How big a hole is the U.S. daily newspaper industry in?

We know the toll in newsroom jobs — about 20,000 lost in a little under a decade — and the fact that the industry as a whole took in about $26 billion less in 2014 than it did a decade earlier. We’re used to, and fairly inured to, those numbers.

So let’s ask a new question: How close is the industry as a whole to reversing its long slump? That’s an answer we can quantify.

First, we’d ask what would a new normal would look like. Let’s say the newspaper-based industry could simply maintain itself at rate of inflation in the overall economy. The Fed’s target inflation rate is 2 percent, with all kinds of deflationary fears bringing that number into question. For 2014, it clocked in at just 0.8 percent, the lowest since 2009’s Great Recession, following 1.6 percent in each of 2013 and 2012. That’s not as big a goal as growing as fast as the overall economy, of course, which has been running at 4.5 percent growth or more over the last two quarters — but it would be a big start. If the industry could match its previous year’s revenue — plus a little inflation, at least — it might be able to stop cutting.

Let’s assume a 1 percent inflation rate for 2015 and use, then, a 1 percent revenue growth as our target for a new newspaper-industry normal. Hit that number broadly across the industry, and we’d hear at least a small rallying cry that the bleeding is over. How close — or far — is the industry from raising that voice?

We won’t have full-year 2014 figures from the Newspaper Association of America (NAA) for a few months, so let’s use previous years for our math.

In 2013, total revenue in the U.S. industry totaled $37.5 billion, according to NAA. That number was down an even one billion dollars, or 2.5 percent, from the year before. The difference between its actual performance and what it would have needed to get to the new normal: $1.4 billion. With a revenue of $38.9 billion, the industry would have grown one percent and stayed even with inflation.

The industry missed a new normal by about 4 percent.

It may seem like a small number, but it’s been a mountainous goal. The industry hasn’t overall seen revenue growth at all (much less with inflation taken into account) since 2007. The continued declines in print advertising — down in the high single digits, percentage-wise, year after year — have been too big for other revenue sources to make up the difference.

So what do publishers need to do achieve to effect a turnaround — to reach a talkable milestone of stability?

Of course, it’s more than an academic question. With the Digital First Media sale moving forward, we revisited the questions of who would want to buy a newspaper company in 2015. As private equity investors eye the whole of Digital First Media (“Digital First Media’s upcoming sale is producing some surprises”), that question is very much on their minds. Key to valuation is the projection of future cash flow; without a business that at least keeps up with inflation (if not the overall growth of the economy), that’s tough. Certainly, would-be buyers appear poised to find new “efficiencies” in an acquisition — some real, some imagined, some smart, and some that portend new damage to the products they offer up for sale to readers and advertisers.

Their math can’t be just about expense-cutting; somewhere, sometime — even in the span of four to seven years in which private equity may stay in the game — new revenue must be found.

Dallas Morning News publisher Jim Moroney makes that point often and succinctly: “How do you deal with all of that? To create a sustainable business model, you have to have growth.” In other words, simply managing decline of the print business won’t get your there. Without new revenue, the sad shrinkage of America’s local news pipeline will continue.

So: How might “up” be found? Where could that plus revenue come from? We’ve heard a lot about paywalls, marketing services, and new programmatic ad approaches in last couple of years. How likely are they to turn the negative into a positive?

Think of industry’s potential revenue growth buckets as three-fold: reader revenue, digital advertising, and what we’ll call the Third Stream.

Reader revenue

The situation: The revolution of reader revenue — a.k.a. paywalls — has boosted overall circulation revenue over the past three years. In 2013, it came in at $10.87 billion. 2012 served as the first year that serious paywall-led all-access subscription circulation revenue increases, so that’s a good starting point.

The numbers: 2013: A growth in circulation revenue of 3.7 percent, or $386 million. 2012: A growth in circulation revenue of 5 percent, or $459 million.

Bottom line: If reader revenue were to be the sole boost towards the plus-1-percent goal, it would take $1.4 billion in new reader revenue for full-year 2014 — or more than 3× the growth in circulation revenue we saw in 2013.

Prospects: The short-term trend line is circulation revenue growth is troubling. 2012’s 5 percent increase derived from early paywalls going up across the U.S. With more than half of U.S. dailies now sporting paywalls, you might think circulation revenue growth would be going up — not down.

The big problem: After early increases in circ money, many publishers have run into a pricing wall. They’ve harvested the early fruit, enticing print subscribers to opt into (or, to be accurate, not opt out of) increased “all-access” pricing. Take a look at quarterly reports from the public newspaper companies and you can see the 2014 growth number (probably to be reported by NAA in April) will come in lower than last year’s 3.7 percent. Gannett is down 0.5 percent in circulation revenue through October 2014; Tribune is up about 1 percent.

Takeaway: Don’t expect much growth in circulation revenue for full-year 2014.

Digital advertising

The situation: At most companies, digital ad revenue growth has slowed dramatically. In 2013, it came in at $3.42 billion. Of that, only 24 percent was defined as “pure play,” meaning the other 76 percent is still sold somehow bundled with print ads.

The numbers: 2013: 1.5 percent growth, or $50 million. 2012: 3.7 percent growth, or $120 million. 2011: 6.8 percent growth, or $207 million.

Bottom line: If digital ad revenue were to be the sole boost towards the plus-1-percent goal, it would take $1.4 billion in new revenue for full-year 2014 — or more than 28× times the growth in digital ad revenue in 2013.

Prospects: Again, a trend line going in the wrong direction, with both percentage growth and overall revenue growth slimming each year. Though digital advertising — the number one source of advertising in the U.S. — is expected to reach $52.8 billion this year, still growing 13 percent annually, newspaper publishers’ share of it drops markedly each year.

It’s not for lack of effort, with programmatic and network efforts receiving new investment. The giants of digital advertising — led by Google and now Facebook — become more dominant each year, and none of them create news content as their core businesses.

Takeaway: The industry may be lucky just to stay even in digital ads in 2014.

The Third Stream

The situation: In 2013, what NAA considers “newly developing” revenue came in at $3.15 billion. Notably, this is the fastest growing play publishers have, growing a little faster than circ revenue.

What’s in this bucket? It’s things like commercial printing, distribution of other products (e.g., other newspapers), event marketing, e-commerce and marketing services. In fact, though NAA doesn’t report marketing services revenue by itself, it does say it grew 43 percent year over year. That’s off a very small base, but it’s significant. Marketing services is where most of the big players are putting their biggest chips, from New Media’s Propel to Gannett’s G/O Digital to McClatchy’s impressLocal (“The newsonomics of selling Main Street”).

The numbers: 2013: 5.0 percent growth, or $150 million. 2012: 8.0 percent growth or $248 million.

Bottom line: If Third Stream revenue were to be the sole boost towards the plus-1-percent goal, it would take $1.4 billion in new revenue for full-year 2014 — or more than 9× times the growth in Third Stream revenue in 2013.

Prospects: Though marketing services shows boatloads of promise, its execution is tough — a block-by-block exercise of inventing a whole business with many small customers each paying in the multiple hundreds of dollars a month.

Takeaway: Growth in marketing services should be real, and ramping up, but it’s unlikely to throw off the big dollars needed for the up turnaround. The other new revenue sources are good, but won’t grow a lot.

Our conclusion: The industry, as a whole, is far away from getting to any new stability. Growth that matches inflation would be very difficult; growth that matches the growth of the overall economy even tougher. In fact, even in the areas the industry has looked to for recent growth, the trend lines are the opposite of what we’d hope.

Significantly, though, there are a few companies that are close to that 1 percent growth level. One is The New York Times, which is running up 0.9 percent through three quarters and finished 2013 up 0.5 percent. Of course, the Times, now a global news business, shares even less with its 1,400-plus local and regional peers than it used to.

For most newspapers — using more or less the same business models as their peers — there are no growth drivers on the immediate horizon to make up those precious three or four percentage points of turnaround. Assuming continuing retrenchment in print advertising — and that’s what those in the industry expect — it’s a fact that the business still needs new ways of driving new revenues.