In May, as the New Orleans Times-Picayune put to bed an epic, eight-part investigation into Louisiana’s prison system, its editors began to disappear. First, Mark Lorando, the features editor, was nowhere to be found. Then the chairs of the online editor, Lynn Cunningham, and the sports editor, Doug Tatum, were empty. So was that of the city editor, Gordon Russell. Newsroom wags called it The Rapture.

Conspicuously left behind: Peter Kovacs and Dan Shea, managing editors for news, whose subordinates, sworn to secrecy, hadn’t told them what was up. As Kovacs, Shea, and a team of 20 put final touches on the series, “Louisiana Incarcerated,” the chosen editors—including Jim Amoss, the top editor—were two miles away in the Place St. Charles tower, implementing a plan that would make a story like that series far more difficult to pull off in the future.

The secret meetings in May led to a bloodletting in June. Advance Publications laid off nearly half the paper’s newsroom, halted daily publication of the Picayune, and implemented a business and news model that shifts the focus of the operation to its free news website, NOLA.com.

Ten months later, a battle still rages for the soul of the Times-Picayune, and over the meaning of what happened. Much of the media coverage of the changes in New Orleans, while critical of Advance and the paper’s leaders, has focused on the decision to cut publication to three days a week and, to a lesser extent, on the layoffs, which were devastating even by today’s standards. Those are, of course, important storylines.

Less examined: the radical change in how journalism is done at the 176-year-old Times-Picayune and what that means for the future of news coverage. And even less examined are the strange finances of the move, which help explain what to many appears inexplicable, from either a journalistic or a business point of view.

Advance argues that it is taking a difficult but bold step into a digital future, in New Orleans and across the country. But its actions make more sense with a close look at the numbers, which suggest something other than its claim of “securing a vital future for our local journalism.”

* * *

American newspapers have lost more than half their advertising dollars in the last five years, an existential threat to an industry that in 2007 depended on ads for three-fourths of its revenue. The Times-Picayune is no exception to the trend. Its advertising has plunged 42 percent since 2009, according to an analysis of figures its publisher gave The Wall Street Journal in September.

There is no sure answer for what to do about this. Still, by now, most major newspapers have begun moving to strategies that play to their strengths: charging core readers online while allowing casual visitors 10 or so free stories a month; increasing the price of the paper, sometimes by charging an upsell fee for bundling digital access with print; shoring up Sunday circulation; and attempting to convert ad departments into marketing-services operations that provide more holistic solutions to local promotion, like website creation, social-media help, app creation, and the like. These and similar strategies are based on the value of the content, and on a hopeful bet that newspapers can keep significant subscription revenue in the coming all-digital future.

Advance is following the industry into marketing services. But mainly it has stuck by what was conventional Web wisdom from before the recession—chasing clicks. In the new NOLA model, editors push reporters to increase “inventory,” more content with fewer journalists. And more of its remaining resources are in sports and entertainment. In this system, a distracted click on a story that says, in its entirety, “Hornets officially announce their nickname will be changing from Hornets to Pelicans,” is worth as much as one on, say, a prison exposé. More, actually, since the former comes with less time and effort.

If you worked for Advance Publications, you might have seen this coming. In 2009, Advance shut down the 174-year-old Ann Arbor News and replaced it with a website, a buzzword-driven news agenda, and a biweekly newspaper called AnnArbor.com. It fired roughly half of the newsroom, partially repopulating it with fresh-faced journalists with job titles like “Sports Reporter—Buzz.” Reporters churn out three or four posts per day.

By most accounts in Ann Arbor, its journalism deteriorated dramatically, but Advance declared AnnArbor.com a success, financially and journalistically. In 2012, it moved all its Michigan papers to a version of the model, centralizing functions like sports and statehouse coverage and slashing newsrooms and pressrooms. Times-Picayune staffers watched with unease, but figured New Orleans, with its devoted print readers, would be last among the Newhouse papers to get the Michigan model, if it got it at all.

And if anything was broken at the Times-Picayune, it wasn’t the newsroom. The paper covered its metro area as well as any in the country, a mix of broad daily coverage and ambitious enterprise reporting that effected change, despite a news staff already down roughly a third from the 270 it employed before Hurricane Katrina. It could be counted on to unearth the foibles and corruption of local politicians, cover the Saints and Uptown social events like a blanket, and capture poignant photographs like one that ran in May of a five-year-old girl, shot in the abdomen at a birthday party, dying in her father’s arms. It produced stellar investigative work, too, like Cindy Chang’s prison series, which exposed the perverse financial incentives behind Louisiana’s bloated penal system. Readers rewarded such coverage: The Times-Picayune had the highest market penetration of any major US daily.

Nonetheless, on May 23, word came that Advance was bringing the Michigan model to New Orleans—ending daily publication of the paper and firing much of the staff. NOLA.com had already introduced a redesign, on May 8, based on the original Michigan template, down to its garish yellow color scheme and what its creators call a “river of news,” a blog-style rollout of stories. It had been hooted out of town. The colors were subsequently toned down and the river of news downplayed, beneath editor-picked stories.

As in Michigan, the newsroom would be partly repopulated by younger digital natives who could be paid much less—as NOLA Media Group reporters, not Times-Picayune reporters. They would be told to write search-engine-
optimized posts for the Web multiple times a day, and not to worry about print deadlines. Editing would be de-emphasized. “Curators” on the newspaper side would pick stories off of NOLA.com and put together a print newspaper on Wednesday, Friday, and Sunday. This in a city that worships its habits and traditions.

Editor Amoss told his staff that the new NOLA.com would be a “website emphasizing sports and entertainment.” The new publisher, Ricky Mathews, handed out talking points for managers that said, “NOLA Media Group will . . . position us to better serve our readers, advertisers, and business partners,” and that “the course we have chosen for New Orleans is tailored to the needs of this market.”

But as many loudly pointed out, New Orleans is one of the poorest and least digitally advanced cities in America. More than a third of its residents have no Internet access at home. Between two-thirds and three-quarters of its population read the daily at least once a week. By 8 a.m. the morning after the news broke, Anne Milling, an Uptown philanthropist and longtime member of the Times-Picayune’s citizens’ advisory board, had bought savethepicayune.org and kicked off a fierce citywide protest. Tom Benson, a local who owns the Saints and the Hornets, would offer to buy the paper, as would another “serious player,” according to Milling. “We could have saved the Picayune, we could have continued it as a daily, we could have done a lot of things, and the community would have rallied,” she says. “But they refused.”

“They” were Advance’s owners, the Newhouse family. “We have no intention of selling,” Steven Newhouse told The New York Times on June 12. “No matter how much noise there is out there.”

Meanwhile, the bloodletting had begun. Earlier that day, a young business reporter, Richard Thompson, went into his early-morning meeting with the city editor, Gordon Russell, carrying a bottle of Crown Royal and a family photo. He offered Russell a drink. When the editor declined, Thompson poured himself a shot and turned the picture to face his boss, saying, “Gordon, what do you want to talk about?”

“I like your style,” Russell said, then laid Thompson off (he would later be essentially unfired after more people quit than higher-ups had counted on). Then he called in the next reporter. But Russell took no pleasure in it, apparently. “By the time I came in, he was pummeled,” Bruce Nolan, a 41-year Times-Picayune veteran, says of Russell. “He was beaten up. He was very sorry; he was remorseful. He said, ‘This is a terrible thing; I’m sorry this is happening to you. You know how much I love you.’ We both understood we were being carried along by forces bigger than both of us.

“And I came out, and I walked through a corridor and into the newsroom, where everyone is standing around. It’s a death march. Every face turns to me, and I draw my finger across my throat. It was stunning.”

On June 19, fearing an evisceration of the paper’s culture, 17 of the paper’s remaining top reporters—all of whom had been offered jobs with the new NOLA Media Group—signed a memo to Amoss and Mark Lorando, who would effectively become the new managing editor, and Lynn Cunningham, the online editor (who has since retired). They had simple questions: “Will there be goals or quotas for tasks such as blog posting, activity on Twitter, and entering comment streams? Will there be opportunities for producing enterprise stories, and if so, how will they be determined?”

They got no reply. Most of them would soon leave, too. Cindy Chang, the force behind the prison series, took a job at the Los Angeles Times. “Even though they continued to pay lip service to great journalism,” she said, “you could also see the direction they were going.”

* * *

The New Orleans overhaul is part of a broad initiative by the Newhouse family, which, through its closely held Advance Publications, recently rolled out the Michigan model at its papers in Alabama, Pennsylvania, and New York. Next, presumably, are the Cleveland Plain Dealer, the Portland Oregonian, and the Newark Star-Ledger—all, like the Times-Picayune, imperfect institutions that over the years have nonetheless been the news lifelines of their regions. Union officials in Cleveland have already gotten word that they’ll lose 58 people this year, a third of the news staff.

Neither Steven Newhouse nor Ricky Mathews responded to repeated requests for comment from CJR. Most of the current and former Times-Picayune journalists interviewed for this story declined to comment on the record for fear of retribution. (In the case of the former employees, it was because of non-disparagement agreements that Advance required they sign in exchange for severance packages.)

But in a Poynter blog post in August, Steven Newhouse cast the changes at the Times-Picayune as a part of a “Great Leap Forward” in newspapering: a necessary, if painful, reordering of news organizations meant to take full advantage of digital technologies while bowing to grim economic realities:

The changes we have made in Michigan have strengthened our confidence that we can secure a vital future for our local journalism elsewhere. While we believe that our print revenue will decline further, we are hopeful that our increased focus on digital will allow digital revenue to become an even greater revenue growth engine, and, eventually, turn our local companies into growth businesses once more, allowing them to continue to serve their communities with the quality of journalism that readers expect.

Media analysts have responded mostly with puzzlement. While everyone agrees on the general problem, the Newhouse family is suddenly almost alone among newspaper chains in continuing to insist on the free model for news and an intentional acceleration of print’s demise. “The business case is not all that strong,” mused Poynter’s Rick Edmonds over the summer. Ken Doctor, the news industry analyst and consultant, wrote that “It’s near impossible to see how this is a growth strategy for the T-P’s (and the city’s) future.”

Because Advance is a closely held firm—and a secretive one—it is difficult to get numbers. But a rough estimate based on CJR analysis and reporting puts the combined entities’ annual revenue at about $90 million and operating profit at $9 million, both of which come overwhelmingly from the print side. Data from Kantar Media indicates that the Times-Picayune brought in $64.7 million in print ads in 2011, while NOLA.com brought in $5.7 million, according to Advertising Age. Considering circulation revenue of roughly $25 million to $30 million, based on CJR estimates, the print paper brought in more than 90 percent of the company’s revenue before the changes, and still likely brings in five of every six dollars in revenue. If NOLA Media Group were a standalone business with no newspaper to support it, its costs would exceed its revenue by many times.

In the near term, Newhouse’s idea to shrink the print product makes perfect business sense. It still gets revenue from three fat papers—Sunday, Wednesday, and Friday—even if readers are alienated by the loss of less profitable Monday, Tuesday, Thursday, and Saturday editions. And by laying off 200 employees—journalists, salespeople, pressmen, and delivery drivers—and sharply reducing what it pays for paper and ink, Advance may have doubled its operating profit in New Orleans. Doctor estimates that the moves gave the Times-Picayune a one-time boost of 11 percentage points in profit margin.

But that’s the near term.

Long-term, everyone agrees that print is in decline. But the digital side is still far from self-sustaining, more than 15 years into its existence, and it faces long odds to ever, on its own, support a newsroom of the sort required to cover New Orleans thoroughly. NOLA.com would have to quadruple or quintuple its 2011 revenue to support its current size.

And digital ad rates continue to fall.

* * *

Jim Amoss denies that the newsroom has been gutted, saying that it has been reduced from 181 in May to 155 today. But the current number is inflated by the inclusion of new part-time high-school sports contributors, according to newsroom sources. On an apples-to-apples basis, the newsroom is down into the 130s.

At the same time, the mix of jobs has moved away from news toward sports and entertainment, which have grown significantly since the layoffs. News staffing has declined, according to people familiar with the matter, in large part because of reduced coverage of the suburbs (Amoss disputes this). And several of the new hires have the title of “community-engagement specialist,” a quasi-marketing position that seems mostly to entail asking readers to comment on posts like “Are you a Bieber Believer? Did Justin’s Tuesday night concert rock your world?”

The newsroom is still led by Amoss, who says, “I think fundamentally, newspapers right now are choosing between remaining as they are and hoping that somehow things will turn around, or restructuring radically in order to have a long-term future.

“When I say that I think that our owners have invested, I mean that they chose the second path. All the evidence points to—and this is why I decided to stay, by the way—their wanting to stay in business long-term, and figure out in an intellectually rigorous way how to do so.”

Advance has certainly put money into the operation in the form of new offices. On the top two floors of a 32-story tower, in some of the most prestigious office space in the city, NOLA Media Group has tried to shake off the industrial era and capture a sort of Silicon Valley cachet (observers are watching whether the company goes after lucrative Louisiana digital-startup tax credits). To get to what used to be called the Times-Picayune, go to the French Quarter and head to the Shops at Canal Place. Take an elevator down, walk past J. Crew and Anthropologie, dodge the shoppers, and hop on another elevator that goes up, past the floor with the Panda Garden knock-off, to the offices of NOLA Media Group. “I work at the mall for a website,” says one reporter. The publisher, Ricky Mathews, has spoken of his desire to create a “Google-Nike kind of vibe.” By design, there aren’t enough of the sleek desks for everyone, so reporters are told to not bring in personal effects. They’re encouraged to do “backpack journalism” from coffee shops and their homes.

“When you put all sections of the newsroom and the website together in one room in downtown New Orleans that’s equipped in a way to foster collaboration,” Amoss says, “it’s just amazing that it actually does that in a way that’s both, in our case, unprecedented and was unforeseen—by me, at least. It makes people think about what they’re doing minute by minute, hour by hour, in a way that being in a legacy newsroom, where you have been for decades, and where you’re cheek-by-jowl with the printing press, doesn’t. It’s just a psychological difference that’s interesting to observe.”

Newspapers have been integrating their Web and print staffs for years, though, and NOLA has swapped one form of segregation for another: The staff that cobbles together the printed paper remains at the old Howard Avenue headquarters. The Times-Picayune’s three weekly print editions are thick with news and advertising. The Wednesday paper would be a Sunday paper in most cities. And the Times-Picayune, when it’s there, is still pretty good—if noticeably diminished—compared to similar-sized operations, a testament to the skills of those who remain, and to Amoss. “The reality is that all the people who are still sitting here are committed to putting out a quality product and are committed to make this thing work,” says Mark Schleifstein, one of the few top reporters who stayed on. “They don’t know how that’s going to happen, and they want a voice in making that happen.”

“A lot of younger reporters are getting their chance to play in the big game,” says another current T-P reporter. “It freshens up the ranks. If it wasn’t so depressing, it would be exciting.”

But despite its physical heft, coverage looks thin at times. Incomplete versions of stories have ended up in the paper, including one on BP’s criminal fines in the Deepwater Horizon disaster, as writethroughs posted to NOLA.com went unnoticed by the print “curators.” If you read NOLA.com, you get an unsettling sense of déjà vu, seeing stories you saw online elsewhere days earlier. That happens even if you don’t read NOLA.com. “I saw one recent front page of the Picayune where three of the stories were already in The [Baton Rouge] Advocate,” says Steve Beatty, editor of the nonprofit local news startup, The Lens, and a former Times-Picayune journalist.

As the old structure disintegrates, some staffers say, the quality of the report is deteriorating. The planning required for medium- to long-term projects is mostly gone. With fewer editors available, stories that should be 10 or 15 inches balloon to 30 online.

In fact, reporters say they often file without any editor seeing their copy. They’re told to write two-sentence ledes because someone up the chain at NOLA got the idea that Google’s algorithm favors them. (“It’s a secret that only we’re in on,” says a sarcastic reporter.) After Hurricane Isaac in August, one top editor bemoaned the clicks NOLA.com had lost to outlets that called it a hurricane while it was still a tropical storm, arguing that NOLA.com should have matched the inaccuracy rather than lose search-engine points.

In January, imitating an infamous Huffington Post piece, NOLA.com ran a brief post headlined “When is Super Bowl 2013” to draw cheap search-engine clicks. But showing how the organization doesn’t quite get the game, it tweeted the post, too, effectively spamming its followers with SEO detritus meant only for Google spiders.

The larger question, always difficult to answer, is what’s not being covered. “Stories where people of poverty talk about issues of importance seem almost nonexistent these days,” says Katy Reckdahl, who focused on those issues before she was laid off in September. “There is no regular female news columnist, now that Stephanie Grace is gone.”

The Baton Rouge bureau, under the purview of James O’Byrne, the former NOLA.com editor, is widely viewed internally as an embarrassment. The second sentence of one November story’s lede would be hard to imagine in a high-school paper: “Fortunately for the citizens of the Red Stick, local law enforcement continue to team up with state legislators and federal agencies to ensure stricter drug enforcement laws and regulations make it onto the books.”

As Bobby Jindal kicked off his presumed presidential campaign in the days after Obama won re-election, the Picayune failed to get a story out for weeks. When the bureau posted a piece on that topic on NOLA.com, insiders say that editors thought it was so bad, they yanked it from the site (Amoss denies this). The version up today is still fairly weak, particularly when compared to the sophisticated cover story that the local alternative paper, Gambit, ran on Jindal’s bid two weeks earlier. That piece was written by Stephanie Grace, the ex-Picayune columnist.

Amoss, a native of New Orleans—and once an immensely respected if emotionally distant leader—is now viewed with decidedly mixed feelings by both current and former reporters. The most generous among them say they believe he stayed on to fight to preserve as much of the news culture as he could. “He’s the captain that decided to go down with the ship,” says a reporter still in the newsroom. “He’s a thinker. He’s not a business guy. He’s doing the best with what he’s got.”

* * *

The irony of Advance’s big digital push is that the company has been behind the digital curve for so long, and still is. In the late 1990s, in the first few years of the Web’s exponential expansion, Advance formed a separate company to create and control its newspaper websites. Advance Digital, as it is called, imposed a cookie-cutter design on the 32 papers in the chain, in an attempt to find economies of scale. It would be one thing if this template were well done; it is not. Advance’s news websites have long been laughingstocks in the industry, famously difficult to navigate, much less look at, “a cross between a dusty phonebook and The Internets circa 1999,” as The Atlantic Wire wrote in July, about NOLA.com.

In a town rich in history and its own peculiarities, NOLA.com seems like an out-of-town visitor. The site made cosmetic and structural changes in May and June after a wave of complaints, but is still an ugly mess—challenging to navigate, with corrections that aren’t flagged when fixes are made. Few of the pleasures of the print Times-Picayune come across on NOLA.com. But the problems aren’t just cosmetic.

* * *

The Newhouses, along with their editors and publishers, framed their move as investments in the future. But it’s a clear disinvestment in New Orleans. And compared with decisions by other owners, it looks like an unnecessary and premature surrender of the qualities that make newsrooms worth having—and saving.

And there are contrasting visions of a digital future. Consider the Orange County Register, a similar-sized paper that was purchased by the Aaron Kushner-controlled Freedom Communications in June. Kushner boosted print pages by 40 percent and added a new business section. He’s installing a metered paywall, raising print prices, and even improving the paper stock. Most important, he has gone on a hiring spree, expanding the newsroom by 50 percent, from 180 to 270. “Aaron Kushner is the anti-Advance,” writes Ken Doctor. “It’s been widely reported as a print-first strategy. I think that mischaracterizes it, though print is getting well funded. It’s a reader-first strategy, and a wily one that aims at doing the right things in the right order, with capital to match.”

Kushner’s idea is that newspapers can’t cut their way to survival, let alone prosperity, particularly when almost all metro newspapers are already thin imitations of their former selves. Diminishing your journalism means chasing away readers and advertisers who have paid you good money.

Kushner ended the futile pageview chase the Register had been on for years, just as the Picayune joined it in earnest. Most of the Register’s 40-some blogs have been shuttered with a note that reads, “You may have already noticed a few changes to our website as we shift our focus to more quality, informative content. With these changes, we are saying goodbye to a few of our blogs, including this one.” The old regime gave reporters Web quotas. That, too, is gone.

Other publishers have different strategies, not as radical as Kushner’s but nonetheless drawing on the strengths of newspaper journalism. The New York Times has preserved the size of its dominant newsroom at the expense of its profit margins, and devised a digital-subscription model that others in the industry are emulating. As a result, last year the Times’s revenue was up for the first time in six years, despite continued print-advertising declines.

The Naples Daily News, an EW Scripps paper in Florida, has increased revenue each of the last two years by reinventing its ad-sales department and increasing its print circulation. Even Gannett has gotten results from its new strategy to raise circulation revenue (a metered paywall and a print price increase). Its publishing division saw revenue increase 4 percent in the fourth quarter, though it was helped by an extra week in the period.

In New Orleans, the internal and external backlash against the new model has delayed or moderated some of Advance’s plans. In December, editors disappeared again for another meeting, in which the dreaded Web-production quotas were discussed. Virtually all of the news desk—including most of the new hires—signed a letter to the top editors—Amoss, Lorando, and Lynn Cunningham—protesting the idea of quotas and seeking a meeting.

The editors were taken aback, and quickly told reporters that the quotas were mere “goals,” not something set in stone. Few believed it, particularly now that the newsroom employs a Staff Performance Measurement and Development Specialist and incentive pay might be introduced next year. Lorando has told staffers that accomplishing the goals could mean roughly three to five posts a day. Of the emphasis on quantity, one reporter says, “We were given certain assurances that it wouldn’t get to this point. I just don’t like going in there anymore.”

Meanwhile, the Picayune has opened its print moneymaker up to competition. The Advocate in Baton Rouge launched a barebones startup in New Orleans, a much bigger market 80 miles to its southeast, and scooped up 23,500 paying readers in its first three months.

It’s hard to imagine a lucrative future for NOLA.com once the print edition inevitably slides into the red. But consider this: If they sold the paper right now, the Newhouses probably would get less than $40 million for it, based on the earnings multiples of recent newspaper sales. By radically slashing costs, as they have done—perhaps by as much as $25 million—the company can earn that amount in a couple of years thanks to higher profit margins. Anything beyond that is gravy.

This looks like an orderly liquidation. By cutting costs well ahead of perpetually declining revenues from the “Inkosaurus,” as James O’Byrne calls the print edition, the Newhouses can ride the Times-Picayune down profitably while minimizing the loss of money. Once the paper reaches terminal velocity, they can shut down Advance Central Services, the print wing, tie up any potential liabilities from the paper, and pitch them into the Mississippi.

If NOLA Media Group is able to turn a profit on its own by then, probably with a dramatically lower headcount than its newsroom has even now, so be it. But it will never amount to much as a business. Not to a family worth at least $14 billion. And not to serious readers, either, who likely will have long ago floated off the river of content. By then, a system that so clearly emphasizes quantity over quality will have taken its toll. And not just in New Orleans.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.