The Reuters-Politico Deal Is A Great Win-Win For Newspapers And The News Agency That Should Really Worry The AP, Far More Than CNN’s Proposed Service Which Should Now Just Fade Away

Philip M. Stone December 16, 2008

Reuters and the AP are the world’s two largest and most used news agencies, but Reuters has hardly any US newspaper business – just 15 print subscribers -- but its Politico deal should change that and for newspapers seeking an AP alternative then this is something far, far better than what CNN is proposing.

Reuters and Politico have agreed that those newspapers that are part of the new Politico Network also will have access for their web sites to 10 Reuters stories a day and 20 news pictures a day, and for their print editions daily 10 stories and 10 news pictures. Reuters will provide direct feeds of its North America Report and its news pictures service directly to those Politico network newspapers, and they can choose, within the daily limits, the stories and pictures they want.

For Politico this should give a big boost to expanding its network that already has 67 US newspapers including the Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and The Denver Post (Dean Singleton’s flagship –Singleton currently is chairman of the AP board!). Politico provides its service at no charge in return for selling ad space on each newspaper’s web site on a revenue share basis.

By having Reuters in the deal it means that each newspaper will now have access to a world class international news agency, so for national and international news there is a credible alternative, especially if AP’s cost structure is such an issue as many newspapers claim.

But AP still has a big edge for US newspapers, however, through its state news reports – parochial  coverage Reuters doesn’t get involved in -- which is why it has so little US print business, having only those larger newspapers that want an additional national and international news source.

But more and more newspapers are looking at forming their own statewide consortiums to provide local and state news (look at what is going on in South Florida, in Ohio, and other places) and if newspapers can agree to cooperate with one another on the state level then Reuters and Politico together would be the perfect addition for the Washington, national and international news – Reuters will also have up to five Politico stories within its coverage daily -- and suddenly the need to pay AP all those dollars suddenly disappears. Why would anyone want some 30 CNN stories a day when newspapers can have Politico and Reuters news and pictures? 

For Reuters, it’s an outstandingly smart marketing ploy. It makes 10 stories and 20 news pictures available daily to newspaper online sites and 10 stories and 10 pictures daily for print editions. Then after six months, when newspapers have had plenty of time to experience those Reuters services, the news agency will then try to strike deals for newspaper print editions to have full access to the news and pictures services at a very competitive fee.

As Christoph Pleitgen, the managing director of Reuters News Agency, told ftm, “Market conditions in the US are changing so dramatically. You have to align yourself to people doing new things. The Politico relationship makes for a fantastic marketing vehicle.”

Is this the start of Reuters going after the AP on its own home turf? Pleitgen says not so. “We are not taking the fight to AP”, he said. “We are of a different nature” – but he also admits there is “writing on the wall” -- US newspapers are looking for low-cost alternatives and certainly Reuters has the national and international product to fill any void, and if the price is right …

Whether this is really something for the AP to worry about all depends on how much newspapers are willing to help themselves in finding new ways to obtain their state and local coverage. If they can resolve that issue among themselves – for instance, agreeing to share one another’s news posted on newspaper online sites – then the Reuters proposal can make real financial sense – certainly its editorial product is beyond question.

Reuters will also be using the Politico deal to earn more revenues outside the US by offering its content, except for comment and blogs, as a supplement to its text World Service.  Reuters can use up to five Politico stories a day within its text services, but two requests to Reuters editor-in-chief David Schlesinger for comment drew refusals to say anything, he deferring to PR people.

Pleitgen told ftm that Reuters will be introducing several new video products in the coming months, all important for newspaper web sites that must have video in order to attract more and more online viewers, and with them more and more online advertisers. By getting the Reuters foot finally in the door of American newspapers and then coming out with additional video web products that those newspapers desperately need in order to attract more advertising income to offset the falling print revenue, then this could indeed be the US opening that Reuters executives have for so many years been searching. 

For the AP, it couldn’t come at a worse time. It already has announced it is reviewing its ownership structure and while putting on a brave face the co-op is in turmoil – it has far more cancellations on its books than is normal, and newspapers are publicly complaining the AP rate structure, even with recent reductions, is still far too high – at least 30% too high.

When the AP had the playing field to itself it was one thing as it has been for the past 20 years or so since the demise of the real UPI, but if newspapers arrange for their own local and state content and get a great financial deal from Reuters for national and international news then this is a really serious threat the co-op cannot just slough off with brave words about how editorially great its content is. It can certainly use that argument to scare off a proposed CNN newspaper product, but it has no meaning whatsoever when trying to fight off a Reuters.