EW's average circulation has been steady for a few years:
But in the first half of '08, it was down by 7%, according to Folio. More importantly, their ad pages dropped by nearly a fifth through September of this year. They had layoffs earlier this year, which some actually considered good news, because lots of people held up EW as a candidate to fold.
But their web traffic has been doing great!
The Christian Science Monitor has already announced its plans to become the first major paper to go online-only. So EW's move would not be an off-the-wall thing. Print ads bring in most of the revenue, but when ad page sales crater, the production of the print magazine stays wildly expensive—far more expensive than gaining readers online.
UPDATE: We got an email from EW's PR person denying the rumors:
I just wanted to let you know that there is absolutely no truth to the rumor that Entertainment Weekly is going digital only. In fact, our circulation is stable, our audience numbers are up and we're full steam ahead for 2009.