Tuesday, April 10, 2007

A shot across AP's bow

Baltimore Sun columnist Jay Hancock has written those words that one does not speak in polite conversation:

Why do newspapers pay the Associated Press to distribute their expensive, hard-won stories to radio, TV, Yahoo and other enemies of newspapers?

Newspapers run AP as a collective, but the interests of AP and its members have never been further apart. The No. 1 problem for all media is promiscuous content distribution with low or no compensation.

AP makes this worse, striking its own deals and enabling newspapers in their role as content floozies.

Papers must regain control of their stories, hoard them under their banners and Web sites and stitch them to their subscribers and advertisers. If you want Yahoo viewers to read your stories, deal with Yahoo directly, as McClatchy newspapers agreed to last week. Quit AP or revamp it.

(I've put in the link to the McClatchy story -- something missing from Hancock's online column. Yet another example of how newspapers still don't totally get it online, but I digress ...)

I doubt they're shaking in their boots down on 33rd Sreet, but AP execs have got to be paying attention to this because where there is one columnist wiling to say it, I can guarantee there are several hundred media executives thinking it.

I stand by my analysis of two years ago that took out against two misguided E.W. Scripps execs who suggested cutting out AP and going to a peer-to-peer network of news sharing. They were wrong because of this central point:
As content loses value, expert editing and customer-driven bundling are becoming the tools for building audience. And audience -- not content -- is the news industry’s value proposition.
This "content is crap" approach contrasts with the "content is king" movement of the past two years. Benz and Phillips complained that AP was spending too much to create its own online content and doing too little to facilitiate sharing of its members online content. My response: Here's one reason the AP is so damned expensive -- it's members don't share as they are supposed to, and so the AP ends up having to staff or string a lot of stuff it shouldn't have to. From what I hear from the trenches of AP, that still basically stands.

And recently I took out after a San Francisco Chronicle columnist for his suggestion that newspapers be granted an anti-trust exemption to control content and charge for it.

We're going to hear more of this -- journalists are going through the Five Stages of Grief. They've generally gone through denial -- Knight Ridder, Tribune, the constant drumbeat of circulation losses has seen to that. They now seem to be somewhere between the anger and bargaining phases. (The unsettling part is that depression is still to come before acceptance -- can the people in this business get any more depressed? And under the classic stages, that would be the "I don't care anymore"; I can't think of much else more dangerous to jouralism and society.)

Hancock's column is an excellent example: We must "hoard" our stories, "stitch them" to subscribers and advertisers (as if your readers wanted to be stitched to).

Hancock, and Lazarus of the Chronicle before him, fail to get the idea that much of what newsrooms do these days is not the sort of stuff that people just want to break into the walled gardens to get. Yeah, OK. Maybe their columns. But much of what is in the paper is still commodity news. And that's exactly because of the AP -- as papers like the Sun have cut their bureaus and pulled back they've turned to the venerable wire service to fill the gaps. (Tom Scocca of the New York Observer noted well that "The Sun has tended to make splashier news than it's written.")

But Hancock's column is worth a little more thought because he takes a bit more even-handed approach than Lazarus' outlandish antitrust efforts. Aside from the AP lines, he also has the following questions/suggestions:

  • Experiment with charging for online access. If it works you'll start pumping revenue oxygen back into Tribune Tower. If it flops you've invested in wisdom. (Not to forget that the Sun is a Tribune paper, and this column is in the context of what Sam Zell, the presumptive new owner of the chain, might do to improve its fortunes.) Hancock's suggestion here is sensible -- experiment. I do think every newsroom probably has some products it can charge for, be it columns, obituaries, some kind of specialized information. The key here is to get away from the one-size-fits-all method that too many papers and chains take. As I've written, for obituaries, putting them behind a pay wall is stupid, but that doesn't mean the "charge" for access can't be an eight- or 10-second ad for the florist shop and an "order flowers" button at the top of every page.

  • Spend more to develop circulation. [I]t's time for papers to again spend serious dough on promoting their off-line product, which still generates most profits. This may involve better ad campaigns, reducing subscription prices or massive door-to-door sales. It also requires improved service for existing customers, which means reversing Tribune's transfer of its call centers to the Philippines, for a start. Simultaneously, newspapers must push hard for Congress to enact a "Do Not Call" exception for newspapers similar to the one in Canada. This one skirts a little close to Lazarus' problem. Good idea, wrong target. While the printed edition may generate the most profits, the online is generating the revenue growth. The point here should be to figure out some innovative marketing that gets people to use you as a package -- the Web and the paper. No one's really figured that out yet. Too much of this is presented as one or the other. The company that figures out how to truly economically integrate the two will be a long way ahead of the game.

  • Stop treating the newspaper's information as fishwrap the minute it comes off the press: Much of what newspapers do - restaurant reviews, crime reports, high school and college sports stats, movie reviews - are valuable long after publication. Thanks to the Web and terabyte hard drives, they need never be out of readers' reach.But papers are terrible about preparing old material for reuse. Instead of just sticking it in a searchable archive, they need to reorganize it by category for easy access. It's more like being in the database business than the news business, which is why papers don't get it. But it might increase readership or position archives as a revenue center. In this, Hancock just follows the meme established by Adrian Holovaty last September. But it can't be said enough, and it's good to see it as moved from the blogs to the business pages. Gannett and the Atlanta Journal-Constitution have said they are establishing desks to address this sort of thing; maybe Tribune will, too.
But back to AP. Hancock has dared to broach that question not spoken in polite company, the one that haunted the halls at 50 Rockefeller Plaza and now has them tossing and turning on 33rd Street: Once you've sold it to Yahoo, why is there a need to sell it to anyone else?

And there is an accompanying question, one posed by AP's recent decision to provide news for the online functions of the Wii video game: At what point do you basically say your core customers are never going to reach that market and strike out on your own to develop that revenue source?

Hancock says "the interests of AP and its members have never been further apart." Allow me to disagree. In some ways they are closer than ever as newspapers cut back.

Right now, that value proposition is fairly straightforward: Agree to share your news and you get a lower-cost ticket to the party. Not that AP rates are low cost (and they certainly aren't to the folks who carry the big calculators), but as the pullbacks by the Sun and others have shown, they are far lower than trying to run your own far-flung operations. And while a relative handful of papers like the Sun can afford to field large state capital staffs, most can't -- or won't. So the AP fills in that doughnut hole as well as bringing news from the far-flung corners of the states.

That value proposition is becoming more precarious, however, as people keep muttering the mantra "hyperlocal." If the future of newsrooms is in smart, intensely local news people can't get elsewhere, a few questions crop up. File them under the "Will anyone care?" header:
  • Will anyone care about those overseas AP bureaus? If the international news is on Yahoo, why does it need to be in the local paper or on its Web site?
  • Will anyone care about the Statehouse? Even as the federal government has pushed more responsibility to the state level, statehouse bureaus have been cut or have remained unspectacularly the same. But for many papers this might almost as well be foreign news already, and will the hyperlocalism movement aggravate that?
  • Will anyone care about the day's stories from the South Succotashes in the far-flung corners of your state? Yes, when there is some kind of spectacular murder trial, perhaps?
Right now, those state wire franchises are still the things priming the money pump at AP, but as Hancock suggests with the McClatchy deal, they are subject to being undermined. South Carolina, with its concentration of McClatchy papers, might be one of the early tests of that.

That's got the attention of the suits on 33rd Street, trust me.

Hancock talks of revamping AP. I'd like to hear more from him on that. What I think I'm hearing so far is that he wants to go back to the old AP that sold primarily to newspapers, with a stripped-down wire going to most broadcast stations. And forget the Web. That's not going to happen. It already isn't (in fact, you can get your news direct from AP and not have to go through a member, even Yahoo, except for those state reports, which shows you how valuable AP thinks they are).

That's not a viable economic model for AP or for any of the organizations, including his paper, using wire copy to fill the holes left by cutbacks, etc.

As for news sharing, I already know of desks within newspaper chains complaining about the "shares" they get from fellow papers in those chains. Will they be any happier with feeds from non-affiliated properties? If there's a major development in a story in western Maryland, for instance, will the Sun be satisfied with the "share" it gets from a Cumberland? AP does provide a quality control filter.

But it's also clear something will have to change. Will AP have to come up with some kind of explicit revenue-sharing model for contributions that goes beyond the implicit one now in place? Will it become much more of a parachute-in organization that ditches its high-cost bureau structure? At what point does it essentially become a for-profit in form, if not in name?

These are not fun times on 33rd Street.

Update: here is the response from Jack Stokes of AP's PR office. What Stokes doesn't address with the 4 percent figure is the broadcast element that Hancock sees as "the enemy" but that AP would put in the member category. I also suspect that the figure gets a lot higher if you isolate the state news wires.

April 9, 2007
Baltimore Sun
To the Editor

I bring your attention to an inaccuracy -- and a continuing misperception -- about The Associated Press and commercial Web sites and aggregators, contained in the recent April 8 Baltimore Sun column by Jay Hancock. The column leaves the erroneous impression that much of the content AP sells to commercial Web sites comes from member newspapers.

In fact, a very small fraction of this content -- less than 4 percent -- is contributed from AP-member newspapers. The overwhelming majority of content sold to commercial, nonmember Web sites is original content produced by AP staff. To say that the newspapers are paying AP to distribute their content to "other enemies of newspapers" is a gross distortion, at best.

It is important to remember that in 1999 the AP Board of Directors voted to allow AP to sell a slice of its international and national content to commercial Web sites in order to support the growing costs of newsgathering and help keep member costs low. In 2006, in fact, there was no general assessment increase for AP members.

Likewise, it is facile to claim that the interests of AP and its members "have never been further apart." Nothing could be further from the truth. AP has stood as firmly for protection of intellectual property rights of news providers as it has for freedom of information. AP's licensing arrangements with commercial internet distributors are clear evidence of that commitment. What's more, AP is working with its membership today on groundbreaking initiatives in every aspect of digital convergence, focusing on enhancing the position of member news providers as the audience for news moves online and new channels of distribution join the expanding mix of media beyond the printed page.

Not least, it is worth noting that Mr. Hancock failed to practice the cardinal rule of journalism before writing his column: He did not check his facts before publishing them. AP never received a call from Mr. Hancock asking about the issue.

Jack Stokes
Corporate Communications
The Associated Press

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