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Originally published October 23, 2008 at 5:20 PM | Page modified October 23, 2008 at 5:20 PM

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AP suspends pricing plan, to review its structure

The Associated Press suspended plans Thursday for a new pricing structure that drew complaints from many of its member newspapers facing unprecedented financial hardships. It promised another $9 million in savings on top of $21 million previously announced.

AP Business Writer

NEW YORK —

The Associated Press suspended plans Thursday for a new pricing structure that drew complaints from many of its member newspapers facing unprecedented financial hardships. It promised another $9 million in savings on top of $21 million previously announced.

The AP, which is owned by its U.S. member newspapers, also said its board of directors has asked management to complete a sweeping review of the news cooperative's membership policies by next April. A note to staff said some job cuts are likely.

"It is time to consider fundamental change," said William Dean Singleton, chairman of the AP board and CEO of MediaNews Group Inc.

Most issues are on the table in the membership review, including the requirement of two years' notice for cancellations, according to a statement from the not-for-profit news organization. But AP executives called it unlikely the changes would include taking the AP public or bringing in Web operators such as Google Inc. and Yahoo Inc. as members.

The board's actions follow cancellation threats by more than 100 AP members, including the Los Angeles Times, the Chicago Tribune, The Columbus (Ohio) Dispatch and the Star Tribune of Minneapolis, Minn.

Reasons varied, though many of the complaints centered on cost.

"We understand that it's a tough era and some people want more," said Tom Curley, AP's president and chief executive. "This is an attempt to show that we are moving in the right direction."

It was not immediately clear whether the changes announced Thursday will mollify all AP members, but Gary Graham, editor of The Spokesman-Review in Spokane, Wash., called it "a good starting point."

"I'm encouraged that the AP board is responding to the concerns that many of us have had," said Graham, whose paper recently announced plans to cancel AP services and took the further step of threatening to go to court in a bid to void the two-year waiting period.

Ben Marrison, editor of the Dispatch, said it was too early to say whether the announcement would affect the Columbus paper's cancellation notice. But he called the move "a good first step by AP and a signal that it understands the issues facing the newspaper industry as a whole."

Nancy Barnes, editor at the Star Tribune, said she had just received a letter telling her of the changes. "We're looking forward to hearing in more detail the steps that AP is taking," she said.

The AP has yet to identify offsets to the rate reductions. It recently imposed a companywide hiring freeze, and a notice to staff said some job reductions were likely and that some work might be reassigned.

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Curley said in an interview that he could not yet offer specifics, but said reductions through attrition alone were unlikely. The need for job cuts, he said, results from the broader economic downturn rather than the specific rate cuts totaling $30 million.

The company reported $24 million in net income on revenue of $710 million last year. About 25 percent of the AP's revenue comes from U.S. newspapers.

Last October, the AP's board approved the first major overhaul of its fee structure since 1985, when the cooperative began assessing newspapers based on their circulation instead of the population in their area.

Under the plan that would have taken effect Jan. 1, newspapers were to get a basic package called AP Breaking News and then have the option of paying extra for an additional premium service called AP Complete, which includes analyses, enterprise and other stories.

The board voted unanimously to offer AP Complete to all members at the basic package price, forgoing about $7.2 million next year in projected additional revenue.

Under the original plan, fees would have dropped for most newspapers, but about 10 percent would have paid more. Those increases, totaling about $1.8 million, have been put on hold pending the membership policy review.

Although the review could lead to a restoration of separate pricing for basic and premium stories, "the distinction is likely gone for good," said Tom Brettingen, the AP's senior vice president and chief revenue officer.

Brettingen said the policy review could ultimately lead to different classes of memberships, such as a basic level for smaller papers that might not need the full range of services.

"The review will be wide-ranging," he said. "The review is going to study just what does it mean to be a member of the AP versus a customer."

The AP will consider rate adjustments for broadcasters as well.

AP is a global news company founded in 1846. It serves about 1,500 newspapers and 5,000 radio and television stations in the United States. About 1,300 of them are regular members and more than 4,000 are associate members - generally weekly newspapers and broadcasters.

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AP writers Paul Queary in Seattle and Andrew Welsh-Huggins in Columbus contributed to this story.

Copyright © 2008 The Seattle Times Company

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