Source : Globe & Mail

Wire service diversifies its revenue mix

The Canadian Press could be dealt a significant blow in the next few days, one week after it received a ringing endorsement from a Senate committee for its importance as a national news operation.

Officials with the 89-year-old wire service, which distributes news across Canada and employs 300, will learn this week whether CanWest Global Communications Corp. plans to serve notice that it will pull out of CP, a co-operative run by several news organizations.

CanWest pays roughly $4.6-million a year into CP, and wants to scale back on the services it buys. CP is concerned such changes would undermine how the non-profit organization works and has refused to budge.

Under CP rules, CanWest must give a year's notice by Friday if it wants to leave next summer. However, the decision can be rescinded over the next 12 months.

"If we give notice, it will be to keep our options open," said Scott Anderson, vice-president of editorial for CanWest MediaWorks Publications.

While the departure of CP's largest member would take a sizable chunk out of its budget, the loss would not cripple the organization, said its chief executive officer, Eric Morrison.

Unlike a decade ago, when the viability of CP was threatened by the possible pullout of former newspaper giant Southam Inc., which contributed 35 per cent of its revenue, it would lose less than 10 per cent if CanWest left, Mr. Morrison said.

Changes in the industry over the past few years, including the breakup of Southam, and the fragmentation of news audiences caused by the Internet, have helped CP tap new revenue streams. The organization will bring in $48-million in 2006. CP sells its news feed to more than 230 customers in government, business and education, pulling in new dollars that didn't exist before.

"CP has evolved quite considerably over the last 10 years in terms of what our revenue sources are," Mr. Morrison said.

The organization's reliance on newspapers has dropped by a third since the mid-nineties. Papers represent 40 per cent of its revenue, compared with 60 per cent a decade ago.

However, a CanWest pullout would likely affect the wire service's content, as CP would lose stories contributed by CanWest's 10 city papers, which include The Vancouver Sun, Ottawa Citizen and Regina Leader-Post. Although CP has its own bureaus, it also relies on its members to contribute content.

CP was formed in 1917 by an Act of Parliament, but receives no government funding. It is composed of several news outlets that share photos, articles and broadcast material. The list includes CanWest, Torstar Corp., Transcontinental Inc., Quebecor Inc., Osprey, Gesca Ltee and Bell Globemedia, owner of The Globe and Mail.

In an era when content has become an increasingly valuable media commodity, feeding websites and print, CanWest is concerned it may be giving material to CP that it could otherwise be selling. The company started its own news service a few years ago and sells the material to outside subscribers.

A Senate report on the state of Canada's media industry last week flagged CP as a vital service, since it reports in both French and English and gathers news from regions many papers don't cover.

It also raised concerns that a CanWest pullout could be designed to weaken CP as a competitor. Should the company leave, there are worries in the industry that other organizations could follow.

"Some members have indicated that they might pull out of the co-operative and perhaps establish a rival for-profit news service," the Senate report said. "The resulting loss of revenue and material could have a major impact on CP's ability to continue."

CanWest has said it wants to use its news service to boost revenue.

Mr. Anderson said the debate over leaving CP is not aimed at cutting costs, since CanWest would likely use that money to bolster its own wire service.

© Globe and Mail