Summary:  In what may be a variation on the model of the RIAA campaign against illegal music downloaders, AP has launched an assault on the “free” use of news on the Internet–not just their feeds but, apparently headline links.  A part of this assault is a suit in US district court in New York against All Headline News Corp., a news aggregator.  That court just denied a motion to dismiss the suit, applying the principle of “hot news” to online news for the first time.  One point for AP.  That decision and the legal theories underpinning the “assault” are connected.  Add another point for AP.  (Please note that a copy of this entry can also be found at digitaldumonde.wordpress.com and globalgeneralcounsel.wordpress.com)

AP recently announced that it is fed up with the misuse of its news feeds-an understandable lament given that its customers (newspapers) own AP.  You may be hearing echoes of the famous movie, Network, and they are more than echoes.  At the annual AP board meeting, the chairman, Dean Singleton said “We are mad as hell and are not going to take it anymore.”

We take no position on whether this is a good or bad thing.  Many, many talking heads (“typing hands” for a new name for bloggers?) are decrying what they see as a frontal assault on the doctrine of “fair use.”  We do not see it that way.  We do see it as an opportunity to clarify not only the application of that doctrine online but also a way to discuss, and eventually clarify, the appropriate business models for online news and information.

A Few Details

They plan on policing the misuse of copyrighted material.  How is a matter of speculation.  AP has signed up with Attributor, a company with technology that can track use of digital information (stories and photos) that have a digital “fingerprint.”  Armed with that information, AP could demand some portion of ad revenues from sites using the offending materials in a manner beyond the limits of the “fair use” doctrine.  (You heard it here first, by the way.  We wrote several weeks ago that demands by newspapers for such revenue are not unreasonable as a move to increase revenues for online newspapers.)

Fair Use May Change.

We get it.  We might not support the approach (and we might also support it) but fair use has been strained to, if not beyond, the limits of credulity to justify online use of information created by others, for which the copyrights are also owned by those others.  In these situations-where a legal doctrine lags too far behind market development-the doctrine becomes the focus of legal assaults and the consequences are a changed doctrine.  Regrettably, the public debate on this matter has begun to take on ideological “hate” language that relies more on ad hominem attacks than reasoned analysis and argument (in the “rhetoric” sense of that word).

The First Salvo:  All Headline News.

AP is going after All Headline News, a news aggregator.  They have been accused of stripping attribution (including copyright notice) from AP articles and re-publishing them without any changes whatsoever.  Again, we take no position on what they are doing.  AHS filed a motion to dismiss, which was denied by the district court in an interesting opinion.

Why?  Because the court anchored its action to the “hot news” doctrine from 1918 (an opinion from a case that arose from the start of the business of the real-life model of our favorite film character, Citizen Kane).  There, news that is so “hot” (like breaking news) becomes the quasi-property of the people creating the news stories in the first place.  Whatever your opinions on the doctrine, this is the first time that “hot news” has been applied to the online news world.

So What?

We discern a certain theoretical strategy behind AP’s approach, something that seems to have escaped notice with all the screaming against AP now underway.  In a sense, hot news can become something of an argument against a “fair use” defense.  That is not quite it-but we will leave that sentence in, anyway.  Rather, finding the applicability of the doctrine, the court gave AP the basis for arguing “misappropriation.”  That can become the basis of a legal theory that differs from mere infringement.  In a simple manner, it can be explained that the word is the civil law equivalent of “theft” in the criminal context.  Putting aside discussions of legal theories, strategies and tactics, the opening into this legal argument carries with it the potential of using “freighted” language to use in the PR battles that AP faces and will continue to face.

Information Wants to Be Free??

That rallying cry has energized much of the discourse that coincides with the explosive growth of all things digital.  Whether something as diffuse as “information” can be called something singular in that context is one thing;  whether it can “want” anything is another.  But that’s not our point.

There might be a tectonic shift underway (OK, warning: Now we’re getting really speculative).  Most obviously, the collapse of the newspaper industry alarmed people (OK, primarily the pundits and shareholders and employees but you get the point) enough for alternatives to “free” to be openly discussed as new (or recycled) business models.  At an even more abstract level, the conservative interpretation of the “free” market is now in retreat (rightly or wrongly is not our point), and so also might other ideological positions that tend toward a libertarian bent.

We don’t know.  But we do know that AP has a fight ahead of it–and it is a good fight.  The outcome might not be what AP wants-or what anybody wants-but it will be a changed world because of it.


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Summary:  European newspapers are figuring out how to survive–even using an old concept.

We have posted quite a few blogs on newspapers (see others at digitaldumonde.wordpress.com where a different version of this entry is posted).  No, Chicken Little, the sky is not falling in the newspaper world, though it does look a bit cloudy.  Look around you.  Try Europe, for starters.

Premium Services, Not Premium News Access.

One approach is to provide premium services.  In Norway, you can pay a hefty price ($90) to join a weight-loss club that is part of a newspaper website.  Your profile on the site can be updated but only for another fee.

Now, paying to upgrade your profile may be a bit much (unless the weigh-loss membership has not been successful) because of the nearly ubiquitous networking sites, but the point is to offer other services for a fee.

US papers tried this approach but in a different manner:  They charged a premium for access to certain news.  (One site, about which we have written, http://www.globalpost.com, charges a premium for additional news AND access to the editorial meeting, of a sort, and access to the journalists themselves).  Think about other services.

The Old Horse of Repurposing Content

Axel Springer, a large player in the publishing space, revived an old concept, which makes perfect sense:  Write once, distribute many times.  Write the article and post it on multiple sites.  This is the old concept of “repurposing” content for different platforms and different audiences.

Data as a New Source of Revenue

Newspapers make money not be delivering news but by delivering audiences to advertisers.  Few things are better than granular data about audience interests.  The more platforms on which your news is available, the more granular those data.  Advertisers like that.  They will pay for that.

Perhaps losing weight through a club run by a newspapers does not sit well with your idea of reading weighty editorial pronouncements.  But something else might.  Newspapers thinking this way create what their advertisers want:  connections with their potential audiences.

And some of them may lose weight, too.

Oh, and if you want to think about the ramifications for licenses then go to globalgeneralcounsel.wordpress.com.

You can look elsewhere to find out details of the bill (we really do not want to bore you), but we do want to emphasize that much of the bill will funnel money to digital companies across a broad range of projects.  This could be a good thing.

1.  Many billions will go to develop broadband access.

2.  Many billions will go to digitize medical and related health care records.

3.  Many billions will go to upgrading the national power grid–specifically, to make it a “smart” grid.

4.  Many billions will go to upgrading “classic” infrastructure like bridges and roads–which will undoubtedly include digital initiatives.

Oh yes, the bill will change in the Senate and in committee, but these focal points are not likely to change.

The online ad model is taking a pounding because some of the major names in the biz are not hitting their numbers and CPMs–and other metrics with which to make money are plummeting.

Here’s the prediction:  It will dip for a while and then climb–fast.  And here’s why:

1.  The current dip comes from these sources and, if you ponder them for a bit, you will see that they reinforce each other:

Source One:  The contaminated economy in general.

Source Two:  The te3rrible ad-spend market, related to the lousy track record of large media companies in hitting their numbers.  (And in particular, companies with a big Internet or mobile play)

Source Three:  Advertisers still “don’t get the web.” (OK, let’s expand our brains and start saying something like:  “Advertisers don’t get the digital platforms.”)

So, you have the ad people unwilling to stick out their necks:  What they really want to do is preserve their jobs while all around them are losing their heads.

2.  The upside?

2.1 (love this numbering system, huh?):  The reach per dollar spent is pretty enormous in the digital markets.

2.2 The demographics are changing–of the ad buyers and ad placement people:  They are “digital natives.”

2.3  The production costs are nearly nil.

2.4 You can change ads on the fly and according to market response.

2.5  And the main reason:  The granularity of the demographics and the data.  It is soooo good (and getting better every day) that people do not know what to do with it.

3. Advertisers really are finally getting the opportunity to run campaigns across three (some would say four) screens/platforms.  That’s powerful.

2009 is one of those transition years–the shift of more money to new media platforms.  Ad agencies will look like geniuses because “now they get it.” But, …

It does not follow that this is advice for new investments.  A lot of people are not sanguine about start-ups and the ad-driven model.  IN other words, the fortunes have been made there.  Now it is the spread of the model to the established economy.  Advertising needs scale or depth–breadth of audience or depth in a niche audience (which, when you think about it, is really the same thing).  Venture capitalists are not looking very closely at startups with the ad-driven model.  So even if you think you are the next Google, please be prepared for a lot of rejection.

Please be prepared for a lot more going on in the new media ad world?  Digital platform ad world?

And where will that take us with the digital transformation occurring in February????

Hello world!

December 2008

This is the first entry of this new blog–Transactions & Strategy, a place meant for those who want to explore the various intersections of transactions, strategy and law–especially internationally.  I am writing this one from Milan but we have offices in California and Colorado and soon possibly in Washington, DC.

Transactions:  licenses, M&A, distribution networks–you get the picture.

Strategy:  Not all transactions are guided by strategy.  How does a transaction (re)shape strategy?

Law:  This ought not to be the domain of the lawyers speaking a secret language.  This is an attempt to bring the legal issues back into the strategic discussion.

Finally, this is a place to discuss what’s happening in these areas.  For example, I am seeing here in Milan that the financial meltdown is echoing throughout the banking and private equity worlds here.  It is the single topic of dinner conversation–well, that and the worry that the downturn will cause the authorities to ratchet up efforts to collect more taxes.