Cutting costs

Faced with dwindling revenues - or projections of dwindling revenues - newspapers across the country have resorted to cuts as a way to prop up their bottom lines. Oftentimes, the longest knives have been reserved for the newsrooms, which have seen a mass of layoffs, buyouts and reduced benefits in the last few years.

A study from the University of Missouri suggests all the chopping has done little to save money and might be costing some publishers - at least at smaller papers. Consider this finding:

Data from small newspapers with an average circulation of 13,000 showed that a 1 percent cut in the newsroom reduced expenses about $10,000 but led to a revenue drop of $23,000 and a profit decline of $3,000.

Researchers at Missouri's Reynolds Journalism Institute combed through data from more than 300 newspaper with a circulation under 85,000 and compared the relative cost in revenues and profits of slashing personnel from different departments. Here's what they concluded:

The authors advised that newsrooms should be the last department cut. When cutting costs, newsroom cuts are by far the most damaging to revenues – and the longer the reductions occur, the greater the acceleration of damage.

Too late now for many papers. As the study says, three-quarters of all newspapers have trimmed their newsrooms by at least 10 percent.

Here are more detailed findings:

1. Newsroom cuts are the most costly on revenues. A one percent cut in newsroom expenditures led to a .44 percent drop in revenue. A one percent cut in the ad sales force led to a revenue drop of .24 percent. A one percent cut in the distribution force led to a .08 percent drop in revenue. In dollar amounts, the picture is even more clear. Data from small newspapers with an average circulation of 13,000 showed that a 1 percent cut in the newsroom reduced expenses about $10,000 but led to a revenue drop of $23,000 and a profit decline of $3,000. A 1 percent cut in advertising sales force reduced expenses by $8,000 but led to a revenue drop of $12,500 and a profit decline of $600. Finally, a 1 percent cut in the distribution department reduced expenses by $6,400 but led to a $4,000 drop in revenues, while showing a slight gain in profits.

2. The bigger the cuts, the impact on revenues gets progressively worse. For example, a 10 percent cut in newsroom expenditures led to a 5 percent drop in subscription revenues, while a 50 percent cut in newsroom expenditures led to a 30 percent drop in subscription revenues.

3. Newsroom cuts are the most costly on profits. A 5 percent cut in news expenses led to a 1 percent drop in profits, while a 5 percent cut in advertising department budgets led to a .3 percent cut in profits. A 5 percent cut in distribution budgets led to a .2 percent drop in profits. Similarly, a 50 percent cut in newsroom expenses led to a nearly 40 percent drop in profits, compared to a 22 percent drop in profits if the advertising department faced a 50 percent cut.