Tuesday, September 09, 2008

Politico and the specialized wire service

Tim McGuire got to this before I could (five hours in the classroom today will do that), but Politico has announced it's starting, in essence, a specialized wire service, the Politico Network.

Forget the rather elitist tone of the release ("Under the new network, media organizations selected by POLITICO's editors will have access to POLITICO's top stories ..."). This does open an interesting front in the wire service terrain.

I'm not sure what kind of challenge it poses to AP. The idea of the specialized wire service is not new -- the "supplementals" have existed for years and more than a few editors have professed preferring that copy to the AP's (even while running AP -- "well, you know, we had to get the paper out and the AP copy fit and we didn't have time to really trim the supplemental and ...").

But the supplemental wire service with online savvy, now that is a bit of a different beast. Politico was born online and I suspect just by that knows online better than AP or the others out there. Further, it's proposing a system where it will sell ads and split the revenue with publishers (about as close to "free money" as a publisher can get, especially if you are not using up valuable ink and paper).

(I'm interested to see more of how this will be used. I went to the papers Politico cites as using its feed but generally found only AP and locally generated stories with no special advertising that I could tell.)

Ultimately, it's another reason for AP to at least consider reworking or dumping the news cooperative model. AP already has a Web site where you can read its stories for free and without going to any of its member papers, and there are ads on the site. So you have to start wondering.

McGuire posits that ESPN might also be likely to come in under the radar with a specialized feed for sports sections. Frankly, I've wondered why it hasn't done it before. The costs are almost nothing to program the servers to strip off and package a certain number and type of stories.

And why not the Food Network for recipes and food news?

You can probably think of other opportunities. For that matter, one might wonder why McClatchy, for instance, doesn't consider retooling its national news feed into a similar revenue-sharing model. (It has a public version of a national feed, but it's not the same, mostly serving up truncated versions and referring people back to the originating paper.)

McGuire also points back to an earlier interview on Paid Content with AP's revenue director, Tom Brettingen. The story cites one of the AP's favorite statistics -- that the price news organizations pay for AP content is small compared with the benefits received. AP estimates that newspapers spend roughly 1 percent of their total expenses on its services and that smaller papers pay probably about 10 percent of their editorial budget while AP fills close to 40 percent of their main news sections.

But this overlooks "efficiency," more and more a key metric in these tight times.

If I am spending 10 percent of my budget to fill 40 percent of my paper, but still am using only a small percentage of the material sent my way, I'm liable to think about what the wastage is costing me and whether I could reduce that 10 percent by being able to more efficiently choose only what I want. Of course, if you promise to share ad revenue with me, as Politico has, I'm liable to think less about that.

But if, as a publisher or editor, I do think about it, it could blow holes in the AP's basic model, which clearly needs the revenues created from inefficiencies to help pay for "loss leaders" -- the expense of sending that correspondent to the latest Balkan hotspot or African coup, etc. Those are stories that need to be covered but that, frankly, might not be seen as "necessary" unless they were bundled in with a larger package, even if you slim that package down and call it "breaking news."

AP still, out of necessity if it is going to maintain things like vibrant international coverage, needs that loss-leader subsidy model just as rural phone and power companies needed it in the early and middle of the last century to pay for the rural electrification and telephone wiring of America.

That could, theoretically, change were the AP to go (at least partly) to a model like Politico's. Given robust tagging, etc., it could assemble all those Albanian stories and create a feed for the news outlets/Web sites specializing in reaching the Albanian communities in their areas (and, of course, that need not be only in the U.S.) But two big questions loom: First, once you put the stories on one site, do they need to be on any other (a huge question for the AP and every other news outlet as search and personal aggregation become more robust). Second, do any advertisers really care about reaching the targeted Albanian community, at least enough to make the costs of selling and gathering those ads, not to mention of gathering the stories, worthwhile?

If you think about it, that's really the key to a lot of our Internet business woes and no one seems to know the answer so far.

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