Newspapers that invest in journalists make money. Those that try to cut newsroom costs eventually lose money. That’s the conclusion from a thorough and hard-headed study of ten years of American newspaper financial data by researchers from the University of Missouri-Columbia, released earlier this month.

The researchers have come up with a model to show where money is best spent – and conclude that the thing that most affects the bottom line is news quality.

Researcher Esther Thorson says that the study’s most important finding is that newspapers are under-spending in the newsroom and over-spending in circulation and advertising.

“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,” Thorson says.

When former Fairfax CEO Fred Hilmer released his book last month he said that despite waves of cost cutting and redundancies the costs of the Fairfax newsrooms were still too high for comfort. More cost cutting is expected if the Rural Press merger goes ahead.

Nor is Fairfax unique, although it is the exemplar of what happens when board and management don’t understand media or how newsrooms work.

“Content is king” may be the mantra in the advertising industry, but very few news media organisations behave as though they believe it. Instead the talk is all of “better and smarter marketing“.

The University of Missouri-Columbia researchers say they are confident their findings will influence the industry in the USA.

Let’s hope that Australian newspaper executives, particularly at Fairfax, at least give them the once over.

Peter Fray

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