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Like Newspapers, The Associated Press Is Dead

I'm amused by the Associated Press' attempt to invent a new legal complaint-- "misappropriation"-- to defend the business model that they have so far failed to sufficiently change in order to adapt the company to the current market.

What's interesting though is that they invented that new concept eighty years ago:

In 1918, the AP was involved in a case called International News Service v. Associated Press. Like current competitor All Headline, INS didn't actually copy AP's stories. Instead, they'd snatch AP's hot wartime scoops off the wire, have a hired hack rewrite the story in his own words, and put out their own version of the breaking news without having to bear all the overhead (not to mention the considerable risk) of sending trained reporters to a war zone. It wasn't quite copyright infringement, but it sufficiently offended the justices' sense of fair play that they developed the doctrine of "misappropriation" to cover the immediate copying and dissemination of "hot news" by commercial competitors of a news organization. If such "free riding" were allowed, the judges reasoned, the parasites would always be able to undersell their hosts, to the detriment of journalism in the long run.

I'm not sure how you call this "free riding" since in order for INS to have access to the wire at that time, they would have had to have been subscribers. This is, in fact, what just about every newspaper that carries AP content in its print and/or web editions does, except that sometimes the hired hack doesn't really need to work that hard-- after all, they have the rights to run AP content for their markets, so they're just editing it for space.

INS of course was attempting to ape the AP, probably by paying one fee to the AP for access to the content, and then splitting that fee (plus some margin) to their own subscribers, undercutting the AP's own rates. What they are calling "misappropriation" is actually illegal sublicensing. Perhaps AP's client agreements at that time were insufficiently precise.

To drag this concept out of the muck to deal with aggregators, bloggers, and services like Google News is just ignoring the basic fact: the AP's business model is broken because the business model of their primary source of income, newspapers, is broken. It is broken in a way that cannot be mended. It has been broken now for nearly two decades, it has merely taken this long for the process to advance to a point where people are able to see it clearly.

It used to all be so simple. A printing press was a license to print money, because they were expensive to buy and run. You gave your paper away for free to build a reader base, or else charged a nominal fee, enough to cover distribution. You document your reader base by polling your community, and throw in concepts like pass-on to increase your audience. You package that audience to advertisers, who buy space in your publications.

You have a number of advantages in your market once you've been running for awhile. First is that your major capital cost-- your press-- is sunk. If it's a good press and needs only minimal maintenance, then you can afford to charge for your paper and for your advertising a rate which reflects only your ongoing costs: paper, ink, and newsgathering, which includes not only your own reporters but your AP subscription.

It also includes the salaries of your "hired hacks" to rewrite and/or localize your AP content.

Anybody who wants to compete with you in your market has to invest up-front in their own press or lease capacity from you. Their pricing model has to cover those costs, and perhaps even the cost of financing those costs, which means they probably can't compete with you in price at the start, and perhaps not ever. They'd have to appeal to an entirely different market-- either a different segment of the same market (which is why in the days of 'yellow journalism' papers were fiercely partisan and appealed to audiences on presumed political perspectives) or in a different geographic area. Papers from far away will have their papers arrive later than yours, so that is also to your advantage.

Because the costs of transportation limit the territory of any one paper, and the appeal to individual portions of the market, broken down by political lines, newspapers flourish. Any city or town of appreciable size has at least one. Many have several, some publishing in the morning, some in the afternoon, appealing to all portions of the available political spectrum. Eventually, as improvements in logistics and technology make it possible, there is consolidation-- papers become less partisan and more objective, try to cover entire geographic markets and then to link those into regional blocks, buy out their competition, and national chains emerge.

Then a technological advancement comes along that threatens to remove all of those advantages: computers and computer networks.

Computers are cheaper to own and run than presses, but can distribute content just as well. At the beginning, they are still expensive, difficult to use, transmission speeds are slow and fidelity is low, but the capacity exists and it is inevitable that all these problems will be solved.

The press-- which was once the expensive barrier to entry for your competitors-- is now an albatross around your neck. No blogger or news aggregator needs one. They don't need to buy it, don't need to finance it, and don't need to feed it paper and ink. You can't just dump it in the river because the fact that you have it is the only reason your real customers, your advertisers, give you money. While a computer connected to the Internet is a great way of distributing a newspaper's editorial content or equivalent information-- basically, words and pictures-- it is somewhat less appropriate a tool for the distribution of the most expensive forms of newspaper advertising-- namely, four-color, broadsheet-sized full page display ads. Screens aren't big enough, connections aren't fast enough. In short, you are screwed because the part of your content that the audience wants can easily fit into the Internet-connected computer, even in the earliest days. What won't fit is the advertising, which is what actually pays the bills-- most of which are for your expensive press and the expensive paper and ink it needs to run.

You can't just get rid of the press. If everybody did, en masse, the market would be glutted with them and who would buy it? Even if they did, how would they take delivery? A lot of buildings were built around such presses and the press was actually worth more than the building. The only thing you could do would be shut it down, write it off, and try and move on.

But how could you? Even if you can see that these new devices have the capacity to destroy your business model, not all of your audience has or uses them yet, and your value to your customers-- again, the advertisers, not the readers-- is in your ability to reach a large number of readers. So you don't. You launch a website because you think you have to and then you try to figure out how to make money off it.

Charge subscription fees? Sure. Except other newspaper websites might not, and unlike newspapers from other cities that arrive late and more expensive than yours, websites from around the world arrive instantly and at no extra charge.

Sell advertising? Of course. However, the nature of Internet advertising means that nobody has to guess what responses are-- the customer knows exactly how many people viewed an ad, how many clicked on it, and how many sales it generated. It is difficult to play with rates, and at any case, in the early days, the online audience is small. In short, the demographic impact of the small number of early defectors from the print newspaper audience have a disproportionately large negative effect on the value of the print audience to the advertiser compared to the positive effect on the online audience, because they are well educated and affluent: after all, they own a computer, subscribe to an Internet access provider, and are using their network access to read content.

Basically the readers the advertisers want most to reach with the print edition will be the first to abandon it, but the online audience alone, however affluent and demographically desirable, is not enough on its own to support the same volume of advertising expenditures. There is no way the newspaper can split its usual business operations between online and print versions that allow them to retain the same amount of advertising income. The more they improve their online presence in an attempt to stave off new competition, either from other newspapers or third parties, the more they undermine the print edition and decrease its value to advertisers, without appreciably improving the value of the online edition, due to technical and other limitations: there is no way of delivering a four color broadsheet advertising page to a computer in a way that a reader will accept or that an advertiser will pay for.

So now we come back to the Associated Press. With newspapers focusing their own newsgathering on their local areas, the AP filled in all the gaps: elsewhere in the state, elsewhere in the country, elsewhere in the world: pay us a regular fee and we'll deliver it all to you in words and pictures. Take and use what you like. The AP wire was for newspapers, television and radio stations what RSS aggregators are now to regular Joes.

Just as the only conceivable way forward for the newspapers was to cut out the portion of their business model that had been made obsolete and kept their costs high-- the printing press-- the only conceivable way for the AP to move forward was to cut out the portion of their business model that had been made obsolete, and that was the newspapers themselves. The AP could generate all the copy they wanted but they couldn't reach an audience without the newspapers. They didn't own and run presses. They were reporters, photographers and editors who made ready-packaged content, waiting to be dropped onto the page. The Internet-connected computer meant that the press was no longer necessary. The AP could distribute directly to anyone capable of receiving the content; and unlike the newspapers, their content was not limited by the technology at all. The text and photographs they distribute are entirely well-suited for Internet distribution, and as technology has improved and speeds have increased, this situation has only gotten better; at the same time, display sizes have not increased commensurately, so advertising is still as restricted as it was at the beginning.

Of course the AP could no more cut out the newspapers than the newspapers could ditch their presses. Any AP internet presence would compete directly with the web presence of local newspapers that subscribed to the AP. Whether given away for free or on a subscription basis, it would cut the newspapers out, and they would retaliate by cutting off their subscriptions. Even more troubling, newspapers themselves contribute content into the system-- if the AP made open war on the newspapers they would lose a good deal, if not a majority, of the content they resold. They might be able to hold on to that content generated by freelancers who sold both to the AP and to local papers, but any reporter on newspaper staff would be lost, and certainly papers would move to get exclusive rights from freelancers who used to be available to work for the AP as stringers. The AP's access to content would be strangled.

And so because neither group, the newspapers or the wire services, would take the bold decisions back then because of the negative consequences, now both groups are reaching the end of their lifecycles, with nothing in line to replace them. But their collapse is now inevitable.