AP aiming for more lucrative deals with major Web sites as offline media slump worsens

AP eyeing better deals with Internet heavyweights

The Associated Press hopes to negotiate more lucrative licensing deals with major Web sites while mining new revenue from advertisers and readers as the 163-year-old news cooperative adapts to Internet-driven changes in the media. Chief Executive Tom Curley touched upon the AP’s financial priorities in a Tuesday interview after a meeting with employees in which he discussed possible revenue opportunities and initiatives to protect online content.

The AP is trying to capture new sources of revenue to offset the reduced income it is getting from newspapers and broadcasters, whose ad sales are shriveling dramatically. Its four largest online deals are now with Google Inc., Yahoo Inc., Microsoft Corp. and AOL.

After lowering its fees for U.S. newspapers by $30 million this year, the AP will reduce fees by a total of $45 million for newspapers and broadcasters next year, Curley said Tuesday. In April, Curley had disclosed plans to lower newspaper fees by $35 million.

AP’s rising concessions reflect the deepening troubles facing newspapers and broadcasters as they grapple with the longest U.S. recession since World War II, as well as marketing trends that are shifting more ads to less-expensive alternatives on the Internet.

Without offering specifics, Curley said the AP expects its revenue to fall this year and next. The AP, which is a not-for-profit cooperative owned by the newspaper industry, saw its revenue rise 5 percent last year to nearly $748 million.

With its revenue dropping now, the AP plans to eliminate about 10 percent of its payroll costs by the end of this year. Management is trying to hit the target through attrition and early retirement offers, but hasn’t ruled out layoffs among its work force of 4,100 people.

Although AP doesn’t expect its revenue to continue to crumble, Curley said the management team assumes the economy will remain sluggish through 2012.

Curley identified new licensing contracts with the AP’s largest Internet customers as his top priority.

The Google contract, which expires at the end of this year, could be the trickiest — and most important — negotiation.

After years of wrangling, the AP and Google finally reached a licensing deal in 2006 without specifying the financial terms.

It has been an uneasy alliance. The AP and the newspapers that own the cooperative sometimes assert that Google’s practice of displaying headlines and snippets of stories primarily benefits Google. The AP and newspapers also contend that Internet ad networks run by Google and other companies have made it too easy for Web sites pirating copyright stories to profit from ads shown alongside the unlicensed material.

Google didn’t directly address its relationship with the AP in a statement Tuesday. “We believe search engines are of real benefit to newspapers, driving valuable traffic to their Web sites and connecting them with new readers around the world,” the company said.

Yahoo, one of the AP’s oldest Internet customers, said it expects to work with the agency for “years to come.”

Besides hammering out new Internet licensing contracts, the AP also plans to review more effective ways to capture revenue from advertising tied to its stories, photography, audio and video, Curley said.

One way could be through a new system that will bundle some of the AP’s top stories with those of newspapers and broadcasters on certain topics. The system, which is still under development, would rely on so-called “landing pages” that could compete with the news sections run by Google, Yahoo and Microsoft’s MSN.

Readers also might be asked to pay to read and see some of the AP’s content, either on mobile devices or on computers, Curley said.

Charging consumers and relying more directly on ads would herald a significant change for the AP, which traditionally has gotten most of its revenue from selling its material to other media — newspapers, broadcasters and, more recently, Internet sites. About 17 percent of the AP’s revenue come from the Internet or other digital sources.