(Note: This is part two of a three-part post. Read part one here.)

If current trend lines hold up, circulation revenues at The New York Times will pass ad revenues sometime this quarter for the first time ever. In the second quarter, the Times (I’m using NYT Media Group numbers, which are almost all from the NYT itself) brought in $185 million in advertising revenue, while it reaped $166 million from its subscribers. Three years ago, those numbers were $316 million and $156 million respectively. The ad-to-circ revenue ratio at The New York Times has gone from two-to-one to one-to-one. Stunning.

Since its ads are currently declining at a 30 percent clip, while its circulation revenue is slightly increasing, the NYT may already have passed, in the three weeks since the second quarter ended, the tipping point to where circulation makes up most of its revenue.

What does this mean? It’s a landmark event, one way or another. It either means the legacy press is going out of business (not unlikely!) or it points the way toward a new model. The New York Times in the second quarter pulled in from its 1.1 million daily print readers (averaging in Sunday) about $151 each in the second quarter—and I’m talking about straight out of the readers’ pockets, not via advertiser subsidies.

$151! That’s $50 a month per reader. You think if the NYT went online-only and charged readers, let’s say, one-third of that that most of them wouldn’t pay?

Let’s say half of them did at $15 a month (saving subscribers more than $400 a year). That’s $99 million a year.

But print subscribers aren’t the only pool: Think about the 20 million or so unique visitors to nytimes.com every month. How many of them would pay $15 a month? Let’s say 2.5 percent (I think it would be much higher than that, but I’ll be conservative). That would be another half a million paying subscribers and another $90 million a year.

We’re up to $189 million now, which is more than enough to pay for the entire New York Times newsroom. (UPDATE: I should have said $189 million may be enough to pay for the Times’s newsroom. I’ve relied on this reporting from then-ombudsman Barney Calame from May 2007 where he said the newsroom budget was “more than $200 million.” In the two years since, there have been significant cost cuts, including layoffs and a 5 percent across-the-board salary cut. The NYT does not break out its newsroom costs.)

But wait, just because people pay doesn’t mean you can’t serve them ads online. The Wall Street Journal, despite its paywall, will bring in $120 million in online advertising this year, according to Rupert Murdoch. That’s just below the $150 million I’ve estimated nytimes.com brings in without a paywall and below the $150 million to $175 million others have estimated.

Let’s say the NYT gets three-quarters of that (it would have the same number of online subscribers as the Journal under my little exercise). That would be another $90 million. But the Times print advertisers would still want to reach its readers. Tiffany has advertised in the same spot on page three for like a billion years, for instance. That would presumably increase demand and thus ad rates, for its online advertising space.

At this point we’re up to $279 million a year in revenue and the Times has dumped the enormous costs (I don’t even know how to estimate this) of printing and distributing the physical paper. The Times could still print its hugely profitable Sunday paper and add more revenue.

Now the problem here is that the Times can’t just switch over from a legacy business model to a new-media one willy-nilly. It still has legacy costs it has to contend with, namely debt. It might have to reorganize in Chapter 11 to emerge a leaner company able to implement this strategy.

But my point is to try to figure out a model to pay for the journalism. That’s what’s critical here. I couldn’t care less about the physical form of the paper. I don’t see online advertising, by itself, in its current form, able to sustain the level of professional journalism I think we need.

More to come in part three of this post. (UPDATE: Added link to part three)

Ends today: If you'd like to help CJR and win a chance at one of
10 free print subscriptions, take a brief survey for us here.

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. Follow him on Twitter at @ryanchittum.