LONDON (BLOOMBERG) - The late Elmo Smith and his wife borrowed US$25 in 1933 to start a mimeographed weekly newspaper along Oregon's Snake River, near the Idaho border.

The business grew into a chain of publications - chronicling local events through the Depression, Mr Smith becoming Oregon's governor, and a gas leak in the '70s that destroyed one of the company's printing presses - all under the family's ownership. Until this week.

Elmo's son, former congressman Denny Smith, sold off the publications after years of seeing the internet and social media eclipse local outlets. Covid-19 was a final blow. The papers will continue under the ownership of publisher Chelsea Marr, but the move brought layoffs and uncertainty about how the chain will operate in the future.

"We will be transitioning and will certainly have some bumps along the way," Marr told readers. "Please give us a brief break, as we reorganise."

It's a familiar story across the country. Local papers are slashing staff and publishing less frequently as the already-battered businesses try to weather the Covid-19 storm. Many either won't survive or will have to drastically reduce their operations.

"I'm aware of weekly newspapers that have shut down completely," said Mr Dean Ridings, chief executive officer of America's Newspapers, a national trade association. "Some have gone to a digital presence only. Some are changing print frequency to twice a week."

Advertising dollars have become even more scarce now that companies are conserving cash and nonessential retail is largely shuttered.

"I'm hearing 40 per cent to 60 per cent drops in revenue over the last 30 days," Mr Ridings said. "The advertisers are the local mom and pops, the retailers, the restaurants, who are understandably cancelling their advertisements."

That broader crisis will eventually pass, but the changes that newspapers make now will probably be permanent, according to media analyst Ken Doctor. A paper that drops print days is never going to add them back later, he said.

Deeper cuts

The largest US newspaper chain, Gannett Co, is suffering alongside the smaller outlets. It said this week that it's slashing jobs and furloughing workers to cope with Covid-19. The company, which owns USA Today and hundreds of local news outlets, also is suspending its dividend and selling real estate to pay down debt.

Gannett, which merged last year with New Media Investment Group Inc, was already tightening its belt. But it wouldn't have reached this point without the coronavirus crisis, Ridings said.

"This pandemic has done more than accelerate - it has changed the dynamic significantly," he said.

Still, many publishers were already flailing. In February, McClatchy Co, the owner of the Miami Herald, Kansas City Star and other newspapers, filed for bankruptcy.

As the industry has declined, investment firms have stepped in as newspaper owners. Fortress Investment Group LLC controls Gannett, and Alden Global Capital owns about 50 daily papers, including the Denver Post.

Though job losses have accelerated across the industry, newsrooms have become especially fearful of Wall Street firms, figuring that they'll make even deeper cuts.

As part McClatchy's bankruptcy plan, the publisher will hand majority ownership to hedge fund Chatham Asset Management, owner of the National Enquirer. That would put more than a third of the total circulation of US newspapers under control of private equity firms or hedge funds, Doctor said.

The newspaper industry may look like it's doomed, but 90 per cent or more of daily newspapers were profitable before coronavirus hit, according to Mr Doctor. That's what has attracted Wall Street firms. "There's $1 billion of free cash flow in this industry," he said.

Stay or go?

But it's hard to maximise those profits without squeezing newsrooms. And now that this crisis has descended on the industry, investment firms may not want to stick around, Mr Doctor said.

"Fortress didn't get paid on how well these papers serve their communities," he said. "For private equity, the second quarter will be unprofitable - but what do they see on the other side? Do they want to be in this industry or do they want to get out?"

Mr Warren Buffett has already abandoned the industry. In January, his firm, Berkshire Hathaway Inc, announced it was selling all its 31 daily papers to Lee Enterprises Inc for US$140 million (S$202 million).

Mr Charlie Munger, Berkshire's vice-chairman, said earlier this year that "technological change is destroying the daily newspapers in America," adding that "they're all dying".

Lee Enterprises, which has publications in 26 states, is now making its own cutbacks in response to the virus. CEO Kevin Mowbray told employees they'll be required to take two weeks of unpaid leave, according to a memo obtained by the Poynter Institute.

Newsroom cuts are especially troubling during a pandemic because local communities need news more than ever - a point Mr Smith made when he sold his newspapers this week.

"As our communities work their way through Covid-19, local news organisations will continue to play a vital role in providing factual and timely information," he said.

If local papers are pushed to the brink, the virus's legacy will be felt long after the crisis is over. In many places, the hometown paper is irreplaceable, Mr Ridings said.

"Whether it's the watchdog to cover the city council, or the school board, or even the Little League, the newspaper was the last remaining source for local information," he said.