May 28, 2010
At the hype-heavy TechCrunch Disrupt conference in New York last week, Publish2 CEO Scott Karp announced that his company is launching a news exchange that will become “the New Associated Press for the 21st century.”
That’s more than a little grandiose. In fact, the Publish2 News Exchange targets a modest slice of the AP’s total business. But it is artfully aimed at facilitating the many content sharing arrangements that have been springing up among newspapers. And it could remove a major stumbling block for the several papers that had threatened in 2008 to drop AP but eventually backed off and maintained their memberships. 
Sharing stories outside the AP

As Karp explained the concept in a phone interview, the system allows any news organization to create mini-newswires, specifying who can use shared content and on what terms. Publish2 already offers a related service to share and manage links; the new step is to format content so it “plugs right in” to newsroom publishing systems.
Karp told me that his conversations with editors in the 20-some states that now have direct news exchanges outside the AP suggest that they’ve been limited by cumbersome back and forth e-mailing of story lists and stories. His system would also facilitate news exchanges across state lines — say, among a set of papers that all cover Big 10 sports.
Karp said that his market research also included talking to editors who had given the required two-year notice to drop AP but later returned to the fold. “They were able to cobble together a federation of replacement sources,” he said, but the stumbling block was that “there was no easy way to integrate it into their workflow.”
I spoke by phone with Roger Plothow, editor and publisher of the Post-Register in Idaho Falls, Idaho, one of the more vocal would-be AP dropouts, who said Karp’s account was accurate. “If his service does what he says it does,” Plothow said, “I’ll be lining up for it and so will a lot of other people.”
AP leadership has not responded to Publish2’s announcement, and spokesman Paul Colford told me, “There’s always room for new ideas.”

When I described what Publish2 is doing and targeting, Colford added that there is an existing AP service, “Member Marketplace” (which works within the AP Exchange browser), that supports content sharing arrangements or automated searches of what is published elsewhere. (His example was that a Nevada paper covering gambling may want to harvest related news from the East Coast and Canada.)

The business model of Publish2’s News Exchange

By Karp’s own account, a series of events will need to happen for News Exchange to become a viable business and any kind of threat to AP.

Initially the service will be free and hence generate no revenue. “For now we will simply run parallel to AP,” he said. The first order of business is to assemble a critical mass of participants to “build up value.”

Over time, Karp expects two revenue streams. While many of the newswires created will be free exchanges, the system also supports charging for content. When Publish2 builds in a payment system, it will begin charging a transaction fee (à la PayPal). Karp said that he also anticipates eventually “charging newspapers a software licensing fee — but only when they are realizing obvious savings.”
The News Exchange has already signed on a number of content providers, Karp said. Most of them are tech-oriented, but the list also includes the Huffington Post Investigative Fund, Kaiser Health News and the Hechinger Report, which follows education policy. Karp said he was getting expressions of interest from newspapers “minute-by-minute” and hoped to release a list of participants within a few weeks.
The News Exchange will not generate its own content and has no aspirations, Karp said, to replicate offerings such as the AP’s noteworthy coverage of the Haiti earthquake.

But a rival tech solution to exchange stories and access a range of content, Karp argues, could press AP to switch to cafeteria-style pricing for the coverage it does uniquely well. Currently AP uses the cable TV pricing model, in which clients pay a comprehensive fee for full access to the service (with a few optional add-ons).

How this fits into members’ gripes with AP

The Publish2 strategy pokes at a couple of factors that had both small and big papers in a state of near-mutiny two years ago, climaxing in a heated session at an editors meeting in which Dave Schribman of the Pittsburgh Post-Gazette told Associated Press CEO Tom Curley that the AP was acting like the Politburo.
The editors’ beef was three-fold:

  • Rates were too high and not being adjusted downward as newspapers experienced steep ad revenue declines and slashed news budgets.
  • The package included way more material than they were able to use as they reduced news space.
  • The state reports were drifting away from basic nuts-and-bolts coverage, such as stories on legislative hearings that they relied on AP for.
AP has reduced fees to the tune of $65 million overall, or about 20 percent for most papers. It offers a new basic service with an option for additional coverage in five topic areas. (AP membership dues run to a little less than $100,000 for the Post-Register in Idaho Falls, $300,000-plus for The Spokesman-Review in Spokane, Wash., and well into seven figures for major metros.)


Still unresolved are the content of the state reports and protocols for picking up member stories and offering them on the wire to competitors — a longstanding source of tensions.

The roster of papers that had given notice to drop at one time included The Spokesman-Review, the New York Daily News and all of Tribune Co. However, my check of websites shows all of them still using a variety of AP material.
So will Publish2 chip away at AP’s membership?

Small and midsized papers that fully embrace the mantra of local-local-local may still be tempted to opt out of AP — if they could get a few basics elsewhere, like sports scores, weather and highlights and photos of national/international news.

The AP still has mass, inertia and solid news chops (3,700 worldwide employees). Plus, it is owned as a cooperative by American newspapers with a board packed with publishers and corporate execs (including St. Petersburg Times CEO and Poynter Chairman Paul Tash). But it’s tough for any organization, even one of AP’s size, to pursue as much expensive journalism as in better times; AP said in its annual report in April that it had trimmed staff costs by 10 percent in 2009 and expects a significant cost reduction in 2010.
These same qualities make AP a huge establishment monolith and a target in new media circles. Karp played to that sentiment at the TechCrunch Disrupt conference with a brief pitch (part of a competition for the best start-up idea) promising to “Craigslist” the AP. That tone was amplified in TechCrunch’s giddy account of what he said and a series of uncritical tweets and links that followed.
Nonetheless, I believe there is a serious business proposition lurking here. Karp is not a novice operating out of his basement. Publish2 had initial venture capital backing of $2.75 million. Its initial product won the Gannett prize for technical innovation last year from the Online News Association. And its board includes both techies and experienced industry hands like Howard Weaver, former head of news operations for McClatchy.
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While the AP may be the great white whale for new media enthusiasts, it will keep swimming around the ocean for some time to come. But credit Karp and company with a well-aimed harpoon.

CORRECTION: The original version of this post misstated how the Associated Press enables content sharing among its members. (Member Marketplace uses the AP Exchange browser; they are not two separate means of sharing.) The original post also misstated the number of AP employees.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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