by Bryan Daniels, University of Missouri News Bureau, http://www.journalism.missouri.edu/news/2007/02-15-newsroom-profitability.html, February 15, 2007
A February 15, 2007 article by Bryan Daniels on the Missouri School of Journalism website shared the findings of a study on the correlation between newsroom spending and newsroom profits. The study's conclusions run counter to the conventional wisdom that cutting jobs to save on costs is the best way to earn higher profits.
The following is an excerpt from Daniels' article:
In recent years, the newspaper industry has experienced a variety of changes. None have been more noticeable than declining profit margins. Researchers at the University of Missouri-Columbia now have valuable information that could help publishers reverse the downward trend.
Murali Mantrala, who is the Sam Walton professor of marketing in the College of Business, and Esther Thorson, director of research for the Donald W. Reynolds Journalism Institute and associate dean for graduate studies in the Missouri School of Journalism, recently examined the profitability of newspapers. They collaborated with marketing doctoral students Hari Sridhar and Prasad Naik, who is now a professor at the University of California-Davis. The team of researchers focused on three areas of operation - news quality; distribution and circulation; and advertising - by analyzing financial data of small- to medium-sized newspapers with circulations of 85,000 or less. Research revealed that news quality most directly affects the bottom line.
"The most important finding is that newspapers are under-spending in the newsroom and over-spending in circulation and advertising," Thorson said. "If you invest more in the newsroom, do you make more money? The answer is yes. 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 assessment was made using a diagnostic tool developed by the researchers. It consists of a mathematical formula that breaks down revenues and expenditures from news, advertising and circulation departments and predicts profitability. The financial data, which covers a 10-year period, was provided by Inland Press Association, a trade organization of more than 900 daily and weekly newspapers. The identities of the newspapers were anonymous.
Click here for Daniels' article in its entirety on the Missouri Journalism School website.
