Times are tough for newspaper executives.

The newspaper industry’s woes were highlighted once again last week when The New York Times Company posted a quarterly loss from continuing operations and announced that it would have to write down the value of some of its assets by over $100m.

The company’s stock slid to its lowest level in more than 15 years and Standard & Poor’s cut the company’s debt rating to junk.

As the global economic crisis deepens and the Times’ financial position declines, the future of one of the world’s most prominent newspaper companies looks quite uncertain.

The industry-wide drop in print revenue continues to be fast and furious and there is no end in sight.

But as much as the doom and gloom about the newspaper industry is very much justified, there are some small bright spots if you look hard enough.

According to the Newspaper Association of America, which analyzed data from Nielsen Online, 41% of US internet users visited newspaper websites in the third quarter. This amounts to 68.3mn unique visitors.

As Erik Sass of MediaPost’s MediaDailyNews blog points out, “these figures are records not only for the third quarter of the year, but any quarter measured since 2004.

Other important metrics, such as pageviews, pageviews per visitor, visit duration and visits per person are all at record highs as well.

While the election cycle in the US certainly has something to do with this, it’s quite clear that newspapers are more than capable of competing online.

As Sass observes:

“This good news for newspapers suggests they are well-positioned vis-à-vis online competitors, leveraging their editorial authority and reputations to attract large audiences of Internet users.”

Of course, if that’s all there was to it, newspapers wouldn’t be in the situation they’re in.

So what gives?

The big problem is that despite all of the gains newspapers have made online, online revenue is not only not offsetting print revenue declines, it’s not keeping up with the record growth in online readership.

In essence, newspapers are faced with an unusual situation – the demand for their product has arguably never been higher but the size of the market in terms of revenue is shrinking.

So what are newspapers to do? There are no easy answers here.

As I mentioned previously:

“Today’s business environment is going to force most newspapers to adjust their business models and the way they operate. The days of massive return on investment are probably gone and while the current losses look scary, that’s partly due to the fact that newspapers have not yet fully retooled their old ‘infrastructures’ for the environment they find themselves in.”

If newspapers could wipe out all their debt and retool overnight for the internet age, there’s no doubt that they’d adopt different business models.

The challenge, as I see it, however, is that the great content that is attracting visitors to newspaper websites in record numbers is produced by the newspapers’ print-focused operations, which, of course, was built around print-driven revenue.

If we accept that, realistically, there’s no way that online revenue can offset the massive decline in print revenue, we’re faced with a Catch 22.

The simple fact is that newspapers are still one of the best sources of reliable (if not totally unbiased) news we have today. Although some bloggers love to celebrate the downfall of the newspaper, the reality is that the vast majority of bloggers simply regurgitate news that is developed by newspapers and other “big media” outlets (and some simply copy and paste what is provided to them). Blogs are not taking readers away from newspapers, but changing economics are taking revenue away from newspapers.

So how do newspapers continue to bring us the news in a fashion that works when the business models that previously supported this don’t?

That’s the $64,000 question.

I can’t help but observe some irony in all this. Newspaper executives are increasingly finding themselves in a position where they’re facing the same problem many new media executives are facing – how do you turn popular content that most consumers would prefer not to pay for into profit?