USC Annenberg Online Journalism ReviewUSC





Reuters, AP Follow Different Paths in Search of Revenues

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Widespread news online results in a loss of branding. Restricting the commodity is one way to gain value, selling as widely as possible is another. Newspapers look on warily.

You stumble around online and come upon what looks like a news story. There's a headline and a dateline, and a lot of reporting going on. What's missing is who wrote it and what news organization bankrolled the reporting.

More and more you'll find a news story written by one source, picked up by a wire service, licensed to a portal such as Yahoo News, then picked up by a Weblog or personal site, perhaps e-mailed around to friends, and it loses its identity. The reader at the end of the line isn't sure who wrote it and where it came from.

As news becomes more of a commodity online, wire services are balancing their twin urges to disburse material widely and preserve its value. Reuters decided to pull its licensed business content from various Web sites in order to drive more traffic to its news portal. Dow Jones pulled its news feed from Yahoo Finance, and only gives headlines to Yahoo from The Wall Street Journal's site to drive traffic and paid subscriptions. Conversely, AP Digital jumped into the vacuum with a new expanded business-news service.

But are the original brands important? Sites with no original reporting such as Yahoo News (No. 2), AOL News (No. 4) and Google News (No. 17) remain popular destinations, according to the Nielsen//NetRatings ranking of top news sites for March 2004. Susan Mernit, a former executive at AOL who now does new media consulting, told me that the psychology of surfers, who don't distinguish various trusted sources of news online, is helping to lower the value of breaking news.

"The wire stories are becoming more of a commodity," Mernit said in a phone interview. "News is becoming less branded or the brands are becoming less distinguishable. I think as long as it's a credible source, (readers) won't care if it's CNN or AP or Reuters or The New York Times. They're looking for the most current, digestible bits of  data. I think that's why Google News is doing so well, because not only is news a commodity, but branding has kind of mushed together."

Mernit believes the portals are driving down the value of hard news by making it part of a package that includes user-generated content and comments.

"In a way, part of the commoditization is that the news story in itself becomes less important," she said. "The idea of blogging or a vox populi, a voice of the people, is something that many portals are dealing with in their own way by giving readers opportunity to comment, by showing the most popular or linked to stories, by asking people to rate the story, or take a poll. News stories are becoming part of the package and that in turn diminishes their brand value."

Lewis D'Vorkin, editor in chief of news and sports at AOL, told me via e-mail that his portal's business relationships have certainly changed since the boom time online. Back then, content providers paid a fee to be an "anchor tenant" on AOL; now the deals are more "performance-based" and AOL has to pay or barter for the content it uses by delivering traffic or subscriptions, he said.

He told me that AOL News was currently looking for a new business news partner after Reuters pulled out and is weighing the new AP Digital offering and Bloomberg. D'Vorkin feels that AOL provides an important distribution service for the news online and doesn't devalue it.

"We have helped parent news organizations recognize that their online arm is not just the newspaper or TV station online, but it is a vital part of the total news organization, reaching an audience that the parent company has been losing," D'Vorkin said. "Consequently, more people are seeing the journalists' work than ever before. Many of the people who are seeing the journalists' work belong to a demographic that previously had been lost to the company -- particularly if the company is a newspaper."

Keep it in or let it out?

Just as newspaper and magazine sites have struggled with the pay vs. free dilemma, wire services have to balance low-cost feeds with the heftier fees they might get from institutional clients, especially in the business-news realm. So Reuters and Dow Jones both made moves to keep readers of its business stories on its own Web sites. (Reuters declined to comment for this story.)

Jessica Perry, vice president of business development for Dow Jones Consumer Electronic Publishing, told me via e-mail that licensing content is only a supporting business. Dow Jones makes more money from selling content directly than licensing, though licensing does help drive traffic and paid subscriptions.

"(In licensing decisions) we weigh the potential size of the revenue opportunity against what we'd be likely to generate directly," Perry said. "The current strong advertising market certainly factors into our most recent thinking, as well as potential direct subscription revenues. ... Certainly, there are a few other news providers who have more of a mass-market approach, and they make their content more broadly available. But, as is the case with any product, wide availability tends to reduce its perceived value to the end user."

Not long after Reuters made its move to rein in business content online, AP Digital announced a new expanded business-news service called AP Financial News, with its first client being Yahoo (which had lost Reuters and Dow Jones news on-site). Ruth Gersh, director of online services for AP Digital, said that expanding its business news service had been a big initiative since last summer, but that "changes in the financial information market accelerated our schedule and made the project even more crucial to our members and customers."

Though AP Digital has been aggressive with licensing its content online, it doesn't have a Web hub containing all its news as Reuters does. Gersh believes that trusted news online still has value, even if it's spread thin throughout the global Web.

"AP has always been in the business of making news available widely and quickly and its outlets have grown with the technology," she said. "And first-rate, trustworthy news is never a commodity. The very proliferation of information puts a premium on accuracy and reliability, which are hallmarks of the AP."

Chris McGill, general manager of Yahoo News, doesn't think that free news online has necessarily devalued it to people who are less likely in the Internet Age to buy print newspapers or magazines.

"News begets news -- so it's not really possible to have certain news devaluing other news ... even on the local level," McGill told me via e-mail. "Our belief (shaped by external and internal research) is that users-- especially younger ones -- are looking for multiple sources of news. We believe that local newspapers have an ingrained local audience and while the Internet is obviously taking share from both TV and print media, it would appear that both can survive in the near future."

The fight for local turf

The proprietors of newspaper sites don't buy that argument about local news. In fact, as national and international news makes the rounds of various portals and broadcast sites, it's the local news that becomes more scarce, and hence, more valuable.

While Yahoo has built out a local news section, the AP will not allow it to run any of its state news feeds there. John Leach, editor of digital media for The Arizona Republic's AZCentral.com, told me that he has fought to keep AP from selling the Arizona state wire -- with many stories from the Republic -- to the portals.

"Yahoo and MSNBC want to have this perception that they have local news," Leach told me by phone. "It's not nearly as rich as a newspaper site tends to have in terms of local news. I've had long discussions with AP about AP selling our state wire to those services, because then the Republic story would go to our Web site and would go to AP and would end up bouncing back to Yahoo where it's actually on their site physically. That would be real dangerous to me."

Leach also has had to get AP to label Republic stories that ended up on local radio as "Not for Online Use in the Phoenix Market" so it didn't end up on a competing Web site. And he's also wary of Google News and its efforts to sell local advertising and localized search.

Chris Kelley, editor of Dallas Morning News site DallasNews.com, shares Leach's concern about the AP state wires. "It strikes me as, if you're going to use our stuff and you're going to give it to a national portal to go local, then you're hurting us there," Kelley told me by phone. Kelley is a big fan of AP Digital and sits on the AP Managing Editors board, holding one of the two online seats.

His biggest concern about wire services is the cost he has to pay for them, with AP charging member newspapers a seperate fee for online feeds. While the print newspaper used to pick up that cost, now the burden has been shifted in many cases to their online brethren.

"We've seen where newspapers used to pay for the wire feeds, and now interactive companies, our divisions are having to pick up that cost now that we're growing some ad revenues," Kelley said. "They're saying, 'If you're doing so well, you pick up (the cost of) that wire feed.'"

Rising above the competition

While Kelley is also concerned about the growing encroachment of portals and aggregators into the online news business, he seems to welcome the competition. "I really think these guys are going to keep us on our toes," he said. "They're going to make us more competitive. That's just the nature of the beast."

Kelley told me that DallasNews.com did a market survey on what its audience was reading and found his site had 168 online competitors. That's a seismic shift from the newspaper formerly thinking of a crosstown rival paper or the local news or radio outlets as competition.

Karen Jurgensen, who recently resigned as editor of USA Today after the Jack Kelley scandal, talked about the new landscape for media competition for a 2002 Freedom Forum publication on best practices and leadership in news organizations (irony deleted).

"This would not have been true in 1982 (when USA Today began), but I define competition now as anything that competes for our readers' attention," she said. "Whether it is a metropolitan newspaper or a Web site or a cable TV channel or an e-mail that somebody sent, an e-mail newsletter that goes out -- the business has changed so much that we are inundated with information. News is a commodity, it's cheap. Because news is a commodity, because it is everywhere, we have to give the readers the things they can't get anyplace else."

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Chris Kelley, editor of Dallas Morning News site DallasNews.com

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Susan Mernit, new media consultant and former AOL executive

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John Leach, editor of digital media for The Arizona Republic's AZCentral.com

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