CNNMoney.com is running a story about Google (GOOG) News dropping AP stories. Apparently the company is not providing detailed comments other than "At the moment we're not adding new hosted content from the AP," and reports note that the two are in the middle of negotiating a new licensing contract. But the big issue here isn't AP being spanked. It's the total unreliability of the online media business model and technology for traditional media companies.
AP's carping over the last few months has made it the media Rodney Dangerfield, because it gets no respect, no respect at all. Actually, what it doesn't get is enough money because there's insufficient revenue from online ads to fund almost any media venture well enough to even cover the costs of gathering information. It's the same reason that Rupert Murdoch has his back up. Even for big media sites, online ad rates are relatively small -- in the estimate of Richard Gingras, CEO of Salon.com, even the New York Times is probably commanding only $8 to $9 per thousand viewers for a given ad.
What AP shows is that media companies are starting to follow through on their complaints and be willing to walk away, which is, after all, the foundation of any good negotiation strategy. But that's only part of the problem. The other part is the essential unreliability of the technology behind online publishing because, effectively, such companies as Google and Yahoo own it. They are media companies because they gather the audience by bringing content to them. But the process is anything but transparent. I remember a stretch of time here at BNET when some of the blogs weren't showing up on Google News and others were. Why? Who knows? It was one of those mysterious "Google must have changed what it's doing again" situations.
Not only is the monetary model insufficient to fund many media producers, but it is a marketplace with no appeal should things go wrong. That may be the ultimate problem for media companies looking for an advertising fix from links, otherwise known as depending on your kindness to strangers. Without a formal contractual and financial arrangement -- an aggregator uses material under the U.S. copyright "fair use" doctrine -- there is likely little practical way to deal with an abrupt change in how stories are chosen. A shift in the search engine algorithms can freeze out a site without warning, and there goes the ad revenue.
In the case of AP, Google is clearly playing hardball. The question is whether the downside for traditional media companies has any more pain than the upside. It may be for most, there literally is no hope because the prevailing conditions cannot support what they currently do. That will mean a complete shift in what media is and how it's done, and that's going to be disruptive not just for the traditional companies, but also the online ones that depend on them.
Image via stock.xchng user mrceviz, site standard license.