By: Michael Liedtke
The Associated Press said Thursday its net income plunged as revenue fell nearly 10 percent last year. The news cooperative also expects a decline in revenue this year, which would be its first back-to-back drop since the Great Depression.
The AP released its 2009 financial results at the not-for-profit organization’s annual meeting in New York. AP executives used the forum to explain some of the ways they hope to boost revenue for the organization and its members, such as with news applications for the iPad.
Net income decreased 65 percent to $8.8 million in 2009 from $25.1 million a year earlier. The AP would have posted a loss had it not booked a $13.2 million gain from the sale of its German-language news service. Revenue totaled $676.1 million, a drop from $747.7 million in 2008.
It was the first annual decline in revenue since a 6 percent drop in 1993. If revenue falls this year as anticipated, it would be the first time that has happened in consecutive years since 1932 and 1933, according to the 164-year-old organization’s corporate archives.
Back then, the AP got most of its money from the U.S. newspapers that own it. The AP is far more diversified today, with a steadily growing amount of money coming from online and broadcast customers, photo archives and other commercial endeavors such as a sports statistics joint venture. U.S. newspapers account for about one-fourth of AP’s revenue today.
The cooperative has been cutting the fees of both U.S. newspapers and broadcasters, which together account for 40 percent of revenue, to help them deal with their own financial woes.
Other media companies had an even tougher year than the AP.
For instance, revenue at Gannett Co., publisher of USA Today, plummeted 17 percent last year after falling the previous two years as well. Similar declines were reported by The New York Times Co. Several newspaper publishers filed for bankruptcy protection. The Seattle Post-Intelligencer went online only and the Rocky Mountain News closed entirely.
The AP began bracing for its financial erosion in late 2008 as it became increasingly apparent that the cooperative would have to assist newspapers and broadcasters.
With some media executives threatening to drop AP services to save money, the AP lowered its fees for U.S. newspapers by $30 million last year. It plans a $45 million reduction for newspapers and broadcasters this year.
The downturn turned out to be more severe than AP anticipated. It had forecast 2009 revenue of about $700 million, a roughly 6 percent decline, at last year’s annual meeting.
With less money coming in, the AP reduced its payroll expenses by 10 percent last year. The cuts ? achieved through attrition, buyouts and layoffs ? left the AP with about 3,700 employees worldwide.
The AP ended 2009 with $53.2 million in cash, up from $34.5 million in 2008. The cooperative also shaved its debt by about $1 million to $4.2 million at the end of 2009.
The financial pressures facing the AP and other long-established media have been mounting in recent years as more people get their news for free on the Internet and advertisers shift more of their spending to less expensive online outlets. The Internet’s emergence as a marketing medium has hurt newspapers in particular because they make most of their money from print ads.
Meanwhile, the AP is trying to bring in more revenue from the Internet and mobile devices. It struck a new licensing deal for an undisclosed amount with Yahoo Inc. this year and is trying to negotiate a new contract with Internet search leader Google Inc. A licensing deal with Microsoft Corp. is set to expire this summer.
“The AP, in the last five years, has laid the foundation for a new way of doing business in the digital marketplace,” AP Chairman William Dean Singleton said at Thursday’s meeting. Singleton also is CEO of MediaNews Group Inc., publisher of the San Jose Mercury News and 53 other daily newspapers. His holding company recently emerged from bankruptcy protection.
As part of its digital focus, the AP will launch a service it says will enable it and participating newspapers to track where and how their online content is being used. The AP believes the service, called a news registry, can help it and newspapers find new moneymaking opportunities from online licensing and advertising.
About 200 newspapers have been testing the registry since late last year. The AP hopes to have about 600 newspapers on board when the service officially debuts July 14.
The AP also hopes to build on the popularity of its news application for mobile phones with more sophisticated programs tailored for the iPad, Apple Inc.’s new computer tablet. The initial iPad application is free, but the AP plans other “apps” that will require subscriptions.
“We believe the infrastructure we are putting in place will make it possible for publishers to set rights, apply tags, create products and execute sales direct to consumers,” AP CEO Tom Curley said.
Despite the financial challenges facing the AP, Curley said the cooperative remains committed to covering every major story in the world.
The AP spent substantially less on the mission last year as its expenses for news assignments and coverage dropped $18 million, or 24 percent, from the prior year, to $58 million. Part of the reduction was purely belt-tightening, said Ken Dale, the AP’s chief financial officer, but there also were fewer big events such as an Olympics or national elections to cover in 2009.