"Reinvestment is the return of profits to a firm to further develop the company and its activities. If profits are continually taken from a firm without reinvesting an adequate portion in the company, it is denied resources needed to help it improve its operations, grow, and remain competitive." (Picard, p. 236)
Hmm, is there a better description of the present demise of newspaper companies in an era of unbundling?
As we learned in the readings this week, media companies (including newspapers) need thriving financials to justify further capital investment ... and yet, during the 1980s and 90s, when newspaper profitability was stratospheric (20% margins were practically the norm), there was precious little investment in R&D, innovation, and other creative measures that would have better insulated newspaper companies from the catastrophic disruption created by Web economics.
Perhaps in something of an update from Picard, in 2006 he warned of dire days ahead for newspapers with little investment in innovation:
"... But if any of these newspapers are to survive, capital investment will be essential to their ability to function now and to innovate for future growth. To warrant investors' dollars, new revenue streams must be found; keeping revenues stable will not suffice. Achieving this, however, will call upon levels of creativity, innovation and entrepreneurship infrequently found in newspapers in recent years."
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