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Oct. 22, 2010, 11 a.m.

AP’s “ASCAP for news” — new ecosystem, new revenue streams, new enterprise opportunities

In a speech on Monday, Associated Press CEO Tom Curley announced that the AP would soon set up “an independent rights clearinghouse for news publishers to manage the distribution and use of their content beyond their own Web properties.” (Speech text in PDF link)

The entity, to be designed with input from multiple stakeholders including AP and the Newspaper Association of America, will be established sometime in 2011. It will be a business-to-business clearinghouse, not involving transactions with consumers. Through the clearinghouse, originators of news content (ranging from local bloggers on up; this is not limited to AP members) will be able to distribute their content for digital publication by others, and receive back royalties of revenue shares, according to protocols yet to be determined. The clearinghouse will aim to facilitate a rapid, realtime means of negotiating rights for such content sharing, resulting in a large increase in the potential market for any particular piece of content.

As an illustration, a newspaper (or a broadcaster, or a local blogger) could release a piece of content — a story, a photo, a video — with tags indicating what it is about, who owns it, how and where it may be used, and how the content originator is to be paid. The content, distributed through any available channel, is picked up by another publisher, aggregator, or personalized news service and used in accordance with the attached rights and payments protocols. The clearinghouse monitors usage and payment obligations throughout the network of participating content originators and publishers, and settles transactions among them.

The plan Curley described is very similar to what I proposed in a post here in July, in which I asked, “What if news content owners and creators adopted a variation on the long-established ASCAP-BMI performance rights organization system as a model by which they could collect payment for some of their content when it is distributed outside the boundaries of their own publications and websites?”

Curley framed the opportunity in very similar language: “With the new rights clearinghouse initiative, we are hoping to give news publishers more tools to pursue an audience and capture value beyond the boundaries of their own digital publications.”

Although Curley’s speech did not mention the analogy with ASCAP (the American Society of Composers, Artists and Performers, which has since 1914 protected rights and collected royalties for songwriters and composers when their works are performed or broadcast), the AP’s own story on the announcement said the clearinghouse would be “loosely modeled” after ASCAP.

When I spoke about the project on Wednesday with Srinandan Kasi, the AP’s general counsel, he said that AP had studied clearinghouses in other industries, particularly in order to understand what considerations drove their choice of governance structure. (For those inclined to derail into griping about ASCAP’s perceived shortcomings, the analogy is not to ASCAP specifically; the point is that a clearinghouse for content will speed up and expand content distribution options, and create a new and efficient content marketplace — not that it will be exactly like ASCAP.)

In announcing the project at a meeting of the Southern Newspaper Publishers Association, Curley said it builds on several years of development by AP, beginning with the creation of a digital cooperative in 2007, through which 1,500 newspapers and broadcasters funnel content that AP parses, tags, and returns for use on local websites. In 2009, AP set up News Registry, a system that uses the tags to track where and how that content is being used on the Web and is now used by about 1,000 newspapers.

That tracking functionality, and the possibility of pursuing copyright claims for unauthorized reuse of nothing more than a headline, garnered plenty of criticism for the AP last year. (Even just a few weeks ago, Curley repeated claims of widespread “content scraping,” promising enforcement action against unnamed sites engaged in the practice).

New revenue opportunities for content creators

The real opportunity around News Registry was never in tracking and enforcement, but in helping to find new avenues for content distribution. As an analogy, in the retail world, the equivalent to content piracy is shoplifting and other forms of inventory loss from stores — a real problem, but generally not more than 1.5 percent of revenue and not worth more than that to prevent or reduce. A retailer’s first priority is increasing sales, by building new distribution channels, and the same should be true in the news publishing business, where content misuse is a minor revenue leak compared to the opportunities for broader distribution. AP’s clearinghouse is a big step in that direction.

The digital approach of most news publishers until now has been to seek to control their own distributions channels — their own websites, their own mobile apps, or individually negotiated syndication channels where they retain control. While successful in a few cases, that approach has generally limited access and revenue — for example, the average visitor to U.S. newspaper websites still spends only about one minute per day at newspaper websites, which is less than one percent of total online time.

In a more open system, content with appropriate tags for rights protection and payment provisions could travel the web (and the mobile world) in search of readers via multiple secondary channels, without the need for slow offline negotiation in every instance. The potential for piracy is still there, but the system can establish a network of publishers, aggregators and others who subscribe to the rights protocols for mutual benefit.

The clearinghouse concept grew out of research by Water Street Partners, a Washington D.C. joint venture consulting group engaged by NAA. According to Curley, “Water Street’s work concluded there was a business to be built on the AP’s News Registry work.” (Disclosure: As part of their work, Water Street’s Julian Bene interviewed me about my Lab ASCAP post.)

Kasi told me that Water Street “talked to a lot of people to independently check on various aspects of the things that were under development here or have been developed here or were being considered for development here, and to ratify the path on which we were going.”

For now, Kasi is in charge of the project. He serves as the AP’s chief legal counsel, but is also one of its chief strategists and will likely play a major role in shaping the clearinghouse. He defers answers to many questions about the planned entity’s design. For example, it might be nonprofit, or it might be for-profit: “There are models of clearinghouses that are similar constructs in other industries that have a variety of different structures — profit, nonprofit, non-stock companies, and so on. So there are different models and we’re in the process of analyzing each one of them to understand what drove a particular choice so we are better informed for our effort here.”

Kasi is careful to say that AP is not determining the ultimate governance arrangement, the operational details, or anything in between. Since AP is a content supplier itself, he said, “we thought that journalism would be better served by having an independent entity to provide some of these services rather than the AP.” Serving the greater good of journalism as a necessary ingredient in a democratic society is something Kasi referred to more than once — perhaps an indication that the thinking is leaning in the direction of a nonprofit setup.

While a story by AP reporters April Castro and Michael Liedtke, which was posted on AP’s corporate site, asserted that the clearinghouse would take a 20-percent cut of transactions, Kasi would not confirm that, saying that he was “not privy to the source” of that figure, and that “the number will be something that I think the market will determine.” Kasi also clarified that the clearinghouse will handle content across all platforms from web to mobile, contrary to a few reports that suggested it would focus on mobile only.

The clearinghouse will allow for experimentation on revenue models. It could “clear” payments based on a number of different models, with the method determined by the content originator, who might receive payment based on a share of advertising revenue, user payment revenue, or a royalty payment set by the publisher. Kasi said that ideally, the clearinghouse would provide the flexibility to allow market forces to determine which model would work best. Kasi agreed that a dynamic, real-time, variable pricing or bidding system, as suggested in my earlier post, is possible, but said he’d be concerned that “information may be in some instances essential to democracy, and you don’t want that to be subject to a bidding system that some people may be deprived because they can’t bid into that.” What he expects is a hybrid system that can support multiple pricing methods over time, but not necessarily “on the first day of operations.”

New ecosystem, new opportunities

I can see the clearinghouse spawning a wide range of new business opportunities, and Kasi (who calls it a “new ecosystem”) agrees: “The idea really is for the clearinghouse to bring that efficiency and the toolkit to everybody, regardless of scale, so that we can actually create some vibrant new packaging for example.” Among the possibilities I anticipate:

  • Larger, more robust aggregators of content streams like Daylife. This is also an opportunity for the AP itself, which is one of the reasons it wants the clearinghouse to be a separate organization. Channeling content flows through wholesaler portals of this kind helps ensure proper tracking of rights and payment obligations.
  • New “remixers” — aggregators and niche publishers who take advantage of the ability to publish full content units (stories, pictures, video, graphics) created by others but republished in new contexts, in new markets and to new audiences.
  • New “hyperpersonalized news streams,” created by semantic content-matching engines and presented in multiple formats on the web, as browser add-ons, and as apps. Some of these will be highly specialized enterprise solutions with a subscription revenue models; others will target consumer interests such as sports, weather, cooking, recreation, style, entertainment, travel, pets, sci/tech, etc.
  • Personally or socially curated news channels could multiply and flourish by being able to supply full versions of news content rather than snippets.
  • Many new content-creation opportunities for publishers. The remixers and hyperpersonalized news applications can be seen as akin to the explosion in cable channels since the 1960s, which resulted in a huge increase in video production and consumption (certainly unanticipated, considering the main worry at the time was from movie theater owners who figured “pay TV” would steal their audience). Far more local info can be fed into the content pools available to remixers and hyperpersonalized apps, because as consumers spend more time with these content providers, they will look at more specialized niche content just as they do on cable. For example, newspaper publishers could add more video versions of their stories; they could publish more local statistical information; they could get more traction out of the backstories in their archives; they could create more content on local businesses and artists (perhaps sourcing this from freelancers who share in the ensuing revenue); they could cover events over a wider region; they could provide more specialized coverage of businesses in their area, etc.
  • Clearinghouses — there can be multiple clearinghouses, not just one, that would become major businesses in their own right.
  • Clearinghouse optimization — the equivalent of SEO services: publishers could engage them to help maximize clearinghouse revenue by fine-tuning the rights and pricing parameters, just as there are specialists in Google and Facebook ad marketing for retailers.
  • Payment processing services — (assuming an eventual expansion beyond B2B and into business-to-consumer transactions) — this is a niche that most clearinghouses would outsource rather than do themselves, because of the complexities of interfacing with bank and credit card back-ends and later on with currency exchange issues.
  • Usage metrics — new kinds of distribution will require new kinds of metrics; an opportunity for existing as well as new metrics services.
  • Other service businesses would emerge or grow; for example: businesses that semantically tag content including audio and video as well as text and photographs so it can be fed into the system; advertising networks that focus on supplying local as well as national ads to the remixers and content streams, including real-time priced ads.
  • And the big unknowns: additional opportunities that are created as all of the above are impacted by the very rapid growth of mobile in all its forms, by location-aware services, by social couponing in all its forms, by the addition of item-level RFID tags to virtually all retail inventories (now beginning), the proliferation of QR codes (already saturating Asia), and the emergence of a viable mobile payment systems using point-of-sale proximity sensors or bump technology — all of which could be ingredients in turbocharging a direct commerce layer on digital platforms.

Put all this together and there is no end to the content and commerce opportunities that are enabled when content can travel freely in search of consumers, with revenue flowbacks at multiple levels.

(A final disclosure: I am working with faculty members at the Missouri School of Journalism on opportunities to research, flesh out and develop some of the new opportunities around the clearinghouse concept.)

POSTED     Oct. 22, 2010, 11 a.m.
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