Tribune Co. Layoffs Put Pressure on New York Times

Tribune Co. announced 700 layoffs. The company owns a number of television stations, but most of the jobs lost come from the firm’s newspaper division. The jobs eliminated show how newspaper companies have started to restructure themselves, again, as advertising revenue sags. The New York Times Co. (NYSE: NYT), which wrestles with the same kind of problems, cannot use Tribune Co.’s changes as a yardstick for what it might do to bring down costs. The private company has six large city newspapers. The Times has only one. That leaves The Times with its plan to drive online subscriptions higher as a means to remain financially viable.

Because Tribune Co. runs several big dailies, it can consolidate some of the functions of each property into a central system. Circulation, marketing and advertising sales management will move from the individual newspapers to executives that will manage these functions for all of them.

Tribune Co. has a large pool of employees it can eliminate in business departments because there is so much duplication across them: The Los Angeles Times, the Chicago Tribune, the Baltimore Sun, the Sun Sentinel, the Orlando Sentinel and Hartford Courant. Industry experts argue that these papers cannot get subscribers to pay for online editions, or pay much, because the quality of their content does not match that of The New York Times or Wall Street Journal in the minds of readers. Paywall experiments have not worked very well at other large city dailies. If that is true for Tribune Co. newspapers, it only has the opportunity to cut costs if it wants to maintain margins.

The New York Times only has one option as well. With only one paper, it has to rely on the demand for its content online as a way to increase margins. So far that plan has worked. The Times reported as part of its last earnings statement:

Paid subscribers to The Times and International Herald Tribune digital-only subscription packages, e-readers and replica editions totaled approximately 727,000 as of the end of the third quarter of 2013, an increase of more than 28 percent compared with the end of the third quarter of 2012.

The challenge The Times faces is whether it can keep up the double-digit improvement. If it cannot, layoffs will be its only option. Those layoffs will not give it the same economies of scale Tribune Co. can get from its own downsizing.

Tribune Co. and The Times each has to struggle with revenues that have fallen rapidly over the past several years. Each company has only one significant option to do so. And, if the revenue erosion continues, neither may be enough to stop the struggle.

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