NYT: How's that Paywall Working for Ya? No, We Didn't Think so.

Last Updated Jul 22, 2011 9:58 PM EDT

The New York Times (NYT) announced its earnings and the results were ... eh. Revenue decreased by 2.2 percent, year over year, with ad revenues down 4 percent. It's a continuing slow decline.

Some think that there is a glimmer of a bright side in the expansion of digital subscriptions. That's just wishful thinking. The Times started laying the "we're winning!" groundwork last month, but the numbers aren't saying victory. Instead, they add up to another dash of cold water. If the mainstream news media wants to survive, it has to stop pining for the past and realizing that it has to change, drastically, irrevocably, and unpleasantly.

The cloudy side of the street
Early in June, a nameless Times executive spoke to Business Insider's Henry Blodget, pitching the idea that the paywall was working. In fact, it was doing so well that it actually was supposed to be boosting print subscriptions. You see, the print subscribers get online access included for the approximately $600 a year they pay.

Blodget bought it, almost dislocating his arm by patting himself on the back on his prescience. Unfortunately, the data was sparse and the conclusions unsupported by evidence, as I noted at the time.

Now real information is in, and while I'm not sure that the Times had an alternative, it's clear that the paywall isn't saving the company. As it turns out, print subscriptions are down, not up.

Why pay more?
Why is that a surprise? Even if you get the digital subscription version that includes Web, smartphone, and tablet access (and differentiating that much does seem pretty dumb), you're paying $455 per year, a big discount over a paper subscription. (Though presumably that takes into account the reduced cost of paper, printing, and distribution.) And if you stick to tablet and Web access, it's $260 a year.

It sounds like some customers are choosing digital over print subscriptions and not the other way around. What's more, the NYT might be in even worse shape than it seems, because the company is playing some numbers games. Here's what it said about print subscriptions:

Circulation revenues were on a par with the second quarter last year as the introduction of digital subscriptions at The Times offset a decline in print copies sold across the News Media Group.
Pretty sketchy, especially when you remember that the paper has both daily and Sunday-only subscriptions. So exactly what's declining and by how much?

The advertising downer
This seems like more evidence that people are switching to digital from paper, which isn't surprising as we can see the same trend across all newspapers and in books. The fast growth of digital at the NYT only brought a 2.6 percent increase in ads during the quarter, and it wasn't enough to offset the 6.4 percent decrease in print.

The Times doesn't give the breakout between print and digital, but you can safely bet that the print portion is much larger. Digital ads aren't catching up.

It's partly the enormous amounts of ad inventory available on the Web that depresses prices and, as a result, NYT revenue. But it's also a change in important ad categories, as you can see from this Times table (click to enlarge):


Advertisers in such important categories as retail and classifieds have many other options these days, so aren't going to put so much of their ad budget into newspapers they way they once did.

So, ad revenue continues to drop, as does circulation revenue. And the digital About group, which was the major digital driver for the company, is tanking with a 17.3 percent drop. The Times is blaming part of that drop on changes in algorithm and ad layout changes by Google.

Ah, the good old days...
That type of blame is nothing but fear. This money is going away forever. News organizations cannot plan on regaining what they once had. The funds to support big organizations won't be available, which will have a heavy impact on what news can collectively be gathered and produced.

Forget HuffPo (AOL) type freebie bloggers, who are really bringing in SEO juice, not readers. Forget citizen journalism. It is expensive and time consuming to do this type of work, especially when it requires digging, sifting through documents, and unearthing basic material for public discussions.

News organizations have to prioritize what they will do, based on what they would like to do and what they can afford. Expect more consolidation, less news, and more pundits waving their hands and proclaiming how publishing could "reinvent" itself out of its difficulties. I'm afraid that all publishers will actually be able to do is make peace with the inevitable, until the public decides that the information they want is worth paying for.

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Image: Flickr user Joming Lau, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.