One thing you can say about the New York Times: The company couldn’t be nicer about firing people. Today’s sorry-and-good-bye memo is a paragon of grace and honour.
One thing you can’t say, though, is that the company fully appreciates how far up the creek it is. This happy addendum to the pay-cut section of the memo, for example, is almost certainly wishful thinking:
Although employee pay will be cut by 5% for the remaining three-quarters of the year, you will be entitled to 10 additional personal days off over the nine months. Next year, we plan to return salaries to their current levels.
One can always hope.
For NYT staffers who maintain the sensible life-strategy of preparing for the worst, however, here’s a more likely scenario:
Eventually, when the economy recovers, some salaries might once again be raised to 2007 levels. Over the intervening years, however, at least 40%-50% of the newsroom will be fired.
Unlike other newspapers, the New York Times will not disappear. There’s just too much value in the franchise and web site for that to happen. But the revenue model that has sustained the paper’s hefty cost structure for more a century is gradually disintegrating, and there is just no way the company will be able to replace it.
For now, the New York Times still has a healthy subscription business, and advertising revenue will eventually see a cyclical recovery. Eventually, however, the last generation of folks who were reared to get their news (and ads) in a once-a-day dead-tree package will die off, and the company will be left with a thriving but relatively tiny web business.
What might this business look like?
If the New York Times made the sensible move of charging an online subscription fee, it would likely be able to generate about $200 million a year from its current NYTimes.com web business (ads and subscriptions). The current newsroom, we are told, costs about $200 million a year. Whatever the company spends on editorial, it will need to spend at least as much on the business side (ad sales, technology, management, customer service, etc.). And it will still need some room to make a reasonable profit (say, 20% operating margin).
Put all that together, and the New York Times will, in all likelihood, eventually have to shrink its newsroom by 50% (assuming some growth in revenue). And even doing this would be a feat worthy of applause: The Seattle P-I just shrank its newsroom by 88%. And some papers have just shut down entirely.
So today’s costs cuts and layoffs are another small step in the necessary direction. They almost certainly won’t be the last, however. And they also aren’t a long-term strategy.
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