Do AP’s Owners Really Agree With Management On The News Agency’s Reason For Being?

Philip M. Stone Novermber 11, 2008

The Associated Press describes itself as “the essential global news network” but is that what its owners – US newspapers -- really want these days? Would the owners not prefer a US domestic news agency that for a lot less cost just provides them with the essential news, pictures and video of the day that they can’t get elsewhere?

The AP has announced it is reducing costs even more next year than had been previously announced  because of ownership furor over what newsrooms now see as too high an AP rate structure. Most importantly it says it is going to re-examine its membership and ownership structure that could result in a complete overhaul.

That’s all well and good but if the AP is going to do that, then it might as well go the extra step and really agree with its owners, US newspapers, what is the AP’s real purpose for being these days?

Is the AP, for instance, an international news agency headquartered in New York with subscribers all over the world to whom it provides a first-class text, pictures, and video report of the world’s happenings in equality to all subscrtibers globally? Or is the AP a US domestic news agency, headquartered in New York,  whose primary purpose is to cover the US like a blanket for its US owners and subscribers and of course to provide national and international coverage, too, but anything it does is predicated on providing the best possible editorial product for the US media? Or, is it both?

The problem facing the AP today is that it really does provide great value for money, but given the traditional media economic climate that great value is no longer great enough. The AP has been pretty smart in recognizing that to do everything that it wants to do it cannot rely of increased assessments from its owners and subscribers in the US and so it has embarked on a great many successful projects over the years – especially after finally being allowed to get into the digital game – and its bank account has some $30 million stashed away. Indeed the AP seems to be in far healthier shape than many of its owners!

But the fact remains that for all its diversification the AP still gets 27% of its revenue from US newspapers, and 17% of its revenue from US broadcasters, so the question really becomes whether those two groups that make up near half of total revenue should not be the primary focus of what the AP does and anything else is incidental? Do those US clients really need an AP German translation service -- even if the AP claims that service makes money is that where resources should be spent. Does it need a fully fledged international television news video service on which it has spent hundreds of millions of dollars when there are far less expensive ways today of gaining video necessary for US newspaper and broadcast web sites?

And again the answer to all of that is buried really in agreeing what the AP is supposed to be. US newspapers are saying they want the AP to charge considerably less – some 30% less -- even though for many newspapers the AP today is really a great financial deal considering the space a newspaper devotes to AP products and what it would cost in local resources to fill that space. But be that as it may, newsrooms are hemorrhaging financially and that great AP deal simply is no longer great enough.

The fact is that much has changed since the AP came into being. For instance, with the face of communications changing as much as it has over just the past few years what with password protected web sites, RSS feeds and the like, is much of what the AP does today, for instance, on the state level really necessary? Newspapers can join together to do much of that themselves today, indeed there are places where they are already sharing news without the AP middleman.

And there are plenty of organizations out there willing to fill in any AP slack. Few days go by that ftm doesn’t receive a note from some group saying it is ready to step in for particular coverage should the AP cut back. For instance, here’s a recent note from the FIND Washington Daybook, “Just wanted to let you know that we are seeing an increase in interest in Washington from bureaus considering dropping their AP but who need a Washington daybook. The interest started last summer around the time of the rate increase. We produce the FIND Washington Daybook which is actually more extensive than the AP Daybook. It is used by SHNS (Scripps-Howard), CNN Washington Bureau, St. Louis Post-Dispatch, Milwaukee Journal Sentinel and others …”

And speaking of CNN it has issued an invitation to newspapers to attend a meeting at its Atlanta headquarters in December, all expenses paid, to hear how CNN could serve as an AP replacement since, it says, it already operates its own internal newswire that could act as a basis for an AP substitute. Now that should be kind of interesting since when watching CNN International, at least, much of its breaking news is sourced to Reuters.com (they have to go to the free web site since they canceled the Reuters service directly), but it will be interesting to hear what CNN has in mind.

And then there is the Politico Washington bureau. Co-founder Jim VaneHei has suggested a plan whereby newspapers can use Politico content and in exchange Politico gets the right to sell some of the newspaper’s web advertising inventory. Sounds like a win-win.

In Ohio several newspapers are exchanging state news – if they can do that and the system works then do they need the AP to cover the state for them? Same thing going on in southern Florida – three newspapers are exchanging their mundane news reports, and there are reports of a similar arrangement being made for the north-east.  Today’s digital environment makes it really dead easy now for media to share products without the need for the AP middleman.

This writer has previously written how easy it would be to set up an alternative news agency that could provide all the news the world’s media wanted, and the overall cost would be probably around half if not less than what is paid for the traditional international news agencies today. You could do it out of one huge newsroom located in Bangalore or some other place where labor is cheap and Internet communication is reliable. Digital spiders would be constantly monitoring the world’s newspaper and broadcast web sites and, although you may not like the sound of this, the fact is you could produce a really great Illinois state report out of Bangalore.

Sure, there are many arguments against outsourcing editorial but the point here is that it can technically and manually be done. If you don’t want it done in Bangalore it can be done even in the US in some business park where rents and labor are relatively cheap – there’s no need to do it out of expensive New York. Even the “real” UPI in the early 1980s moved its technical operations from New York to much cheaper Dallas. The point is, technology and communications today allow it to be done, and you don’t need original reporting.  Now you can argue all day and night the pros and cons of such a system but if saving costs is such an imperative these days then shouldn’t everything go on the table?

The AP itself ran a test setting up a site in Florida that allowed members to share stories of local interest among themselves – stories that appeal to a small number of members but may not be of interest to a large percentage of a state's membership. The AP said that was a success so why not grow that concept, with or without the AP, and that includes for pictures, too, and then the need for most of the AP’s own state coverage dissipates which in turn means costs can be greatly reduced. But bear in mind that while this may be all well and good for newspapers, what about broadcasters? Will newspapers and broadcasters share?

Or go in the opposite direction and say the AP needs to cover each state like a blanket, and then the question becomes just how much national and international coverage is necessary for US, not international, client needs.

Or the AP remains all things to all news media internationally as it is today.

It’s easy to make a case for any of these scenarios but the important thing is that the AP US owners and its US subscribers, who after all make up near 50% of AP revenue, need to agree first on what exactly they want the AP to be, and everything will flow from that decision.

One big problem is that current news agency pricing is based on very shaky foundations because it’s all about making members and subscribers pay for what they don’t want. Just how much of the available AP product is actually used by each owner and subscriber? It’s very very little. Propose to the AP that you will pay just a couple of bucks for each story or picture used and just wait for the howls and screams.

With the media these days reviewing just about every cost in the house, it’s only right there be this reexamination now of the AP rate structure. But to do it right the examination has to go really deep – what is the AP’s purpose for being and are US owners and subscribers willing to pay for what that structure costs? If not, then perhaps one more affordable?