Why Google Should Buy the A.P.

If The Associated Press' business model isn't broken now, it could be soon. The non-profit group -- a co-op news organization owned by 1,500 daily newspapers nationwide -- makes much of its money charging newspapers and broadcasters fees for the right to use A.P. content.

It's been a happy little arrangement for the last 162 years, but what happens when many of AP's member newspapers and broadcaster die off or dry up? AP could be left in a lurch. Close to 45 percent of A.P.'s sales come from U.S. broadcasters and newspapers -- two industries in turmoil.

Of course newspapers are more reliant upon A.P. now than they ever were before -- especially since editorial budgets and staffs have been slashed -- but it's a bit like selling drugs to late-stage cancer patients.

[Full disclosure: I did time at the A.P. between November 2005 and August 2007. Also, Wired.com pays for A.P. content.]

The flip side of the equation is that web companies are picking up where the newspapers left off. AOL, Microsoft, Yahoo and Google all generate a tremendous amount of traffic from A.P. stories, and web traffic equals ad revenue. Google C.E.O. Eric Schmidt recently said there is a "moral imperative" to keep news businesses alive. We'd venture to guess there's a financial imperative, too.

We have a crazy suggestion: Why doesn't the A.P. give up the non-profit status, buy out members' interest, and sell itself to a new co-op of internet companies, such as AOL, Yahoo, Google, and Microsoft? Conceptually, it would be a lateral rather than a forward "Hail Mary" pass since they'd be replacing one consortium that was once the center of the news universe -- newspapers -- with the current publishing leaders.

The price for the A.P, would probably be cheap -- the company generated a little over $710 million in sales last year; it earned a paltry $24 million; and members' equity totaled $89.2 million. But from a strategic standpoint, the A.P. could be better off if it were owned by web players rather than newspapers -- and internet companies are probably much better positioned to make money off the A.P., the world's largest news gathering association.

Granted, there's little chance the A.P. could get all 1,500 equity holders to agree to sell. And even if they did, there's no way of knowing what it would look like in 25 years.

"The whole concept of the A.P. would have to change," says Ed Atorino, a newspaper analyst at the Benchmark Company. "By definition, a co-op isn't supposed to make money. Unless somebody could pay $100 million to just restructure the whole thing, I can't imagine that there's any value there."

by Betsy Schiffman for Wired.com

Also on Wired.com:
EBay Shareholder Meeting Goes Off Without a Hitch
House Grants Telecom Amnesty, Expands Spying Powers
Bloggers Get Obama Accuser Hauled Off in Handcuffs

Subscribe to Wired magazine