04/03/2006

COMPARE AGAINST DELIVERY

Prepared Remarks by Tom Curley
President and CEO/The Associated Press
AP Annual Meeting
Chicago
April 3, 2006

The year 2005 was epic for media. Whether it involved covering natural disasters of unprecedented scope or confronting sudden economic uncertainty, our industry was tested on every front.

The Associated Press responded by improving its ability to report the news and by providing solutions to marketplace challenges.

Two events illustrate the changes. When 2005 began, few publishers were willing to risk reader reaction by sharply reducing the amount of space devoted to stock listings. By year-end many were exploring options.

And second, when 2005 began, the price of oil was $43 a barrel. By year-end the price was almost 50 percent higher.

Today’s program will consider the implications of both our changing news environment and marketplace.

On the energy front, Editor Kathleen Carroll and a team of AP journalists from around the world will explore the issues surrounding the higher price of oil, the likely impact on your businesses and lives, as well as the ramifications on American policy and power.

Throughout AP’s history, five broad principles have governed our reaction to economic and technology transitions:

First, for the cooperative to survive, AP must adapt;

Second, AP should help facilitate member transition;

Third, AP’s content or intellectual property must be protected.

Fourth, AP should be compensated appropriately by emerging media for use of AP content;

Fifth, AP’s journalism and its principles must endure.

After studying the Internet and its implications for the cooperative, AP is addressing the challenges head-on. These same principles are guiding us through this critical era of change.

The continuing proliferation of venues for news – from search engines and RSS to mobile devices – illuminated the need to protect AP’s content. Last year, we strengthened the legal and technical safeguards designed to prevent misappropriation of AP news.

A Digital Advisory Committee, composed of leaders from member companies, was formed to help guide new media strategy as the digital economy grows. Their first priority was to oversee proper use of AP content on the Web by search engines.

The board also voted to support additional capital spending to develop new services in multiple platforms to help members and customers capture the growing population turning to digital formats for their news. To that end, we’ve taken several steps to make all of our content available and searchable to members over the Internet, accelerating our transition from satellite delivery to easier and faster database access.

We know the digital era requires more content, not less. And it requires content edited and packaged in ways that help user access and allow for advertising placement. As a result, we are pioneering on several fronts.

One of your most frequent requests was for AP to provide news video for the Web. Last month, we launched an online video network. We partnered with Microsoft for the technology and the advertising sales, so we could get to market quickly. Appropriately, AP has kept control of the content. In phase two, or the third quarter of this year, you’ll be able to upload video your journalists create and keep the resulting compensation.

Here’s a very quick look at the AP Online Video Network in action:

Play Video (45 seconds, wmv. 8.85 mb)

Our boldest content initiative is asap, a multimedia young readers’ service. The service has a dedicated staff who produce original and exclusive content aimed at this audience -- in both print and online formats – as you see on the screen. We launched asap last fall, and nearly 300 newspapers are using it.

In two important vertical content areas – sports and financial information -- we are expanding our offerings for both print and online.

Through a venture with News Corp., we acquired half-interest in Stats, the largest sports statistics organization, to accelerate new product development in the ever-expanding market for sports content.

In the financial information area, we have expanded our news coverage for real-time, online use, and we will soon introduce a new solution for financial data that will enable members to replace their old “stock agate” pages with print and online presentations consumers can’t get anywhere else. We expect to announce our new financial markets products next month, including a new print service that will enable members to deliver more information in a fraction of the space.

We also continue to enhance the core report. We’ve added to financial news coverage by increasing reporters, enterprise and story count. The recent Olympics were a showcase for AP convergence. Reporters there podcast and blogged in addition to providing the most comprehensive report of the games and the most news breaks by far.

We know your newsrooms want more choice in photos. The trend in photo selection in some places is to a featurized look or context. We’re still doing our best to capture that defining news photo. We also are moving 20 percent more photos a day, mostly in the sports and entertainment categories, so editors have greater selection.

All of these content initiatives have come by redeploying existing staff. But, ultimately, The Associated Press is about credibility. Being first and delivering accurate coverage are paramount to building and retaining audiences in this competitive era. Last year, for the first time, AP beat the competition in all critical measures, in all hemispheres and in all formats. We’re committed to earning your trust daily.

The cutbacks in international coverage by nearly all large news organizations have placed more of the responsibility for global coverage with us. We take that responsibility seriously. For the first time in AP’s history, we have senior editors supervising coverage in each hemisphere. We have changed 40 international bureau chiefs, in part to be sure we deliver the journalism you need.

The recent restructuring of AP’s international bureaus and the establishment of new global editing desks have been the foundation to enhancing the speed and exclusivity of our coverage.

And, in this country, a new emphasis on high-impact journalism in the state bureaus and a concerted effort to file more content online – and to file it faster– were also crucial in advancing our performance.

I am compelled to report that coverage is getting more dangerous abroad and more complicated at home. Al-Qaida’s Iraq branch last fall took direct aim at AP’s Baghdad home in a sophisticated, four-vehicle bomb attack. AP staff suffered only minor injuries that day.

Unfortunately, however, the toll for the year was worse. Three people associated with AP coverage in Iraq were killed. A total of 25 AP people were detained in nine countries. At least 29 staffers were harassed, beaten or abused in 22 incidents in 13 countries. Four staffers had to be evacuated for treatment of serious injuries sustained in coverage. Several others found themselves in life-threatening situations and escaped. Many contracted diseases, including cholera, while on assignment.

Closer to home, our reporters and your reporters are joined in an increasingly challenging battle to get access to information and stay out of jail. While this battle is always worth fighting, we believe there is new urgency to explain why these freedoms are the cornerstone of our democratic process even in an era of global terrorism and economic uncertainty.

We recognize the financial challenges associated with an era of technological transition. Last year, AP made critical moves to ensure its financial and operational security. With the support of our staff, we smoothly transitioned from a traditional defined benefit pension plan to a defined contributions system. We also negotiated new agreements with both the news and technology bargaining units that included a reduction in size of half the tech unit. In the last three years, AP’s non-journalist staff has been reduced by nearly 20 percent.

Helped by growth in broadcast and new media revenues and by cost controls, AP achieved record cash-flow. Despite significant investments to cover the major news events of 2005, expenses grew at less than a percent.

The assessment increase passed to newspapers for 2006 was the lowest in 35 years. Newspapers’ percentage of funding for AP coverage is expected to be a record low this year and comprise less than a third of AP’s total revenues. The board and AP management remain committed to giving you the most complete news report at a fraction of the true cost to produce it.

The Associated Press celebrates its 160th anniversary this year. The current time is one of momentous challenges. But in them, we see opportunity, and everyone at AP is excited about tomorrow.