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‘Somebody has to do it’: why a Fairfax pull-out wouldn’t kill AAP

A consultancy report has recommended Fairfax save money by cutting its AAP subscription. But the wire brings in only a third of AAP’s revenue these days. Crikey goes inside the economics of a wire agency.

Could Fairfax cancel its subscription to Australian Associated Press? And if it does, what would that mean for the wire service?

The Australian recently got its hands on a consultancy report suggesting Fairfax do just that. It prompted AAP chief executive Bruce Davidson to send out an email to calm the troops. “The viability of AAP is determined by many factors and the cancellation or otherwise of services by a customer is only one,” he wrote, taking issue with a suggestion carried in the Oz that the cancellation of Fairfax’s subscriptions would threaten AAP’s viability.

Would it? Fairfax is certainly far from AAP’s only customer. These days, news outlets from The Guardian Australia to NineMSN to The New Daily rely on its copy to fill out their websites, and the company is placing more emphasis on its corporate clients. That’s because AAP’s reason for being, like that of all wire services, has become more vital than ever, but also more difficult to monetise.

News has become a commodity, which is largely the doing of wire services. AAP, owned by Australia’s major publishers, has its copy — along along with that of others like Agence France-Presse, Associated Press, Reuters and Bloomberg — published everywhere. Despite some redundancies, its numbers have remained largely steady at around 200 journalists in recent years. These anonymous but ever-present reporters cover Australia in a way few newspapers can now afford to do — comprehensively.

Publishers rely on it more than ever. In 2011, Griffith University associate professor Susan Forde co-wrote a paper on AAP’s usage in the Australian press, which concluded that by offering news as a product, AAP filled the need of Australian publishers for ever-updating, cheap and reliable content. “Wire agencies around the world — and we only have one — have just stepped into the void,” she told Crikey. “They have gotten bigger as news organisations have shrunk.”

On the breaking news sections of Australian media websites, it’s not uncommon to find more than 90% of the copy is sourced from AAP, Forde’s study found. But even this is an underestimation of just how much comes from the wire agency. Wire copy is being increasingly “churned” — that is, a journalist will change it a little, add a headline and byline, and pass it off as their own work. News agencies don’t mind this — they’ve always been the silent partner, and understand that publishers need to appear to be offering as much original content as possible. And wire services churn themselves. It’s not uncommon to find international stories written up by one wire service and localised by another.

But the ubiquity of wire copy doesn’t mean it isn’t valuable, AAP chief Bruce Davidson says. Instead, he sees it as the music that keeps the game going.

News stories seem to come from nowhere, and so some publishers are asking why bother competing with the stuff that people can read elsewhere? But really, it’s agencies and wire services who create this content,” Davidson told Crikey. “If we don’t do it, the stories will stop. Somebody has to do it, and I don’t see who else could.”

AAP’s traditional customers are being squeezed. “They want more for less, and that’s a fact of life for news agencies.” It’s not just more copy — they’re demanding faster stories, updated more regularly, and multimedia content and analysis, too.

But despite this, AAP no longer gets most of its revenues form its traditional wire services. Like its overseas counterparts, over the past few years it has focused on diversifying its client base, as well as its revenue streams. It owns Pagemasters, which subedits and lays out newspapers as well as magazines and trade press titles. It operates Medianet, a press release service that connects newsmakers with journalists. Though it sold its media monitoring service to iSentia last year, AAP still operates a substantial media intelligence service, compiling reports on press coverage sent onto corporate clients.

Around 15 years ago, half of our revenue came from our wire. It’s only about a third of our revenues now,” Davidson said. “It’s still vital — it’s why we’re here. We use the other businesses to support the news wire.”

Using one business to support another is always a tricky proposition. It leaves one vulnerable to competitors with no cross-subsidisation imperative, able to serve the customer more cheaply. Newspapers were vulnerable to this, which is why businesses like Seek and Carsales were able to thrive, offering clients classified advertising at discounted rates. Asked whether the internet has led to new rivals for AAP, Davidson says it hasn’t.

But like all the media, things for AAP are in flux. “We’re not at the cutting edge in terms of having to survive in the marketplace, like our newspaper customers are,” Davidson said. “But we are affected by the dramatic changes that are occurring.”

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