New York Times Will Win in the Long Run

Meanwhile, the Times has focused its efforts on its digital products, acquiring businesses such as About.com, merging its online and print news operations and redesigning its flagship Web site. NYTimes.com is now the most heavily trafficked newspaper site in the world.

The problem is that while the company is posting impressive gains in Internet revenue, that growth is slowing and it still comes nowhere close to supporting the almost $3 billion in expenses recorded by its News Media Group last year. New York Times expects online revenue growth will slow this year from 41% to 30% for a total of about $350 million.

How does that compare with the cost of the company's news operations, factoring out the expenses of producing and delivering printed pages? New York Times doesn't make those figures public, but a source familiar with the business estimates the cost of newsgathering at the flagship paper to be just $200 million. That suggests at least the possibility of a solution for the company's business model in a digital future.

Still, that digital future isn't here yet. Online revenue made up only 8% of the Gray Lady's total revenue last year. The company achieved $120 million in cost savings over the last two years by cutting staff and consolidating its printing operations, and it expects to cut $65 million to $75 million in costs this year. But it has to move carefully.