Spending in newsroom is good for business.

A MUST SEE study

U.S. newspapers that spend more money on their newsrooms will make more money, according to a study released on Wednesday, which questions the wisdom of the media industry's trend of cutting jobs to save costs.

The authors of the University of Missouri-Columbia study, which was based on 10 years of financial data, said news quality affects profit more than spending on circulation, advertising and other parts of the business.

"The most important finding is that newspapers are under-spending in the newsroom and over-spending in circulation and advertising," said Esther Thorson, a co-author of the study.. "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."

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.

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 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, a former Beacon Journal staffer 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."

The study, "Uphill or Downhill? Locating Your Firm on a Profit Function," will be published in the April issue of the Journal of Marketing.

Click on the headline to see the Reuters story on the study or
See the report announcement from the MU news bureau.