If you want to know the nightmare scenario for Fairfax’s major metropolitan newspaper assets, look no further than the United States.

I’ve watched with great sadness over the past few years as newspaper companies, run by well-meaning but misguided executives (I’m giving them the benefit of considerable doubt here) have driven hundreds of revered and respected mastheads into the ground by cutting costs rather than investing in new strategies to address the new demands of the digital era.

At last count there had been more than 33,000 jobs lost in the US newspaper industry since the beginning of 2008. In 2009, which was an annus horribilis for newspapers in all developed markets, more than 100 newspapers in the US shut their doors because — despite the cost-cuts they imposed (rather because of the cost-cutting) people simply stopped buying their diminished products.

We watched in horror, hoping that this couldn’t happen here.

So it was with a sinking sense of déjà vu that I read of the new “strategy” unveiled by Fairfax management, which appears to comprise little more than managing for decline.

So far, Australia has only had a taste of the dramatic falls in circulation that papers in the US and UK have suffered over the past few years, but there is evidence that in Australia the circulation decline is beginning to increase. Management at Fairfax have allowed this to spook them into repeatedly hacking away at the most important part of their company’s money-making equation: the editorial staff.

Source: Audit Bureau of Circulation

The thinking appears to be this: that they will save money by outsourcing production (quality control) and reinvest in content creators — i.e. reporters, VJs and the rest, which will allow them to cover more ground on more platforms, the better to either attract online advertising dollars or to prepare themselves for the day when people show they are willing to pay directly for content.

But this is flawed thinking. In an era where readers can access content from anywhere they like around the world, it is the content that is of the highest quality, which provides real news, well written and presented and that is authoritative and trustworthy and that will attract eyeballs and advertising dollars.

In his book, The Vanishing Journalist, Philip Meyer, a former long-time group editor at the now-defunct US publishing giant Knight-Ridder and now professor emeritus and former holder of the Knight Chair in Journalism at the University of North Carolina, established a strong link between a newspapers’ quality and its credibility with its societal influence and, hence, its profitability.

Source: The Vanishing Journalist, Philip Meyer

His reasoning runs like this: a newspaper’s quality (a quality that is directly bound up with its accuracy and lack of mistakes) is intimately bound up with its credibility with its audience.

This has a two-fold benefit. Audiences respond by buying the newspaper (or returning to the website, time and again). Advertisers like that. But there is a less tangible force at work. A newspaper’s credibility is also intimately bound up with its societal influence. Advertisers like this as well — it means their messages are taken seriously by the people they want to reach.

Meyer puts it like this: “Higher quality earns more public trust in the newspaper, and not only larger readership and circulation but also influence with which advertisers will want their name associated.”

He goes on: “Reversing the argument, cutbacks in quality will in time erode public trust, weaken societal influence and eventually destabilise circulation and advertising.”

The only rationale that might make sense of what Fairfax’s managers are doing, if you agree with Meyer, is that they are harvesting their market position: “reducing quality has a quick effect on revenue that is instantly visible, while the costs of lost quality are distant and uncertain. When management is myopically focused on short-term performance indicators such as quarterly or annual earnings, the harvesting strategy is understandable”.

Meyer tested this hypothesis against the performance of a basket of US newspapers and found a strong relationship between quality and the robustness of their circulation.

The alternative: ripping money out of the editorial side to satisfy a short-term cost-cutting strategy is, says Meyer, a “one-time” only proposition that more often than not sets a newspaper on the downward spiral of circulation and profitability.

He wrote this book in 2004 and from the number of newspaper closures since that time it is clear that far too many media companies failed to heed his call.

It’s not too late for Fairfax’s managers. They have a set of high-quality mastheads that are held in extremely high esteem in their markets. The SMH and Sun-Herald in Sydney and The Age and Sunday Age in Melbourne, are seen as institutions that are part of the very fabric of those cities.

And they have a talented and hard-working staff of journalists who are committed to working with management to find ways to prosper in this extremely challenging news environment.

They just need a plan that works. But ripping the heart out of their newsrooms and banishing quality control will not.