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By the Project for Excellence in Journalism and Rick Edmonds of The Poynter Institute

In the end, 2004 was a disappointment. The industry’s hopes for recovery were not realized. In reaction, many companies turned again to cutting back on their newsrooms, an old pattern that may undermine the future. And aside from the slow cyclical trends of advertising and revenue, the circulation scandals that rocked the industry not only hit some of its most successful companies, they also included bribery, kickbacks and fraud. Anecdotally, we heard from editors at companies with no whiff of scandal at all that advertisers were now suspicious of their numbers, too.

Perhaps most disturbing, there was frankly little hard evidence that the newsroom capacity is being built up, even to develop the emerging journalism of the Internet, where the audience – and importantly, the young audience – is clearly growing. While it may be that fewer resources should be assigned to the print edition of many newspapers, it seems worrisome that resources are moving only sparingly, and perhaps even being cut back, in new media, at the slightest sign of economic difficulty.

It may not be possible to “prove” that quality and investment will pay off in all markets. But it is still disturbing that the effort isn’t being made in many places. The evidence, as best as it can be collected, suggests that the newspaper industry is taking the same cautious, pay-as-you-go approach to creating the new journalism of the Web and specialty publications as it took a generation ago to investing in trying to attract new audiences to the main print edition.

In June, a newspaper executive, now in the candor of retirement, told us that he thought the newspaper industry was now experiencing a crisis in confidence, no longer fully believing in itself and the viability of what it has to offer – on paper or elsewhere.

Our reading of the evidence suggests he may be right.