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June 29, 2011, 1 p.m.

In Canada and New Zealand, news agencies in flux illustrate the pressures on the co-op model

The Canadian Press and the New Zealand Press Association have a few things in common. They both serve as national news agencies to English-speaking countries with relatively small populations. For decades, they were both owned by their nation’s newspaper companies, in a co-operative ownership structure.

But there’s something else only one of them is likely to have in 2012: a future.

While CP is adjusting to a new life as a for-profit entity, the NZPA faces the likelihood of closing. Both show the difficulties in an ownership structure that is under pressure worldwide.

And while the largest co-op news agency — the Associated Press — is in healthier shape, it too has faced questions in an environment where how national news gets created and shared is changing. Co-op agencies thrived in the 20th century as a way for small newspapers in isolated markets to carry national news, by sharing content and creating a shared resource among companies. But consolidating media ownership and changing business models have increasingly pushed them into unknown territory.

Abandoning the nonprofit co-op model in Canada

The Canadian Press was founded in 1917 as a nonprofit cooperative owned by its member newspapers, and it thrived for decades. But over time, a number of Canada’s largest newspaper chains withdrew — Canwest in 2007, Sun Media in 2009. CP also faced a crippling deficit in its pension plan, pegged last year at $37 million. The organization sought — and received — legislative help from Canada’s parliament for relief from pension regulations that would allow it to restructure. In November 2010, it re-made itself as a for-profit company, with investments from the corporate owners of three of Canada’s biggest newspapers — the Toronto Star, the Globe and Mail, and La Presse.

Two weeks ago, the 94-year-old organization announced it was looking for new leadership to drive its “strategic refocusing,” after Eric Morrison stepped down as president. But in an interview shortly before his departure, Morrison said the pressure on the co-op model had been building for more than a decade. He said CP’s agreements with its members prohibited it from publishing members’ content online. As a result, the agency assumed more reporting duties itself to serve the growing demand for online content — destined for web portals such as yahoo.ca and AOL Canada, now in the form of huffingtonpost.ca. Shared editorial content had became a legacy newspaper service.

But the most important issue, according to Morrison, was CP’s struggle to raise capital. “It’s hard in a co-op to raise any funds — either to deal with issues like pensions or to deal with swings in the market,” Morrison said. “It’s hard to raise any funds even to invest or to innovate.”

He said CP had managed to innovate successfully — especially in growing its digital products such as multimedia reporting packages — but “there’s only so far you can go with that.”

CP’s digital offerings now bring in 40 percent of its total revenue, he said, with products and services for its print customers bringing in 26 percent. The remaining 34 percent is generated from sales to mainly broadcast clients. The organization gets 75 percent of its revenue from media clients and 25 percent from corporations or government in the form of services such as media-monitoring.

A dim future in New Zealand

On the other side of the globe, New Zealand’s national news agency is threatened with closing, after one of the two Australia-based chains that own virtually all of the co-op’s member newspapers said in April it would withdraw.

Fairfax Media and its rival, APN News and Media, had, in fact, stopped sharing editorial content in 2006. However, they continued to support the New Zealand Press Association to gain coverage — by the NZPA’s own reporters — in the few areas of the country they didn’t have a presence.

The 131-year-old NZPA hasn’t issued a public statement on its future, but media reports stated that NZPA executives considered Fairfax’s decision to pull out a fatal blow. News organizations reported that the NZPA indicated informally it would try to find a way to survive, but it ultimately advised its union leadership in late April that the organization would fold in August.

Fairfax representatives told reporters the NZPA hadn’t provided the kind of investigative journalism it needed. However, the head of the journalism program at Massey University in Wellington, N.Z., said the country’s two large chains simply don’t need each other anymore.

If fact, says Grant Hannis, they had been inching toward a breakup for years. He said Fairfax had worked to beef up its newsroom in Auckland, where it doesn’t have a major daily news presence. Both chains had also built their own corporate distribution networks to feed their print and online properties.

“We shouldn’t look at NZPA through rose-tinted glasses,” Hannis wrote in an email. “NZPA was originally set up to protect the newspaper industry. As new technology eroded its monopoly — first broadcasting and then the internet — it became inevitable the agency would struggle.”

Morrison argues there are few similarities between the situation in New Zealand and Canada. He said CP had survived the withdrawal of both Canwest (whose major-market dailies are now Postmedia) and Sun Media (the chain of big-city tabloids). In fact, he said, CP has already welcomed back Canwest’s former TV holdings (Global) as a client.

Gene Allen, a Canadian academic who is researching a book on CP’s history up to the 1970s, says the underlying problem is that with changes in technology, “it becomes progressively easier to do the kind of information movement that news agencies are particularly good at, with a less established and elaborate organization.”

The role of ownership concentration

A key factor in the fate of co-ops is the degree of ownership concentration in the market, said Allen, a journalism professor at Ryerson University in Toronto. “In the New Zealand situation where you have two major chains — if you lose one of those, you’re pretty much dead,” he said.

Allen says he hasn’t studied CP’s recent history in depth, but he speculates that, without the pension problem, CP might have been able to continue functioning as a co-op. Despite the exit of Canwest and Sun Media, there are other chains left to support the organization.

That’s one major reason why, in the U.S., he said, the Associated Press hasn’t faced the same threats CP and NZPA have: because ownership concentration is weaker. “If you look at the American market, while there are big chains, it’s a much more diversified newspaper ecosystem,” he said. AP also gets only around 20 percent of its revenue from its member newspapers, with revenue strengths in broadcast and web distribution, along with international growth.

Even within AP, though, small-market members have questioned whether the organization is serving them or its web portal customers. In recent years, they have lamented their inability to profit from Internet distribution while AP raised revenue for itself, selling content to web portals such as AOL, Google and the Huffington Post. As a result, newspapers in Ohio, New York and New Jersey made efforts in 2009 to form regional newsgathering co-operatives.

While some of those have found success, the vocal newspaper threats to leave AP have grown less vocal. In an effort to help its members capture value from Internet distribution, this summer AP will launch its News Licensing Group — an entity that will track and police its members’ content online, with the goal of helping members get paid for it.

Ryerson’s Gene Allen says he’s most interested in whether the new owners of CP will run the organization in their own interest or in the broader interest, as they have in the past. To that, Morrison said before his departure he sees CP continuing to serve is clients impartially. “Our independence is what we monetize. It’s a value that people look to us for. We’re not a house service; we’re not a house brand.”

Massey University’s Grant Hannis said few people in New Zealand will notice — or care about — the demise of the NZPA. “The end of NZPA was quite a big story here, but the public at large probably isn’t that bothered. Readers don’t tend to look at newspaper bylines and most wouldn’t know NZPA from AP, PA, AFP, Bloomberg, etc.”

So are national news agencies a relic of the past in the age of globalized and concentrated media? In their historic role, Hannis says yes.

“Previously, news agencies were as much about monopolizing the news as anything. Where they were relics, they had to — and did — seek to reinvent themselves, such as in the case of Reuters. Where they can provide genuine value, they will survive in the modern marketplace.”

POSTED     June 29, 2011, 1 p.m.
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