As the US news industry roils, its relationship to -- and investment in -- the Associated Press is in the midst of reassessment.

Important Details: Wires services have their own tough slog in the changing news landscape these days. The Associated Press' recent travails tell volumes about the state of the news industry itself, and pose intriguing questions regarding its networked future.

Consider the news coming out of the once-staid AP in the last couple of weeks:

• Newspapers, hit hard by print revenue declines, demanded further price rollbacks from AP and won them. Those rollbacks may amount to as much as a 10% cut in member payments. The rollbacks themselves are symptomatic of a larger reassessment by newspapers about their relationship with and reliance upon AP.
• A consortium of eight large Ohio dailies acted on members' dissatisfaction with AP state coverage and formed its own co-op. Other states are considering further splintering relationships.
• The impact of recent newspaper ownership changes is now being felt on the AP board itself, as Rupert Murdoch (News Corp/Dow Jones) and Sam Zell (Tribune) were elected as members.
• AP's Online Video Network, reacting to member concerns, enabled OVN to act more as a sharable wire, with members able to see and share each others' increasing production of news video.
• AP announced a collective mobile news-oriented initiative, urging central development of news-oriented mobile products, first focusing on the iPhone. The announcement follows AP urging members to join its "tagging" program, centrally adding metadata to news content.
• AP and iCopyright made public their agreement to tag AP stories and photos with web-friendly (e-mail, print, post, license for reprint) tools, offering better trackability and a new revenue source for member papers.

Given both the downturn in newspaper fortunes -- causing a downturn in what member papers are willing to pay AP -- and a booming commercial business for national and international news, only 28% of the revenue AP now takes in comes from members. The rest -- almost three-quarters -- comes from broadcasters and non-member-owned websites, including significant payments from search aggregators Google, Yahoo!, AOL and MSN.

Of course, AP's challenges don't exist in a vacuum. Reuters -- long in turmoil -- is now safely tucked away within the new Thomson Reuters. It generated less than 10% of the company's revenues, but is core to CEO Tom Glocer's platform of "intelligent information", and will continue to be a formidable competitor to AP in global, digital markets.

Implications: AP started as a cooperative network, allowing newspapers across the US to make use of those new-fangled telegraph wires more than a century ago. It was all about efficiency, reducing costs, sharing technology and finding ways to do more with less. Sound familiar?

Now, given the cost/revenue pressure vice tightening on its owners, AP is in a tough position. It must compete in the open marketplace, a marketplace that provides more than 70% of its revenues. At the same time, what it can do, how it can innovate and how it can forge a stable future is in the hands of those contributing a dwindling proportion of its sustenance.

There's at least one great irony here, of course. If the web has proven anything, it has proven the value of networks. We see online content networks (the newspaper consortium's alliance with Yahoo!, the emergence of the syndicators such as Mochila and Voxant, and the growth of new aggregator Newstex) and hundreds of online ad networks, all trying to knit together marketers and audiences, removing friction from the ad buying and selling trade, intent on better mixing and matching content.

In a sense, much of the news-oriented world is trying to create the kind of cooperative that AP was first intended to be and served well as for most of its life. In fact, they are spending tens of millions of dollars to do it, to create new functionalities and new business opportunities on the same coop/network idea.

Yet, its owners/members have a curious attitude about AP's centrality as a future-reaching co-op. Should it play a central role in the news mobile future? Should it be an essential center in processing member news content, making it more intelligent, usable and monetizable on the web? Should it play a significant role in business development on behalf of members? Or should it be patted on the head and told to play a minor, supporting role into the next decade of the maturing web?

With capital increasingly scarce, here is one question publishers should ask more frequently: "Is a dollar of investment in news, or distribution of news, better spent centrally, or individually, by each newspaper company?" Those dollars don't have to be spent on AP, but individual creation of new wheels is a financial expertise which is becoming harder to support by hamstrung profits. So far the answers to those questions have been tentative, and that's been one of the factors hobbling the industry.

AP has had its own struggles in shaking off legacy roots and reorganizing for the digital future. Outsell detailed that challenge in its 1 May 2007 Tale of Two Wires: AP and Reuters report. Now, Outsell believes AP's strategies are on track and that its powers of execution are improving. What must be resolved by AP leadership and the new board is exactly what kind of role AP will play going forward. There's never been such urgency within the industry for fast-time-to-market, cost-efficient, whole solutions.

It's time, Outsell believes, to connect the dots, recognizing that the 19th century co-op can be a 21st century essential growth network. Member/owners can certainly continue their one foot in/one foot out approach, but that's more likely to hobble them than propel them down the narrowing road.

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