Sunday 7 February 2010

AP-Yahoo Deal: A New Beginning or More of the Same?

An end-of-year discussion in the December 19th-January 1st issue of The Economist ("Newspapers and Technology") contained a useful summary of the challenges facing the newspaper business. First the good news from the summary (at least from 39,000 feet) : "The internet may kill newspapers; but is not clear if that matters. For society, what matters is that people should have access to news, not that it should be delivered through any particular medium; and, for the consumer, the faster it travels, the better."

Now for the less good news (from ground level): "The trouble is that nobody knows how to make money in the new environment. That raises questions about how much news will be gathered."

Staying at ground level, there was an interesting announcement on Monday, February 1st, regarding an agreement that had been reached by Associated Press and Yahoo regarding the licensing terms by which Yahoo will pay AP for the right to continue to post AP contents on the Yahoo site.The terms of the arrangement were not revealed. AP has yet to reach a parallel licensing agreement with either Microsoft or Google,and it appears that Google has for the moment suspended posting new AP contents on its site, pending the conclusion of a renewed licensing arrangement with AP.

First a word about AP itself. In its own words:
"AP operates as a not-for-profit cooperative with more than 4,000 employees working in more than 240 worldwide bureaus. AP is owned by its 1,500 U.S. daily newspaper members. They elect a board of directors that directs the cooperative. AP supplies a steady stream of news around the clock to its domestic members, international subscribers and commercial customers. It has the industry's most sophisticated digital photo network, a 24-hour continuously updated online news service, a state-of-the-art television news service and one of the largest radio networks in the United States. It also has a commercial digital photo archive, a photo library housing more than 10 million images."
The most useful summary of the new AP-Yahoo deal that I found is the news report ("Yahoo Keep AP in its Contents Corner with New Deal) provided on February 1st by AP itself. The following points made are worth mentioning:

The Background-- Yahoo, rather than Google or Microsoft, has the largest Internet audience for news (as opposed to social networking or Internet search). AP has providing contents for Yahoo since 1998. That said, AP is the not the sole source of news contents for Yahoo, which also makes use of contents from Reuters as well as from Yahoo's own news staff. Nevertheless, in the words of the AP report, "[t]he formula has worked well for Yahoo...."

The Challenge-- The problem for AP is that a material portion of its revenues has come from the print media and broadcasting. AP has yet to find the financial structure that can compensate for the loss of revenue from these traditional sources of income in an age of the migration of news to various on-line platforms. Hence, the importance of reaching financially satisfactory licensing arrangements with the leading on-line platforms for the distribution of AP-generated contents (in the words of the report, finding ways to "pump..." internet companies for more money"). That said, Yahoo is less financially robust than either Google or Microsoft.

The (Partial) Solution--While the details of the license were not made available, the report did mention the following:

1. In addition to receiving increased revenues, AP wants "greater cooperation" to ensure that its contents are not being used in an unauthorized manner. In this connection, it is reported that AP is working on a tracking system to determine where its contents are being read. Yahoo, for its part, "has pledged to enforce "the strictest standards" to protect AP's contents."

2. AP is contemplating a multi-tiered arrangement (at least in the future) whereby stories containing exclusive contents might charged more than news items, the contents of which are available from other sources as well. Nevertheless, the word is that the agreement reached with Yahoo does not include such a tier-pricing arrangement.

3. Separately, Yahoo has reached agreement with U.S. newspapers that own AP in an arrangement to sell more advertising.

And Then There is Google --The AP report ends with an interesting juxtaposition. On the one hand, the report quotes a statement from Yahoo that the company "... has always recognized the value and importance of original, authoritative news. We are pleased Yahoo and AP will continue that valued relationship."

On the other hand, the report concludes with the following comments about Google: (i) "[M]any publishers believe Google has profited unfairly from their newspapers by drawing upon snippets of their stories to draw traffic ... so it can sell more of its ads ..."; (ii) AP and Google quarrelled for several years about the way that Google summarized AP news items; and (iii) Google believes that it in fact drives traffic to newspaper sites. Reaching agreement with Yahoo is one thing, reaching an arrangement with Google may be quite another.

Final Word-- This is just the beginning for AP, as it fights a declining print media and a challenging online environment as well as sorting its relationship to Google, while Yahoo (with some help from Microsoft) itself seeks to carve out a role for itself in a (still) Google-dominated world. I expect that there will be further posts on this blog that will follow these developments.

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