If there's any good news about the businesses of newspapering these days, it can be found at the industry's littlest papers, which are doing well even as their bigger brothers founder. The average daily circulation of all U.S. newspapers has declined since 1987. The smallest papers, however -- community weeklies and dailies with circulation of less than 50,000 -- have been a bright spot in a darkened industry.

Why? Small papers face less competition from other media outlets, are insulated from ad slumps that have hammered big papers, employ smaller staffs of lower-salaried journalists and have a zealous devotion to local news, both in print and online, industry experts agree. Also, there is less competition on the Web for local news.

The combined circulation of all U.S. newspapers in the six months ended Sept. 30 was down 2.8 percent from the comparable period in 2005, according to the Newspaper Association of America. By comparison, the combined circulation in the small-newspaper group was down 2.1 percent. If that seems like cold comfort at best, consider this: Of the 413 papers in the small-newspaper group, 105 of them -- 25 percent -- gained circulation over the year, faring better than any other circulation group.

Lee Enterprises, based in Davenport, Iowa, for example, owns 56 daily papers and more than 300 small weeklies and other publications. Three of its papers have a circulation of more than 100,000 -- including the St. Louis Post-Dispatch -- but the rest of its dailies are much smaller, averaging about 26,000 each. Over the past five years, the circulation gains at Lee papers have outpaced the industry average; some of the gains came from acquisitions, but much came from the growth of the group's existing papers.

Splintering audiences in the online age are driving risky trends like 'hyper-local ism,' the Project for Excellence in Journalism says.

News organizations confronted with declining revenue and increased competition are entering an era of more limited ambition in which they will drop a broad worldview for more narrowly focused reporting, according to an annual review of the news business being released today by a watchdog group.

The Project for Excellence in Journalism reports that the struggle to create sustainable media brands is driving "hyper-local" coverage in newspapers; encouraging citizen journalism on the Internet; and giving rise to opinion-driven television personalities like CNN's Lou Dobbs and Fox News' Bill O'Reilly.

Daily newspaper circulation declined 3% in 2006, for instance, but the increase in online readership is more difficult to quantify. The three television networks collectively lost an additional 1 million viewers — about the average in each of the last 25 years — but YouTube and other online services created a new delivery vehicle for the networks' content.

But the Project for Excellence report suggests that the boom in online news audiences and income has begun to wane. A Pew Research Center study cited in the report found that the number of Americans who said they went online for news every day declined to 27% in June 2006, compared with 34% in June 2005.

Today's report says that the loss of about 4,000 newspaper journalists since 2000, combined with the smaller number of pages devoted to news, "suggest that American newspapers have reduced their ambitions."

The Project for Excellence report says that the ethnic media sector is one of the few experiencing solid growth. Spanish-language newspaper circulation, for example, jumped 900,000 to 17.6 million in 2005. That was the most recent year with available data.

The report also summarized public attitudes toward the media — noting that journalists remained in relatively low esteem, though not substantially diminished in 2006. For about two decades, the audience has taken a more skeptical view of journalists' ethics, accuracy and professionalism.

The Project for Excellence in Journalism has issued its annual State of the News Media report. This year’s identifies seven major trends. (The report calls them new trends even though they are not new, but that’s a quibble.) The report is lengthy and detailed, a must-read for anyone who cares about the present and future of journalism.