I keep wondering what would happen if the top 10% of the writers at the NYTimes just…walked out. I know it’s crazy, but let’s just explore this a bit for the heck of it.

Today the company is worth just a little over $1 billion. As recently as five years ago it was worth nearly 5x that much. You have to go back to the early 1980s to see a lower stock price.

I certainly don’t think the NYTimes is going to be shutting down any time soon. The company still pulls in nearly $3 billion a year in revenue, down just 10% or so from 2005. But massive overhead, and more than 9,300 employees, make profitability an increasingly difficult goal for The Gray Lady. Her age is showing.

Journalism Isn’t Dead. Just The Old Business Part Of It.

A couple of weeks ago I met the Politico guys just before they taped their Charlie Rose segment. I watched them live from the green room at the show, and read Michael Wolff’s excellent Vanity Fair article on the young company. Their news room is 100 strong and they have more people in the White House Bureau than any other brand. They have roughly the same traffic as we do – 7 million monthly visitors – but they’ve been around just half the time. How did they do it? The site was founded by well known political journalists who bailed to start their own company. They took their personal brands and credentials with them, and the readers followed. Today they are profitable – largely because they launched a three-day-a-week print version of the site. Amazing. Print isn’t dead (yet). Just the overhead is.

And earlier today I got a glimpse at what AOL is up to – they are hiring all the journalists being fired and laid off by the newspapers and magazines. And they now have a news room 1,500 journalists and editors strong. Amazingly, failing old media is throwing away their most valuable assets. And AOL is eagerly picking those assets up for a song. Before anyone knows it, AOL may be the most powerful news outlet in the world.

Journalists still matter. A lot. Especially the good ones.

What if…

So that got me thinking about the NYTimes. $3 billion in revenue. 16 million monthly unique visitors and 124 million page views (Comscore worldwide, May 2009). 9,000+ employees. 1,200 news staff, and just 400 or so writers, critics, correspondents and columnists. I’m still waiting to hear how many editors the paper has on top of those 400, but it’s probably a total full time news staff of no more than 450 people.

I don’t really read the NYTImes beyond the technology section. But I’m guessing that the top performers in the news room, say the best 5%-10% of the writers and editors, produce 50% or more of the real value of the newspaper. The hungriest reporters. The best writers. The most competitive and aggressive editors.

What if that group, the most valuable assets that the NYTimes controls, simply walked out of the building and started their own company? What would that look like?

The New New York Times

The New New York Times, or NNYT, would have a writing staff of say 50 people. These are among the best journalists in the world, and let’s say they wanted to pay themselves $200,000/year, a top salary for a reporter of that stature. That’s just $10 million a year in payroll expenses. Call it $12 million with benefits. Plus, they all have stock options in the new company.

If TechCrunch is any indication, the amount of support staff (developers, office staff, sales people, admin) needed to run the company is at most 20%, or another ten people, particularly if they outsource a lot of that. Put everyone in the cheapest office possible, and you’re looking at additional payroll, benefits and office expenses of another $3-4 million per year.

Now lets just add another 50% on top of that for other expenses and a safety net, and round it up to $25 million per year in total expenses.

That’s $25 million/year to have a well paid staff of the best journalists on the planet. How long before they outstrip those 16 million monthly visitors and 124 million page views? 5 years? Less?

How many private equity funds would kill to put $100 million behind the NNYT to make sure the company had plenty of money until it reached profitability?

My guess is plenty. And Marc Andreeseen, who has already backed two blogs, may be the first in line to invest. And I know a couple of hedge funds that would be right there, too. I know this because they’ve pitched me on a vision not much different than this one.

Of course, none of this is going to happen. Those 50 top journalists aren’t going to be able to self select and organize themselves even if they had the inclination to do something like this. But the interesting thing is that I think something like this would work, really work, if anyone tried it. And the guys at Politico and AOL seem to be doing just that. Lean journalism, for the win.

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As if the New York Times doesn’t have enough to worry about, with total advertising revenues down 32 percent in the second quarter, its online business is deteriorating as well. In its earnings announcement this morning, the company breaks out Internet advertising revenues of $68 million, which is a 15.5 percent drop from a year ago.

The year-over-year declines keep getting worse, as you can see in the chart above. In the last three quarters the annual decline went from a 3.5 percent drop in the fourth quarter of 2008 to a 6.1 percent decrease in the first quarter of 2009 to negative 15.5 percent this quarter.

Annual Decline In Internet Advertising Revenues

4Q08: -3.5%
1Q09: -6.1%
2Q09: -15.5%

While the $68 million is a fraction of the NYT’s $454 million in total advertising revenues in the quarter (and an even smaller portion of the company’s overall revenues of $702 million, which includes circulation and other sources), the NYT is a bellwether when it comes to media sites on the Web. And if it can’t stem the bleeding on the Web side of its business, other publishers are likely having trouble as well.

There is one glimmer of hope, however. On a sequential basis, compared to last quarter, the NYT’s Internet ad revenues were virtually flat ($68.0 million vs. $67.6 million). And the company as a whole was able to eke out a profit of $21 million, but only because it slashed $132 million worth of costs. And Classified advertsing revenues were down 45 percent. So it is still very much in the woods.

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Says New York Times editor (and Bits blogger) Saul Hansell: ” Unlike Google News and Techmeme, we aren’t trying to prove machines can be better editors than people. We have a hybrid model, with Web Crawlers and Editors both helping find and ranks posts.” But the NYT would like nothing better than to displace those two news crawlers.

At first glance, it looks like it is Techmeme for a mainstream audience. TechCrunch happens to be at the top of both the NYT Blogrunner and Techmeme right now. It will be interesting to see which one delivers more traffic. We will report on the results tomorrow. (Update: Blogrunner is not killing anyone yet. Of all referring sites to TechCrunch yesterday and today up until 11 AM EST, Blogrunner is ranked a lowly 105—although we are no longer listed on the NYT Technology page. In contrast, Techmeme is our 30th largest referrer.)

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There’s an argument that the product will bring customized home pages to the masses, although frankly Yahoo has already done a good job of this with well over 50 million users. This will be particularly useful for people who live, eat and breathe the New York Times, but others may find it a bit much.

Users can also add pre-selected non-NYT content or their own favorite RSS feeds, and modules can be dragged around the page, just like every other customizable home page.

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