Bear Stearns' analyst Alexia Quadrani warned that 2008 will be even more troubling for newspaper publishers than last year, according to Editor & Publisher.

The research firm said the newspaper industry is undergoing dramatic changes, including margin drops from 25 percent to 27 percent, the "peak levels” early in the decade, to a forecast 23 percent this year.

Quadrani predicted that ad revenue will decline seven percent for the companies in Bear Stearns' coverage universe, according to the E&P report.

In addition, national, with a 3.7 percent decline last year, is expected to slide 4 percent in 2008. The upswing that some companies experienced last year will not happen again. “National was lifted thanks to foreign fashion, entertainment, and a "short-term" shift in spending out of TV due to the writer's strike,” Quadrani pointed out.

Retail is also anticipated to be down about six percent this year, due to its advertisers experimenting more with online advertising. Bear Stearns warned that the overall decline in circulation will post threats on preprints, E&P reported.

Classified is expected to yield double-digit decreases. The housing depression has "yet to see the bottom," which indicates that real estate classified will plunge another 10 to 13 percent this year, Bear Stearns said.

Overall, classified is expected to drop another 15 percent in 2008.

Auto is also in a slump – it is expected to be down for the third year in a row, up to a 14 percent decline this year.

However, Bear Stearns does detect some opportunities for newspaper publishers, including online revenue, which is expected to boost around 20 percent, and the launch or acquisition of niche publications.