The newspaper business has had its fair share of difficulties lately, especially in generating ad sales. Now, a recent announcement from The Associated Press will pose even more challenges to newspapers with an online presence: They'll have to pay to post AP stories online.
A recent New York Times (NYSE:NYT) earnings report pointed to sluggish ad sales, and Tribune's (NYSE:TRB) mediocre ad growth wasn't helped when automotive giant General Motors (NYSE:GM) recently decided to drop its ads from Tribune's Los Angeles Times.
The newspaper operators know they have to address these difficulties. Increasingly, they are recognizing that to capture more ad dollars, they have to be able to offer advertisers more options, especially exposure on the Web. As Fool contributor Tom Taulli has written, newspaper concerns have been gobbling up once-independent online properties at a breakneck pace.
In addition to buying online media competitors, newspaper firms have also been capitalizing on Web sites operating under their own marquee names. New York Times, for instance, recently reported that its NYTimes.com site reached a record amount of page views in March. And Gannett (NYSE:GCI) indicated that it had a banner month in March, with its USAToday.com property pulling in the highest number of unique visitors ever.
But the AP's announcement means that New York Times, Gannett, and other outfits that operate online versions of their newspapers will soon be facing new costs. Up until now, newspaper firms that had bought AP stories and pictures for print have been allowed to also post those stories and to the Web free of charge. Now they'll have to pay a licensing fee. The AP's pricing scheme for such online licenses hasn't yet been clearly established.
In the near term, the transition isn't likely to be terribly painful, since the AP initially plans to offset the new costs with reductions in other fees. Nevertheless, over the long run, the new licensing arrangement will add another burden for newspapers struggling to compete for advertising dollars, especially since Web-only plays like Yahoo! (NASDAQ:YHOO) and Microsoft's (NASDAQ:MSFT) MSN have to pay only once for their AP material. For newspaper investors, that's an unwelcome story.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
