US Editors Complain About The New AP Rate Structure But They Have Only Their Predecessors To Blame For Killing Off The News Agency Competition

Philip M. Stone January 31, 2008

The Associated Press has announced a new rate structure for its member newspapers in the US and there is a hue and cry by editors of many metropolitan newspapers who believe that in today’s difficult economic climate their rates should be decreasing rather than staying the same or increasing a bit. Well, no sympathy from this corner!

The way it used to be

This writer spent his entire media career in executive positions with news agencies, first with United Press International (UPI) and then with Reuters, and in both cases the arch-enemy was the Associated Press (AP). Hearing newspaper editors complaining about the cost of their news agency fees when the services provided by those agencies are probably the best and biggest bargain that newspapers enjoy therefore falls on deaf ears, even if it is the AP now under attack.

There’s a simple formula for newspapers to use in determining whether their agency fees are cost-effective. Figure out the average cost of an editorial employee, divide that cost into the fees charged by the agency and you now have the agency cost in manpower terms. Next count up how much space in the newspaper is taken up by agency material – news and pictures – divide that figure by the agency cost in manpower terms, and compare that figure to the cost of filling the remaining space provided by editorial staff. For most newspapers, the amount of space given over to agency material, particularly as newsrooms are continually being stripped, is about the best financial bargain in the paper.

What the AP is missing in the US, of course, is competition. That may sound like a strange thing to say, given international agencies like Reuters and AFP are active there, and there are multiple news outlets available on the Internet, but the plain truth is that nobody covers the US like the AP, right down to the high school football game level, the state legislature, and the like.

Now there used to be real competition in the form of UPI (no, not the UPI around today, but the real UPI when it was owned by the E.W. Scripps Company). The competition between the two agencies was legendary and the big winner was the world’s media, and particularly US newspapers and broadcasters. The agencies provided some of the best journalism going, and the cut throat competition was not just in journalistic terms, but on the sales side, too, and that kept prices down for everyone. Clients would sometimes make decisions on which agency to subscribe to on the basis of just a few dollars difference in contract terms.

(One radio station operator actually got this UPI salesman for the state of Indiana, and his AP equivalent on the telephone and tried to operate an auction for how low either of us would go to get his business!)

Those were the days when both agencies fought  tooth and nail against one another – it ended really in the early 80s when the EW. Scripps Company, much to its journalistic shame even if it was smart economically, jumped ship, and UPI went downhill quickly after that.

UPI was never “in the money”, but its real problems started in the 70s when US PM newspapers started suffering big circulation declines, indeed in later years many merged with their co-owned morning cousins. The basic principle had been that if you were a major metropolitan newspapers then you subscribed to both agencies, and then the further one went down the circulation line the more became the custom for the AM newspaper to have AP and the PM newspaper had UPI so its afternoon news reports would be different from those that appeared in the morning paper.

When UPI came under new ownership, and there was a secrecy clause on the terms for the transfer to a couple of guys from Nashville that no one had ever heard of before – and by gosh they were B’Hai’s as well – it gave US newspapers in droves the perfect excuse not to renew subscriptions, indeed to also withhold subscription payments, as they saw the opportune time to save themselves some money. UPI ended up in bankruptcy court a couple of times and today it is a shell of its former self.

(A major metropolitan newspaper publisher told this writer to his face there was stark budget decision to be made. Either the publisher gave up UPI or he had to give up use of the company plane. So much for UPI).

So having killed off AP’s main competitor, there should be little sympathy for US newspapers now complaining their AP rates are too high. What did they think the AP would do once it was alone in the market?  The AP is the only game in town that would provide state coverage in addition to national and international reports and without a competitive UPI nipping at its heels the AP obviously would charge the true value for its services, keeping in mind it was a co-operative of US newspapers. (broadcasters at the time were not members but subscribers).  

In the “only if” category is that when EW.Scripps put the “UPI for sale” sign up none other than Reuters started sniffing around and there were big hopes the British company would take it over. But in the end it decided not to (although it did gobble up quite a few UPI media executives) and in 1985 it got into the news pictures game, buying UPI news pictures.

When this writer joined Reuters in the 80s he had a long discussion with the man Reuters had put in charge of looking at UPI and of course the main question was, “Why didn’t you do it?” It wasn’t a matter of cost, for he had figured out after visiting many UPI offices that instead of paying EW. Scripps for UPI the deal would be structured on how much Scripps would pay Reuters to take it off their hands. No, the real problem was the on-going investment to continue UPI’s news coverage at the state and local level -- something the Reuters executive termed “parochial” – for it was obvious that without that coverage continuing the remaining UPI clients would be lost.

Reuters’ experience was in covering countries from the national standpoint; to go into the US and put in resources to cover state legislatures and the like was not part of its editorial and corporate culture, and at the end of the day that was the deciding factor. Economically, that may have turned out to have been a smart Reuters decision, but journalistically it was the death-knell of continuing news agency competition in the US, brought about by US media in its short-sightedness, and it deserves every price increase that AP has given it since.

According to Editor & Publisher, newspaper editors are now complaining, “We are sharply cutting expenses, paring the size of our publications and reducing staff. We are doing what we must, no matter how difficult, However, year after year, we are confronted with high charges for Associated Press services. Rates for basic services were stabilized in 2007. Yet rates for supplemental services continue to rise. Also, AP invoices lack detail on how rates are calculated and our budget-cutting efforts are stymied by onerous cancellation policies.”

How that brings smiles to a former Unipresser. The AP cancellation policy was the most difficult thing a UPI salesman had to fight against because it was a two-year rolling notice clause. In other words, approaching an American newspaper to drop the AP and take UPI services meant having to convince the newspaper to send in to AP a cancellation notice and then one had still had to wait two years for that contract to expire before the UPI service could begin for those papers not willing to pay for two services.

AP, to its credit, had a great cancellation department that swung into gear the moment such a cancellation letter came in and the phone calls and visits from New York headquarters and contacts by senior editors at metropolitan newspapers saying, “You must be kidding in thinking of dropping AP” and the like made the UPI salesman’s job really tough. The best strategy was to have the prospect sign a UPI contract and then the same day send in the AP cancellation, because there was a better than 50-50 chance that without that signed UPI contract the AP cancellation people would succeed in getting their cancellation lifted.

UPI usually signed three or five year contracts with a six month notice clause and there wasn’t an AP salesman who didn’t know the notice dates of those UPI contracts in their sales territory. Interestingly, AP treated its broadcast clients (not members) in similar fashion with a fixed term and six months notice.

It was cut-throat competition from both sides. The journalism was of the highest standard (sure “little” mistakes occasionally made it through like UPI ending World War I a day early and AP inaccurately having UN Secretary-General Dag Hammarskjöld, on a mission to bring peace to The Congo, arriving at his destination when in fact his plane had crashed on approach to Ndola Airport in Northern Rhodesia (today, Zambia), killing Hammarskjöld and his party.)

Their journalistic folklore is full of such incidents as UPI White House correspondent Merriman Smith crouching under the front panels of the Dallas motorcade car he was in using the only radio-telephone to report that the JFK motorcade had been fired on while at the same time he was fighting off AP reporter Jack Bell who was desperate to get his hands on that phone. Smith later would show the physical bruises he got from Bell’s “beating” but it was Smith who got the world’s biggest “beat” – “FLASH FLASH -- KENNEDY SERIOUSLY WOUNDED, PERHAPS SERIOUSLY, PERHAPS FATALLY BY ASSASSINS BULLET”. If you didn’t have UPI you just didn’t have that story until after Kennedy‘s car had arrived at the hospital.

Today’s AP clients now are going cap in hand to the AP asking for “urgent attention to the financial needs of its members and to begin cutting rates immediately.” It’s a rather curious request from an industry that actively rebukes those who paint doom and gloom scenarios for US newspapers and are told that newspapers remain  cash cows; it’s just that margins aren’t as great as they once were.

US newspapers killed off UPI; they shouldn’t cry now as they face the obvious results.