Publishers will only spend money to produce prize-winning journalism if the journalism pays for itself by increasing circulation and generating extra revenue. Increases in circulation at Pulitzer winning papers were probably large enough to generate that extra revenue, the study concluded.Logan and Sutter argued that Pulitzer Prizes are an important “signal of quality” for consumers. News is what economists call a credence good. Consumers cannot evaluate the true quality of a credence good even after they have consumed the good. For example, consumers have no way to tell if the information in a news article is accurate. This forces consumers to evaluate quality based on a newspaper’s reputation, including the prizes it has won.
We concluded newspapers that raised ad prices or reduced quality would probably accelerate the loss of circulation. However, newspapers that published quality content might stabilize or slow declines in circulation.
The third study had unusual access to 12 years of internal revenue and circulation data from an individual newspaper. The study looked at newsroom spending, subscription revenue, and advertising revenue from the print and online editions of the newspaper. The study used subscription revenue instead of circulation because advertisers value subscribers more than they value readers who don’t pay for the paper. Subscribers are more likely to read the paper carefully and register advertising messages, argued authors Yihui Tang, Shrihari Sridhar, Esther Thorson and Murali K. Mantrala. Results showed increased newsroom spending resulted in increased subscriptions to the newspaper. The subscription increases then resulted in increased print and online advertising revenues. A simulation showed opposite effects – reductions in newsroom spending could lead to reductions in subscriptions, resulting in reductions in both online and print advertising revenues. These last two studies accounted for the Internet. However, the three studies are just a beginning. Many newspapers still rely on print editions to generate the bulk of their advertising and subscription revenues. Online revenue is a distant second when it comes to generating profits. More empirical research is needed to produce additional recommendations that can help newspaper managers who are trying to survive in this difficult environment.