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 New & Now.

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Battlefield Bacteria

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Papers and Profits

 

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Papers and Profits

These are tough times for print journalism. Last year, according to the Project for Excellence in Journalism's most recent State of the News Media report, newspaper earnings were flat, circulation was in decline and newsrooms were shrinking.

"The stage seems set in 2007," the report concludes, "for more business turmoil, a negative industry image and further cuts in the newsroom's capacity to do public-service reporting with distinction."

It needn't be so, say a pair of MU researchers. Murali Mantrala, a professor of marketing, and Esther Thorson, associate dean for graduate studies in the School of Journalism and director of research for the Donald W. Reynolds Journalism Institute, recently undertook a detailed study on the profitability of newspapers. They discovered, in what may come as a shock to bottom-line-obsessed media executives, that cutting newsroom jobs is exactly the wrong way to restore profitability. In fact, say the researchers, papers should be adding staff to ensure quality reporting doesn't suffer.

"The most important finding is that newspapers are under-spending in the newsroom and over-spending in circulation and advertising," Thorson says. "If you invest more in the newsroom, do you make more money? The answer is yes."

The researchers arrived at their findings by analyzing four years of investment and revenue data from approximately 300 newspapers per year, a data set provided without individual newspaper identification by the Inland Press Association. The data allowed Mantrala and Thorson to create a research model that accurately predicted, based on a paper's investments in news, advertising and circulation, its revenue and profit outcomes for each of the four years.

"By looking at the data, investing in news quality does pay off," Mantrala says. "It improves circulation and advertising revenues, which are the bulk of a newspaper's revenues. Better news quality drives circulation and circulation drives advertising revenues."

The study was published in the April issue of the Journal of Marketing.

       
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