Today at the Associated Press Interactive Media Summit in New York, AP
staffers were in full sales mode to display all the new offerings that the AP has for brands. And there’s a good reason for it. AP has forfeited 10% of
its revenue this year due to lost newspaper fees. And if the consortium hopes to retrieve any of that money
online, its best bet is advertising.

Due to newsroom cutbacks and budget problems nationwide, the AP has
been rolling back its fees to U.S. newspapers this year. For 2009, the
consortium has lowered the fees newspapers pay for its content by $30
million. Next year they will pull back fees by another $45 million.

The not-for-profit cooperative owned by the newspaper industry saw
revenue rise 5 percent last year to nearly $748 million. But fee cuts have AP predicting that revenues will fall both this year and next.

Traditionally, the AP has allowed newspapers to use its content for a
fee, helping smaller newspapers expand their coverage and making AP one of the most utilized newsfeeds in the world. As
publications cut back on newsroom staff and struggle to cover the news, that option becomes even more
appealing. But budget cuts have also caused many publications to consider forgoing content rather than paying to use AP content.

The AP’s fee cuts have been a stopgap measure. But the company is struggling to make up for that lost revenue. in addition, the consortium’s licensing deal with Google, which the company finally negotiated
in 2006 after long alleging that Google links leech revenue from
publications and encourage pirating of content, expires at the end of
this year.

And AP’s efforts to bring in additional revenue have not gone over smoothly online. Last June the company sued the aggregation site Drudge Retort for using its content unlawfully, which caused an uproar in the blogosphere, but has since been resolved. This week, the press service released a fee structure for websites that any use of its content, for quoting as litle as five words.

Other options under consideration include charging a fee to readers, which would be a large shift for a service that has traditionally gotten paid behind the scenes. But the AP is ready to change its approach. Speaking to potential advertisers today in New York, AP CEO Tom Curley made it clear that the news service is ready to come front and center:

“This is a very important moment for the AP. For years we’ve been happily behind the scenes, but in the digital media shift, we are more on the front lines…We decided we needed to tell people more about what we do and how we do it.”

With its new advertising options coming out in July, the AP is hoping that lucrative advertising revenues — and ease of use — will help them recoup some money lost to reduced fees this year.

The company’s new ad platform — AP
Custom News — is set to launch in mid-July. Custom News builds
on the AP’s current ad options, but makes it easier for publishers to
integrate AP content directly into their website.

Publishing partners can integrate AP content into their website more seemlessly and AP plans to sell advertising aggressively against that copy. To counteract the variable fee that AP charges publishers (which
the company will not disclose), it will split 50% of ad revenue with
partners. Premium partners can license AP content for a larger fee
upfront and keep 100% of the revenue earned from advertising on AP

According to Jay Tuten, Hosted Product Manager at the AP, the new tweeks to AP ad sharing allow publishers to “set it and forget it. We’re trying to make websites more profitable with fewer resources.”

The benefit of AP’s new approach is that publishers can integrate AP content into their sites with little to no effort and upkeep. AP’s wide breadth of coverage means that websites big and small can suplement their own reporting with AP content in almost any area, and then get rewartded with ad revenue.

Of course, the fee structure is still problematic. While AP has more diverse news options than most content creators, smaller niche sites like Politico are splitting ad revenue with no charge upfront. With CNN, Reuters and Dow Jones all fighting to grow their presence in the newswire space, unless AP can grow its share of the ad market, it will be fighting for increasingly smaller pieces of the ad pie.

But at the AP, they’re hoping that their track record will hold sway with advertisers. According to Jane Seagrave, AP’s Senior VP of Product Development: “If you are first and accurate, you can charge more.” Their new ad push will be in place by mid-summer. By the third quarter of this year, we should see if that theory holds water.