How Associated Press is future-proofing revenues

How Associated Press is future-proofing revenues

The Associated Press has revealed how it is moving away from reliance on its core business of licensing content to publishers.

In 2023, 82% of AP’s revenue came from content licensing with 5% from its software solutions business AP Workflow Solutions, 4% from its business providing broadcast facilities and journalists to global broadcasters, and 9% from other streams.

US newspapers originally made up 100% of AP’s revenue when it launched 178 years ago with just five member titles.

“We are a majority content licensing business still, but US newspapers represent just about 10% of our total revenue,” Kristin Heitmann, SVP and chief revenue officer at AP, told the WAN-IFRA World News Media Congress in Copenhagen last week.

“I say that just to emphasise that throughout our history we’ve had to evolve.”

Associated Press content revenue: Gannett and McClatchy pull back

She said AP is currently “in the midst” of another evolution “as the media industry is facing significant pressure. And for the AP, while content licensing will always be our core we are facing headwinds in that part of our business as the media sector, which is our primary customer, is being consolidated and disrupted.

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“We’ve had to look at new revenue sources to maintain, and grow, our revenue and as an independent not-for-profit… everything we make goes back into our newsroom. We are not a public company, we do not have a family trust, we do not have a billionaire benefactor, although many days I think we all wish we did have a billionaire benefactor.

“We can only spend what we make. And so that makes it essential that we diversify to continue to enhance the news report and invest back into the business.”

Already this year two major US regional news publishers, Gannett and McClatchy, have ended their use of AP wire content although both will continue to use its elections data.

Heitmann said: “Gannett and McClatchy are important customers for the AP and we never like to lose customers. We are in contract through the end of this year and hope they remain customers of ours for many years to come – and certainly will in some way through the election and beyond in other services we provide.”

She added that “thousands of media” around the world use AP content and they “sometimes test not using us and come back. If that’s the case with Gannett and McClatchy, we have an open door…”

But she said it was “not as big of a catastrophe as it would have been when US newspapers were 100% of our revenue so it just highlights, I think, the importance of diversifying your revenue”.

Four key areas of AP revenue diversification: services, ads, AI licensing, philanthropy

Heitmann referenced four areas of AP’s business that are examples of its diversification efforts: services, direct-to-consumer and digital advertising, generative AI and data licensing, and philanthropy.

The newest revenue stream to emerge is AI licensing: AP signed a deal with OpenAI last July allowing the tech company to use its archive going back to 1985 for training purposes, and Heitmann said more partnerships are being pursued.

“We wanted to establish first that training licences are required, that it is not fair to just use our content to train generative AI systems, and that content creators must be compensated,” she said, adding: “So since that first deal, we’ve continued to pursue other deals in the space and are encouraged by the opportunities ahead.

“We’re particularly encouraged by the opportunity for fact-based news organisations to help improve the results of generative AI models which today we all experience as users being rife with misinformation.”

Digital advertising and direct to consumer

Heitmann said AP has had a digital advertising business for almost ten years “but we didn’t invest in it. It actually kind of happened by accident.”

They began to invest in it a year ago, including by relaunching the consumer website and app AP News as “the foundation for a digital advertising business”.

Heitan said: “Digital advertising is a major revenue source for most media organisations but historically it hasn’t been for the AP. And while we don’t anticipate digital advertising ever being more than about 10% of our total revenue, we have a lot of room to grow here.”

AP has also expanded into consumer donations, which it launched in a “light touch way” at the end of 2023 and then expanded to enable recurring donations this year.

“Direct to consumer overall is an area that will continue to see us experiment in and expand,” Heitmann said. “We’ve had a tremendous amount of success in a short amount of time and are taking those learnings to benefit all of our B2B customers as well.”

In philanthropy, Heitmann claimed this type of funding for journalism in the US has almost doubled to $322m over the past ten years.

AP began fundraising around certain content areas such as climate, education and democracy about five years ago but saw a further opportunity to grow by creating an affiliated 501(c)(3) division – a type of US non-profit company xempt from federal income tax.

Heitmann said this would enable AP to “fundraise at much larger levels”. This has been established in the past month and active fundraising around it will begin this summer.

Experimentation is ‘how we’ll continue to persist’

Of the services businesses, Heitmann said they “tap into the rich history of the AP and lean into our strengths as a breaking news business”.

They include AP Workflow Solutions, formerly known as ENPS, a software solutions business for broadcast customers in more than 60 countries.

AP360 enhances the offering of global media clients by providing them with AP journalists as well as provide corporate customers with production services – for example, hosting online live auctions for Sotheby’s.

AP also has content services, for example creating press releases for corporate clients, AP Stylebook training for PR professionals, and election services through which AP is a key source declaring winners in US ballots.

Heitmann said: “So in summary, we have a number of different revenue diversification efforts underway… not all of these are going to work, and they’re certainly not all going to work at the same time, so it’s for us and for everyone in the media sector to continue to build out a diversified portfolio.

“We have to experiment, we have to innovate – it’s how the AP has persisted for over 200 years and it’s how we’ll continue to persist.”

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