Former ABC News President David Westin will lead an agency created to help The Associated Press and other media companies generate more revenue by licensing news content for online use.
The need for more revenue at AP and across the news industry was made clear Thursday at the news cooperative's annual meeting: AP reported a net loss of $14.7 million in 2010, in large part because it reduced the fees it charges to help newspapers and broadcasters offset declining advertising revenue. AP's revenue fell for the second straight year.
AP CEO Tom Curley said the top priority of the News Licensing Group will be to ensure that news providers are paid for content appearing on websites, phones, tablet computers and other devices. Potential customers include websites that run or excerpt content from those news providers without paying for it.
Westin said the licensing group will also benefit large online distributors of news, such as Google. "This will allow them, for the first time ever, to have a single place they can go to, and with a reasonable amount of ease, license whatever they need from a very large number of news providers," he said in an interview.
The licensing group is set to start operations in July with content and data from more than 1,000 publications. It will be owned by its founding news organizations and operate independent of the AP. The AP said more than two dozen newspaper companies have pledged to invest in the licensing group. Neither the AP nor Westin would name them.
The AP also announced Thursday that it would change the formula for determining the fees it collects from U.S. newspapers for the first time in 27 years. The goal is to account for the growing number of readers online and on digital devices.
The new formula, which goes into effect in 2012, will be based on the size of a newspaper's print and digital audiences. It replaces a formula based on print circulation that has been in effect since 1985.
The AP says the new formula won't substantially change the rates newspapers pay. But it could help the AP sell more digital services by making the licensing terms easier to understand.
Traditional news companies have been struggling because of the economic downturn and a shift by advertisers to less expensive alternatives on the Internet and mobile devices. The AP's revenue isn't directly tied to advertising because it makes most of its money selling its services to 1,500 U.S. newspapers, thousands of TV and radio stations and websites.
But the struggles in the industry prompted the AP to lower the fees it charges U.S. newspapers and broadcasters by a combined $80 million during the past two years. In addition, some news companies have cut back on the services they get from the AP. Time Warner Inc.'s CNN dropped the AP, and some newspapers have closed.
AP's revenue fell 7 percent in 2010 to $631 million. Last year was the first time since the Great Depression that revenue had fallen two consecutive years. In 2009, AP had net income of $8.8 million on revenue of $676 million. The 2009 results were helped by the sale of a German division.
U.S. newspapers account for about 20 percent of the AP's revenue. That's about the same amount that the AP gets from online and digital customers, Curley said. More than half of AP's revenue comes from video operations that feed TV stations and cater to the rising demand for news, entertainment and sports clips on websites, smartphones and tablet computers such as the iPad.
Curley said the AP hopes to increase revenue modestly this year by expanding the cooperative's video, Internet and mobile services. As part of its video expansion, the AP is investing $30 million to upgrade its technology to deliver more high-definition video to more than 1,000 broadcasters and websites.
Curley said the News Licensing Group will have three main missions:
-- To create a united front for news organizations to negotiate with big Internet companies, the emerging distributors of news content.
-- To deter unlicensed use of content.
-- To help AP's members create products by providing them data on how their news gets used.
The AP is drawing upon research that began in 2007 to establish an enforcement and payment system loosely modeled after the one operated by the American Society of Composers, Authors and Publishers. ASCAP collects royalties and distributes them to more than 390,000 songwriters and others involved in the creation of music.
The AP would not give any revenue projections for the new licensing group. Westin said the group will start out with 15 to 20 employees, some of whom are coming from the AP. One is AP Vice President and General Counsel Srinandan Kasi, who will leave that job to serve as the new group's chief operating officer and executive vice president.
Westin, 58, stepped down late last year after nearly 14 years as president of ABC News, saying he wanted to pursue other opportunities.
Westin had little background in the news business when he took over in March 1997 from television legend Roone Arledge. He was a partner in a Washington law firm before joining Capital Cities/ABC in 1991 as general counsel.
But Westin led the news division through some difficult moments, including the sudden death from cancer of anchor Peter Jennings and the severe wounding of successor Bob Woodruff in an Iraq bombing.
In his final years on the job, Westin oversaw a 25 percent cut in ABC News' staff, as executives at ABC and current parent company Walt Disney Co. pressured the news division to cut costs.
Even as the AP mines new revenue channels, publishers still own the news cooperative. Eighteen of the 19 board members are from companies that own newspapers; some own broadcast stations, too.
Two members joined for three-year terms: Les Hinton, CEO of Wall Street Journal publisher Dow Jones & Co., and David Thompson, publisher of The Oklahoman. Four directors are leaving: Westin; David Lord, vice chairman of Pioneer Newspapers Inc.; Mike Reed, CEO of GateHouse Media Inc.; and Sam Zell, Tribune Co. chairman.
AP Technology Writers Michael Liedtke in San Francisco and Joelle Tessler in Washington, D.C., and AP writer David B. Caruso in New York contributed to this report.