Study Suggests Quality Pays Off for Small Papers

By: Mark Fitzgerald In a new contribution to the discussion about how editorial quality affects the bottom line, figures from the just-released Inland Trend Analysis Reports suggest that, at least for smaller papers, increased newsroom spending (over the long term) appears to be associated with larger-than-average revenue increases -- while editorial spending cuts are linked with flat or shrinking revenue.

An analysis of the five-year trend reports from the Inland Press Association generally supports the conclusions presented by the Project for Excellence in Journalism (PEJ) at last month's annual meeting of the American Society of Newspaper Editors. Using data from a single year of the Inland Cost & Revenue Survey and comparing it with a similar analysis from 1986, PEJ said small and midsize papers that invested more in their newsrooms had higher revenue, but that didn't appear to be true for papers with more than 100,000 copies in circulation.

E&P's unscientific analysis of the five-year trend reports strongly suggests that increased investment in newsrooms does pay off in increased overall revenue for smaller papers -- but that the link disappears around the 50,000-circulation mark.

The analysis method was rudimentary and not meant to be statistically sound: In each of Inland's five circulation divisions, E&P took the three biggest gainers and three biggest losers in the categories of percentage increase in gross revenue, circulation, and news and editorial-department spending. No trend could be established for circulation, which was nearly flat or down among newspapers of all sizes.

But patterns emerged between gross revenue and editorial spending. In the 25,001-to-50,000-circulation category, for instance, the newspaper with the largest revenue gain, 35.5%, also boosted its editorial spending by the most, 52.8%. The paper that cut newsroom spending by the most, 14.1%, experienced a revenue increase of just 1.4%, below the peer average of 8.1%.

The statistical association quickly broke down for bigger papers. In fact, in the 50,001-to-75,000-circulation category, the three papers that increased editorial spending the most had below-average revenue increases over five years, while those that increased newsroom expenses the least enjoyed above-average gross revenue. One paper increased its editorial spending by just 0.3% over five years -- yet saw its revenue increase 29.3%, well above the 7.4% average gain of its peers. (As in the Inland Cost & Revenue Study, none of the newspapers is identified.)

The full study, which also measures several other factors such as operating profits and advertising revenue, is available from Des Plaines, Ill.-based Inland (http://www.inlandpress.org). This year was the second for the longer-term trend reports, Inland Executive Director Ray Carlsen said.
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