• Silicon Alley Insider, Monday, August 13, 2007 11:30 AM

As the newspaper industry continues its slow decline, Silicon Alley blogger Henry Blodget explains why The New York Times cannot escape a future of downsizing and depreciating returns. Its offline business accounts for just 13% of monthly readership but generates 90% of its revenue, while NYTimes.com's 7.5 million monthly uniques covers the remaining 10.

The reasons? Offline display and classifieds ad sell for more than online ads, and physical papers are also sold. People spend less time with NYTimes.com than they do with the physical paper, as competition for ads comes from other online pubs, blogs, social networks, classifieds sites, even services like Google News.

The Times print business will one day fold altogether, he predicts, in which case online readership would receive a boost, perhaps by 2.5 million. Online inventory and revenue would also receive a boost; he says 33%. Paper, distribution, printing and other production costs would be eliminated, along with print ad revenue. However, content creation costs would stay the same-unless it realizes that cuts must be made. Indeed, the paper has to produce less and lay people off. Otherwise, revenue would drop 40% to 50% and the Times Co. will continue to lose money.

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