By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The Providence Journal’s finances brightened during the first three months of this year, as the paper used higher circulation revenue and more third-party printing work to offset another sharp drop in advertising.

The Journal’s revenue totaled $22.7 million in the three months ended March 31, up 3% from $22 million in the same period last year, according to a regulatory filing. That performance helped offset weakness elsewhere within its Dallas-based parent A. H. Belo, which said companywide revenue slid 7% in the first quarter.

The Journal’s first-quarter contract work nearly doubled to $2.8 million year-over-year as the paper distributed more national and local newspapers and landed new commercial printing jobs. The paper’s circulation revenue also posted a healthy gain of nearly 6%, rising to $8.6 million.

Advertising is no longer the bedrock of The Journal’s business that it once was, contributing only 49.5% of total revenue in the first quarter. Ad sales through March 31 fell to $11.2 million, down nearly 10% from a year earlier, with declines in all categories. Digital advertising on ProvidenceJournal.com slipped 7% to $1.5 million compared with 2011.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Advertising sales at The Providence Journal plunged by more than 60% over the last six years, forcing Rhode Island’s top newspaper to eliminate a third of its work force and to rely increasingly on subscribers and printing contracts to pay the bills.

The Journal’s total revenue dropped for a sixth straight year in 2011 to finish at $95.1 million, down 5% from 2010 and off 43% since 2005, parent company A.H. Belo disclosed in an SEC filing. Lower advertising and circulation sales were partly offset by $3 million in new printing and distribution contracts.

Journal publisher Howard Sutton declined to comment on the results. “The printed Journal has adapted to changing times, intensifying its focus on local and regional news and carefully managing its cost structure to match lower revenues,” A.H. Belo CEO Robert Decherd wrote in an op-ed on Feb. 26.

The Journal sold $52.9 million worth of advertising in 2011, down 11% from the prior year, with retail, preprint and digital lower but classifieds higher. Advertising has fallen a dizzying 61% at the paper since hitting $136.5 million in 2005, though last year’s percentage decrease was the smallest since 2007.

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The Providence Journal will start charging online readers Tuesday, doubling down on its strategy of selling a digital replica of the print edition rather than using an HTML-based paywall like those of The New York Times and The Wall Street Journal.

The Journal said it will create 10 subscription tiers on Tuesday. A seven-day digital-only subscription will cost $208 a year for the Web and iPad e-editions or $192 a year for the iPad e-edition alone through Apple’s App Store. A seven-day subscription to both the print edition and the e-edition will cost $416 a year, unchanged from the current price, effectively making it free to current subscribers. A weekend print subscription with seven-day digital access will cost $312 a year.

The Boston Globe charges the same price – $208 a year – for digital access to its new website without a print subscription. The New York Times charges $195 a year for full access to its website and smartphone apps.

The Journal’s new e-edition designed by Olive Software has been available as a free trial since Oct. 17, when the paper launched its new website, which also offers brief blog items and sports stories for free. The paper’s online traffic has declined 33% since the new site debuted. The paper has not created iPhone or Android apps and did not say whether those will be added.

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The Providence Journal’s publisher, Howard Sutton, issued a memo yesterday explaining what’s happening with the paper’s long-gestating plans to make readers start paying for some Projo.com content, Dave Scharfenberg reports. Although Projo executives have been cagey about what they’re planning – and they never speak to the press – this looks like an evolution of their paywall strategy, not an abandonment of it.

The old plan was apparently to keep some of the paper’s lengthier local stories off the free Web altogether – no HTML version would go on Projo.com at all. According to Scharfenberg’s report, the new plan is to post short summaries of those stories online, but only offer the full versions to print and (eventually) electronic-edition subscribers. Think of it as “Diet Projo.”

With print circulation and revenue still plummeting, the question is whether this will help The Journal stabilize its finances. Off the top of my head, I can’t think of any other paper that offers abbreviated stories online with full versions available to subscribers. I asked Dan Kennedy, the Northeastern professor and prominent press critic, what he thought of the idea, and here’s what he said:

The Journal is sacrificing its website in order to bolster its print edition, which is where it makes most of its money. I understand why Journal managers are doing this, but it’s a short-term solution that could prove harmful in the long term. I also wonder whether it will even accomplish anything. Newspaper readers are skimmers, and a headline and brief synopsis of a story may be all that they want.

That’s a good point. Although I know all of you linger over each lovingly chosen word that appears here on Nesi’s Notes, in most cases people skim, skim, skim.

In fact, what the new Projo.com strategy reminds me of most is The New York Times’ TimesDigest, a nine-page synopsis of the daily paper the company publishes primarily for cruise ships and hotels. (Here’s a PDF example of it.) “TimesDigest indicates that making New York Times stories shorter while retaining their essential news value ain’t really that hard,” Slate’s Jack Shafer wrote in 2007. Will some people be content with an online “ProjoDigest” and opt to skip a subscription?

There were other interesting tidbits in Sutton’s memo. The Journal has retained two of Providence’s savvier firms to help it move forward: ExNihilo is designing a new version of Projo.com slated to debut next summer, while Nail Communications is helping the paper “strengthen the graphical representation of our brand.” And the release date for the paper’s new iPhone and iPad apps, which will use the NYT’s new Press Engine system, also has been pushed back a bit to next summer.

It looks like 2011 will be the Year of the Paywall for the newspaper industry, with The New York Times and its sister paper The Boston Globe among those planning to stop offering their entire print edition for free online after New Year’s. I’ve reached out to a few other media analysts to get their thoughts on the Projo’s plan, and I’ll update when I hear back.