Terrance C.Z. Egger, publisher and CEO of Philadelphia Media Network, owner of The Inquirer, the Philadelphia Daily News and Philly.com., told employees Friday that the company would merge its three newsrooms into one and lay off some employees to save $5 million to $6 million companywide.

Egger painted a dire picture of declining advertising revenue at the company and in the newspaper industry generally. He said he hoped the cutbacks would stabilize PMN's finances and give it a three-year window to develop new products and grow again.

Egger said that PMN would look at charging for its digital products to boost revenue, but that it would do so cautiously so that Philly.com and its mobile products do not lose traffic.

"I realize this is a tough message, but a truthful message," Egger told a 10:30 a.m. gathering of dozens of reporters, editors, and advertising, marketing, and other employees and executives in the public space at the company's main offices at Eighth and Market Streets. A second session with staffers took place in the afternoon.

Egger said that there were many details still to be worked out in the consolidation of the newsrooms, but that cutback conversations with the company's unions would begin next week. The cuts themselves would take effect by year's end.

He did not give a specific number of employees - both managers and union members - who could lose their jobs. Egger said there would be no employee buyouts. There have been three buyouts over the last 18 months, he noted.

Staff from the three newsrooms reacted with dismay and questioned Egger on how the company could maintain distinct voices and brands for the two newspapers and Philly.com when the stories were produced in the same newsroom.

Stan Wischnowski, vice president of news operations, will manage the merging of the newsrooms, Egger told the group.

Wischnowski, a former editor of The Inquirer, said that the company had talked about merging the newsrooms in 2011, but that it didn't happen under previous owners.

"It's 2015, and we have to do this," Wischnowski said, responding to a question from the crowd.

Howard Gensler, president of Newspaper Guild Local 10, which represents 436 employees in the newsrooms, advertising, circulation and finance, said, "The Guild is disappointed that Mr. Egger's first meeting with the staff as publisher was to announce layoffs when he even admitted that he had a lot to learn about the company, changes in the industry, and the people who work here."

Egger noted in an interview Friday that during meetings with employees in early September, before he officially became publisher, he indicated that cutbacks were possible given the company's finances. He was a board member at that time and knew of PMN's financial performance, he said.

Craig Huber, media analyst at Huber Research Partners in Greenwich, Conn., said that advertising revenue at large metropolitan newspapers has declined by 12 percent to 17 percent in recent months in year-over-year comparisons.

More broadly, Huber added, newspaper advertising has declined every quarter since early 2006, forcing newspapers to reduce their staffs by 35 percent to 45 percent.

"Eyeballs and advertising are moving into mobile, and newspapers are not well-positioned for this shift because their readership skews older," he said.

Todd Gitlin, professor of journalism and sociology and chair of the doctorate program in communications at Columbia University, said, "I don't know that any large metro newspaper, with the exception of the New York Times, has made an adaptation to the digital world that brings in the revenue that they are used to."

Philanthropist and former cable-television magnate H.F. "Gerry" Lenfest acquired PMN in 2014 in a court-adminstered auction. In late August, he named Egger, a former newspaper publisher in St. Louis and Cleveland, to head the company.

Egger began Friday's meetings saying that the company had lost $90 million in revenue since 2010. He expects PMN to generate $160 million in revenue this year.

bfernandez@phillynews.com215-854-5897@bobfernandez1