Curley: Newspapers Now Provide Only 20 Percent of AP Revenue

Revenues from newspapers have fallen by about one-third at the Associated Press since 2008, from $220 million a year to about $140 million in 2010, and now make up just over 20 percent of the organization’s total revenue.
 
CEO and President Tom Curley revealed the decline when I asked him last week about the cooperative’s business relationship with its member-owners. He added two more financial nuggets:
  • “We expect it will continue to drop another $5 million to $7 million a year” in 2011 and beyond.
  • The AP loses money on services to newspapers and effectively subsidizes those offerings with more profitable lines of business. But Curley said he was uncomfortable with continuing that imbalance indefinitely.
Though Curley and AP spokesman Paul Colford did not provide numbers for other business segments, Curley said growth areas include commercial photos, software businesses and AP’s international television news feeds, about to receive a $30 million upgrade to digital.

Online news has been a positive, he added, and broadcast is stable. Besides covering news abroad, the AP has also has a large international client base.

 
The 160-year-old collective remains fully owned by its 1,500 newspaper members. Its board is dominated by top newspaper executives (including Poynter chairman and St. Petersburg Times CEO Paul Tash) with a couple of broadcast representatives.
 
That may seem incongruous given the industry’s declining importance to AP’s business fortunes, but Curley said he and other AP leaders are “absolutely not” interested in changes in ownership or control.
 
I asked Curley (and in a separate interview Executive Editor Kathleen Carroll) how AP had defused a hostile faceoff with metro-paper editors in early 2008. In an angry meeting with Curley during that year’s American Society of Newspaper Editors conference, editors variously compared AP and its policies to a cable company that charges extra for the best channels, a game of three-card monte and the Politburo.
 
There were threats of defections, and a number of papers gave a two-year notice of cancellation. In the end, though, none of any size actually left.
 
Curley and Carroll both pointed to three factors quelling the revolt. First, there were rate cuts in 2008, 2009 and again this year. Second, AP began offering a “choice” plan. While not exactly cafeteria pricing, it allows papers to choose among “bands” of service, including a less expensive, basic level.
 
Third, both Curley and Carroll hit the road with numerous visits to state press associations and individual newspapers. At the end of that process, Carroll said, “they felt they had been heard.”
 
I checked the AP executives’ account in an e-mail exchange with Martin Baron, editor of The Boston Globe and one of the most outspoken of the 2008 critics. He confirmed that the Globe’s relationship with AP is now on an even keel and said he sees little sign of continuing dissatisfaction.
 
Curley added one footnote to the controversy. “Our business model trails the industry — we’re about two years behind,” he said. So just as editors were getting orders to make draconian newsroom cuts, AP “had a $90 million cash flow that year. That certainly prompted a legitimate conversation, but I won’t apologize — we needed the money for pensions and updating equipment.”
 
Carroll said at the time that the news-sharing arrangements among papers, starting in Ohio and quickly spreading to other states, would not work as replacements for AP. Indeed, the content sharing deals are thriving, but newspapers continue to find AP “essential,” as the service brands itself, for state, national and international news, photos and video.
 
At last week’s AP Managing Editors conference at Poynter, Carroll announced a sweetener – a big state-by-state database and investigative project that will allow members to expand and tailor coverage of the severe budget crunch in most states.
 
While AP has made peace with its newspaper members, conflict has opened on another front. CNN dropped its AP contract in June. “CNN no longer pays us anything,” Curley told me, “but they continue to make extensive use of AP material.”
 
While neither suing nor directly threatening a suit, AP has criticized CNN for picking up the substance of AP news breaks (usually with attribution) minutes after they have been posted online by paying clients.
 
That’s the same principle behind AP’s expansion of its current content registry to an independently run copyright clearinghouse. Curley said the wire service has been studying how other forms of intellectual property are protected, especially musical composition.

“If you write a great song and 19 people record it, you get paid for it,” he said, and even widely dispersed bars and nightclubs typically pay a licensing fee for music they play. Why, he asks, should enterprise reporting not have similar protections?

 
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In both our interview and a presentation to editors, Curley underscored that the registry and clearinghouse are about more than just enforcement. The “data analytics” of tracking where content gets used, for instance, could be a profitable business in itself for AP, he said.

While AP is a lot bigger and more diversified than its member papers, its developing business model echoes that of newspapers. As traditional revenues wane, it will take many new income streams, mostly digital, to pick up the slack.

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