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Why it could make financial sense to fold the 'NOTW'

Rebekah Brooks strode in to the newsroom to make an announcement that took everyone by surprise. “Costs will need to be cut and savings made,” she warned – the News of the World and The Sun could be merged into a seven-day operation.

The Sun’s staff would effectively produce the News of the World. With the Sunday paper employing 200 people, the scope for savings was clear, even if opposition from within would be high.

Little did she know that just two weeks later she would have to force through what ultimately looks like a very similar option, though the reasons were of corruption rather than financial. The News of the World would go, with The Sun almost certain to become a seven-day operation.

It has been estimated that only about one in four News of the World hacks will be reassigned to the seven-day Sun, while News International is bracing itself for a wave of costly employment tribunals. Many staff there feel that they are carrying the can for the devious work of journalists and editors who were part of a previous regime.

As a former editor – and editor at the time of the Milly Dowler hacking – Ms Brooks failed as a manager, and many believe she should be the one leaving. After all, the News of the World had a 168-year history, much of which it could be proud, such as breaking the Profumo affair.

In fairness, Ms Brooks did offer to resign last week, but instead received clear backing from James Murdoch. His father, Rupert, chairman of the News Corporation parent, said: “I have made clear that our company must fully and proactively cooperate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks’s leadership.”

Financially, the News of the World was struggling compared to the days when it sold eight million copies a week. But a fall in press advertising has been exacerbated by the economic downturn, even before major companies cancelled bookings because of the latest hacking allegations.

But a quarter of Sunday shoppers still bought the newspaper and those revenues and profits were still the envy of the rest of the industry. The News of the World earned £35m a year from advertising and is thought to have made about £10m profit.

News Group Newspapers, the subsidiary that owns The Sun and the News of the World, generated £654m of revenue in the year to June 2010.

On Friday, Ms Brooks was back in the newsroom, attempting to calm the nerves and assuage the anger of News of the World journalists. She said: “You may be angry with me, I understand, but I’m angry with the people who did this [hacking] and feel bitterly betrayed.”

Ms Brooks also moved to ease staff’s financial worries by pointing out that they would be paid for the next three months. She added: “Retaining talent is very important and I have asked all the other titles to fill current vacancies with those from the News of the World where possible.”

It is questionable, though, if many of these employees will want to remain a part of the News International empire.