New Study: Spending on Newsroom Pays Off

By: E&P Staff

The old saw about spending money to make money still holds true in terms of newsroom spending, according to a new study released on Wednesday which questions the wisdom of cutting jobs to save costs.

“If you invest in the newsroom, do you make more money? The answer is yes,” Esther Thorson, 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.”

The University of Missouri (Columbia) study was based on 10 years of financial data. Authors conclude that news quality affects profit more than spending on circulation, advertising and other parts of the business.

A Reuters summary today follows.

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.”

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