoft’s future moves, but it also got me wondering: Is he now the highest-profile experience officer? It’s a position that has been talked about for years, but never formalized in a way that other “chief” executives are. As the man who led the teams that created the Xbox and the Zune for Microsoft, Allard will definitely be one of the people to watch in Redmond in the post-Gates era.