Newspapers spending too little on news quality, too much on advertising: study

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A study conducted by researchers at the University of Missouri-Columbia found that newspapers are underspending in the newsroom and overspending in circulation and advertising.

The researchers analyzed financial data of small to medium-size newspapers with a circulation of 85,000 or less. They found that it is news quality that most directly affects the bottom line.

The assessment was made using a diagnostic tool developed by the researchers. It consists of a mathematical formula that breaks down revenue and expenditures from news, advertising and circulation departments, and predicts profitability.

Inland Press Association, a trade organization of more than 900 daily and weekly newspapers, provided the financial data, which covers a 10-year period.

The identities of the newspapers were anonymous.

Murali Mantrala, a marketing professor at the College of Business, and Esther Thorson, a professor of advertising and associate dean for graduate studies at the School of Journalism, conducted the study that closely examined the profitability of newspapers.

The pair collaborated with marketing doctoral students Hari Sridhar and Prasad Naik, who is now a professor at the University of California-Davis. The team focused on news quality, distribution and circulation, and advertising.

With the popularity of the Internet and specialized Web sites, Ms. Thorson said in a statement that newspapers have lost some of their advertising appeal with high-dollar advertisers, such as automobile dealerships and major retail establishments.

Classified advertising was also noted as not being reliable because readers are more likely to search online for jobs, houses and various niche items.

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

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