Study shows newsroom spending raises newspaper profits

by Robert MacMillan, Reuters

U.S. newspapers that spend more money on their newsrooms will make more money, according to a study released on Wednesday, which questioned the wisdom of the media industry's trend of cutting jobs to save costs.

The authors of the University of Missouri-Columbia study, which was based on 10 years of financial data, said news quality affects profit more than spending on circulation, advertising and other parts of the business.

"If you invest in the newsroom, do you make more money? The answer is yes," Esther Thorson, an advertising professor and associate dean for graduate studies at the University of Missouri's School of Journalism, said in a statement.

"If you lower the amount of money spent in the newsroom, then pretty soon the news product becomes so bad that you begin to lose money," she said.

The researchers developed a mathematical model that showed how newspapers could rearrange their spending on distribution and circulation, advertising and newsrooms to achieve a higher profit, Thorson said in an interview.

U.S. publishers have been eliminating jobs at many newspapers as part of larger efforts to trim expenses amid falling profit margins and, in the case of publicly traded chains, declining stock prices.

According to job outplacement tracking firm Challenger, Gray & Christmas, the number of planned job cuts in the U.S. media sector surged 88 percent to 17,809 last year.

Since the start of 2007, Time Warner Inc.'s Time Inc. said it would cut 289 jobs, and the New York Times Co. announced plans to shed 125 jobs and close foreign bureaus for its Boston Globe newspaper.

"Until recently, people have been doing it because the results looked good to investors on Wall Street, but it's... ignoring the long-term aspects," said marketing professor and study co-author Murali Mantrala.

At the Los Angeles Times, the former publisher and editor were ousted last year after resisting parent company Tribune Co.'s demands to find more jobs to cut.

The new publishers of the Philadelphia Inquirer and Akron Beacon Journal also said they would have to cut newsroom staff after they bought the papers from McClatchy Co.

Publishers have focused on reviving circulation, which is declining, and renewing interest among advertisers who are moving their money to the Internet and other media.

"I am delighted to see them post proof that quality precedes profit," Philip Meyer, a professor at the University of North Carolina and author of the book "The Vanishing Newspaper," said of the study.

"I don't share the authors' confidence that the industry will appreciate the importance of their result and act on it," he added. "Too many owners are more interested in harvesting than investing."

Media consultant and Buzzmachine.com blog proprietor Jeff Jarvis said it "stands to reason" that investing in a better product will improve business, but only if newspapers think better about where to invest.

"I would reallocate resources to the core value of newspapers: reporting, local reporting," he said.

Jarvis also said papers should find ways to work with the public to gather and share news. "If you do this quite well, your public will also help market you, saving yet more money [that] you can invest in reporting."

article originally published at http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:news....

The media's job is to interest the public in the public interest. -John Dewey