Remarks by Tom Curley
President and CEO/The Associated Press
AP Annual Meeting
Washington, D.C.
April 14, 2008

Thank you, Dean, both for the kind words and very inspired, creative leadership during a tumultuous moment in AP and industry transformation.

In August 1995, the Netscape browser famously provided the spark that set off the dotcom investment mania. Closer to where we live, the browser opened a door to online news and other content.

The industry’s initial response was to create destination websites for existing newspaper brands and to try to organize itself to compete for online dollars through the New Century Network. NCN, of course, failed, and the industry went its separate ways.

In the aftermath of the dotcom collapse, search engines rose and became powerful gateways to the Internet. Advertisers followed consumers to the Web, and advertising dollars shifted to the new distributors and away from the content creators.

That abridged history of our challenged world brings us to what likely is the next big inflection point for Web content and, really, for us as decision makers.

Last year Apple launched the iPhone, making it incredibly simple to access by touch all types of content including sports scores, weather forecasts, breaking news, feature photos and even video…along with a music player and cell phone.

Smart phones give you full-fledged access to the same kind of Web pages you see on your PC. They also seem to open a big opportunity for the newspaper industry to burnish its reputation as the dominant source of local information.

AP and the board have been evaluating several new digital business ventures designed to increase online revenues for AP and the industry. One venture -- distributing local and international news through the iPhone and other smart phones -- has been fast-tracked.
Today we announce formation of a new product for the news industry, the Mobile News Network.

The formation of the Mobile News Network positions members to capture opportunities on high-growth mobile platforms. A study of smart phone users confirms the decision to move aggressively to fill the news opportunity. Nearly all i-Phone users already use the device to access news and information.

The Mobile News Network will provide a national platform for smart phone users to get local content from brands they trust. Members can participate by providing local news that will appear alongside their logos. The network also offers a new outlet for members to sell local advertising to the mobile audience.

The size of the smart phone revenue market may be modest at first – we estimate about 10 percent of current industry on-line revenues. Depending on the growth rate of the installed base and whether current advertising CPM’s can be maintained, the market could grow to a half billion-dollar-a-year business before long.

Representatives of Advance, Hearst, Lee, McClatchy, MediaNews and Rust Communications have developed an initial set of business rules governing content contribution and advertising revenue splits. The rules are meant as “Release 1.0” to enable a rapid launch of the platform.

Following launch, the participants will revise the rules based on operating experience. The rules were reviewed thoroughly by the AP board’s revenue committee and the full board.
Apple’s iPhone focuses on local information, and currently offers local maps, directions, weather, traffic…but no local news.

News applications for the iPhone/iPod exist, but none currently provides comprehensive local content across the nation.

Here’s a brief look at the Mobile News Network at work on the iPhone.

The goal of the Mobile News Network is to provide comprehensive, timely, multimedia news in an interactive package, one that combines the authority of traditional news sources with the attractiveness and ease of use that the iPhone represents.

Content will be displayed by ZIP code with AP providing national and international news, and members providing local news. A center managed by AP would handle infrastructure needs, and AP would pick up the costs. Services provided by AP would include ad serving, content markup and delivery.

The Mobile News Network envisions two types of revenue streams: local advertising sold by participants and national advertising sold by a set of national networks The net revenue after infrastructure costs is split 50-50 between the content providers and the ad sellers. Members who participate can earn revenue share both by contributing their branded content and by selling ads on the site.

For ad sales, the intent is to target by ZIP code and let the advertising with the highest CPM win on a first-come, first-served basis. We also will pursue network relationships for national advertising and remnant advertising as needed.

We are working with Apple on iPhone design and functionality and promotion of the Mobile News Network, which will likely involve house ads in participating member media. While the mobile site was designed specifically for the iPhone, it readily can be ported to other smart phones.

Users will be able to specify the locations and brands they want for content providers. To ensure there is enough content on the overall site, AP will seed it with state news as well as national and international content.

On state news, the business rules call for member content to be favored over wire content whenever possible. And, importantly, AP will split the revenue share it earns on the state wire news with the membership 50-50.

The Mobile News Network will rise or fall with member participation, specifically, how fast we can pull together comprehensive network coverage. This product seems ideally suited to a cooperative able to provide a single source of local, national and international news.

The on-ramp to the mobile network is what we’ve been calling the Digital Cooperative. The Digital Cooperative is a program for members to realize new cost efficiencies and revenue opportunities in the online and mobile markets together with AP.

At the center of the program is our effort to standardize the tagging and indexing of daily news content so that it can be discovered more often and in more places as consumers increasingly come to rely on their online and mobile devices.

We want the machines of the Internet and the mobile networks to find our content automatically and send it to the right place at the right time. This process requires a roadmap to the content. The Digital Cooperative is providing the coding and indexing now, and we are offering cost incentives to speed adoption.

To encourage greater participation, as Dean mentioned, we are providing a discount of 5 percent off base text fees for joining the Digital Cooperative. The discount takes effect in 2009 and represents $7 million returned to the industry if all newspaper members participate.

So, we’re offering the possibility of extra revenue, the certainty of reduced cost and a way to connect with readers on the hottest, handiest digital platform. We hope it’s a deal you can embrace.

As digital technology continues to alter the way people obtain news, AP also is restructuring the way it gathers, edits and reports news to fit their needs. The changes affect everything from the way we relay the first word of breaking news to what we report on and where we report from.

The foundation lies in 1-2-3 Filing, a streamlined editorial workflow structure developed last year and now being rolled out to bureaus around the world. Under the new workflow, journalists immediately file a “first word” – a headline or alert – of breaking news, then follow it with a brief story written in a style that can be used by Web, broadcast and print.

A longer, fuller report, customized for specific formats follows. The structure cuts out the old, time-consuming step of filing to separate formats, and aligns the editorial workflow with market needs for immediate, fast content.

1-2-3 Filing sets the stage for development of new products and revenue opportunities, including the Mobile News Network.

Last year, AP also mapped the blue print for moving its editing closer to its reporting to assure that key decisions about coverage and products are made closest to where they matter. By the end of 2009, four regional editing hubs will be operating in the United States. The first, in Atlanta, opens in two weeks, covering 14 states. The hubs will free up significant reporting resources at the bureau level by reducing the number of staffers who work desk jobs re-filing copy.

The international regional editing hubs that were created over the past three years revealed how successful this approach was in getting news out quickly to customers. Last year the global filing desks in Bangkok, London and Mexico City took the next step by filing stories directly to US national circuits. Editors on the Latin America desk estimate their stories are getting to members four hours sooner than when they filed to New York for re-filing.

Meanwhile, with editing resources moving to the regional U.S. hubs, a Top Story desk has been created in New York to focus on selected major stories and to assure that all multi-media elements are included.

As AP steps up efforts for more and faster breaking news coverage, it also is diving deeper into key areas to provide members and customers with premium content that goes beyond what AP provides in its core report. The initial vertical or subject coverage will provide rich offerings – from in-depth beat reporting and analysis to video and archive packages – in three high demand areas: sports, entertainment and financial news.

Sports will debut its first product, Summer Games Plus, at the 2008 Olympics in Beijing, produced in conjunction with NBC and our joint venture partner STATS, the leading provider of sports data. A celebrity video service also debuts next month, and the financial news team also starts producing in-depth specialty coverage in real estate, homes and personal finance.

Also in the works: a business impact feature to leverage the relevance of stories that usually are considered general news but which can move markets – such as coverage of natural disasters and regulatory actions.

As AP works to better connect customer demand with news decisions, it always will fulfill its long-time mission of covering the most important stories of the day in every corner of the world.

Since we last met, The Associated Press has lost two staffers. Last May correspondent Anthony Mitchell was killed in a plane crash while returning from an assignment in Cameroon. And last August, cameraman Ahmed Hadi Naji was shot and killed as he walked to a mosque near his home in Baghdad on his day off.

Finally, I must report to you that on Saturday AP photographer Bilal Hussein entered his third year of captivity. Just yesterday, we learned that the Iraq Amnesty Committee dismissed all of the allegations that had been made against him. It may be that AP and the U.S. military will never agree on the course of events here, but the time has come for both of us move forward and for Bilal to be freed and allowed to return to his family and to AP.

Our world has become a more menacing place, and shining light on abuse and misuse of power a more perilous profession. On behalf of everyone at AP, I salute the brave men and women who have committed to covering the story of freedom from Tibet to Tikrit as well as here at home.