New York Times - June 8, 2000
Salon Dismisses 13 Workers in Effort to Fight Shortfall By FELICITY BARRINGER
The carnage in the world of Web-based journalism continued yesterday as Salon.com, one of the highest-profile Web magazines, dismissed 13 employees in an effort to make up an expected $7 million shortfall in its $35 million budget.
The magazine, which has gained attention with thoughtful commentary, breaking news, and some less savory endeavors -- one of its correspondents said that he tried to pass his germs on to a presidential candidate by licking the doorknobs at campaign headquarters -- announced the cutbacks in the same week that APBNews.com, a crime and justice site based in New York, laid off its 140 employees and the CBS Internet division in New York dismissed a quarter of its approximately 100 employees.
David Talbot, Salon.com's founder, said that the cutbacks would help the site's long-term prospects. But he also made it clear that in this season of investors' discontent with dot-coms, journalism that does not directly bring in viewers or advertisers or partners is unlikely to survive.
And writers competing in the most heavily populated niches online are among the most vulnerable. Of the seven editorial employees laid off, three -- Sean Elder, the media writer; Craig Seligman, the books editor; and Craig Offman, a senior business writer who covered book publishing -- covered media news. The online competition for that audience ranges from Powerful Media's new site, Inside.com, to the Web sites of magazines like Brill's Content, The Industry Standard, Editor & Publisher and the Web sites of national newspapers.
The layoffs also show the financial strain in producing original content for the Web. One competitor of Salon for media news, for example, is Jim Romanesko's Poynter Institute site, which, at little cost, compiles daily links to media coverage around the country.
The criterion for the layoffs, Mr. Talbot said in an interview, was the number of readers -- as measured by hits, or page views -- and the number of sponsors or advertisers. As he described it: "We looked at the hits and the sponsorship."
Salon's stock price, which had dropped as low as $1.9375 during the day yesterday, rebounded on the news of the layoffs, closing at $2.175. The stock was offered to the public one year ago at $10.50, and reached its peak price of $15.175 shortly thereafter. Its current market capitalization of $30 million is about 25 percent of what it had been at its peak.
The site added dozens of employees last year, when sites with original content were at the peak of popularity with venture capitalists and investors. APBNews.com had also increased its staff during that time. Yesterday, an APBNews.com executive said the site had between $50,000 and $75,000 in the bank and debts of $6 million to $7 million.
But the layoffs have not affected the site's public presence. Yesterday, with more than half of the dismissed employees at their old desks, the site posted a special report on the percentage of ballplayers in the National Basketball Association playoffs with arrest records (18 percent, or less than the national average of lifetime arrests). Executives of APBNews.com, meanwhile, continued to talk with possible partners, including America Online and Fox News, the executive said.
And as its bank account was dwindling to nothing in the last six days, APBNews.com's journalists were winning awards -- one from the Investigative Reporters and Editors group over the weekend, and on Tuesday, a separate award for international reporting.
Sydney Schanberg, a Pulitzer-Prize winning reporter who is one of the most senior and visible members of the site's staff, said yesterday that the journalists who were dismissed came in to work without being asked and without being paid.
The layoffs at Salon were in response to a recent financial analysis that projected a shortfall of at least $6 million in the company's original projection of about $20 million in revenue, according to Michael O'Donnell, Salon's president and chief executive.
The difference between the $14 million in expected revenues and the $28 million in expected expenses, Mr. O'Donnell said, would be made up from the $18 million the company has in the bank. As Mr. Talbot described it, "The situation is short-term pain, which we're going through, in exchange for long-term viability."
The pattern of Salon's layoffs reflected its competitors' success.
Mr. Talbot said he was laying off Don George, the travel editor, because travel sites that provide booking opportunities trump travel sites that just provide reading opportunities.
The news was unnerving for those who had left the familiar confines of old media to join the Web adventure. Mr. Offman, who left a reporter-researcher job at Time magazine to join Salon, said, "You're not held for space, to some extent you don't have to compete to get into the book," a reference to the vicissitudes of journalistic life at Time.
"But," he added, referring to the audience counts that cost him his job, "there is some kind of competition going on. It's just not perceptible to the human eye."
Two of those laid off yesterday, Camille Peri and Kate Moses, the founders of the Mothers Who Think section of the site, are the wives of Mr. Talbot and Salon's executive editor, Gary Kamiya, respectively. Asked how he gave his wife the news, Mr. Talbot said, "Very carefully."