Everybody knows that online news is free and that technologically brilliant search engines like Google and Yahoo have been stealing readers -- and revenues -- away from technologically challenged newspaper companies and wire services.
It's a common perception, but it's false. Google and Yahoo, along with dozens of other Internet companies, have been quietly agreeing to deals that compensate some of the country's top news organizations for their content and help drive more traffic to their Web sites.
Recently completed deals, which include arrangements in which media organizations such as the Associated Press will be compensated on a pay-per-click basis, could herald a major shift in the relationship between the old media and new Internet gatekeepers.
``The people who own the content did a lot of work to generate the content,'' Google Chief Executive Eric Schmidt said in an interview with the Mercury News. ``We want them to get the majority of the revenue from advertising.''
Earlier this year, Google signed a deal with the Associated Press, one of more than 50 agreements AP Chief Executive Tom Curley has obtained from Internet players after taking the helm of the world's largest news organization in June 2003.
``The AP and others in the industry early on did not appreciate the value of the content and understand the economics of the marketplace as we do today,'' Curley said in an interview. ``There's been an evolution in our thinking.''
Curley, a former president and publisher of USA Today, has made protecting AP's intellectual property one of his top priorities, creating a committee that focused on ``proper use'' of AP's content by search engines.
Major Internet portals such as Yahoo and America Online have been paying for content since their creation in the mid-1990s. ``What's different is the level,'' Curley said. ``The compensation has been increased significantly.''
While many of the details of AP's deals are secret, they encompass everything from access fees to tailored news products to shared revenues from the advertising displayed alongside AP stories.
The new compensation arrangements appear to represent a significant shift for Google, which is fighting a federal lawsuit by Agence France-Presse over alleged copyright violations. The Paris-based news agency sued Google for including AFP's photographs, headlines and story ledes in search results without permission.
Joshua Kaufman, an attorney for AFP, said the agency was paid by companies like Yahoo, AOL and Microsoft's MSN unit, but not by Google. ``That was the crux of the problem,'' he said. ``All AFP wanted was to negotiate a straight-up license with them.''
Google has denied violating AFP's copyrights.
Not every content provider who is demanding payment is receiving it.
``It has always been fairly clear to me that outside of certain content areas and certain audiences, it is going to be difficult to charge for what many news organizations produce in terms of news,'' said Neil Budde, general manager for Yahoo news.
Budde said most of Yahoo's deals in the past have involved sending traffic back to partner Web sites -- not direct payments or revenue splits. More recently, Yahoo has turned down proposals from some of its content providers.
But Yahoo is also working on what Budde describes as a ``deeper relationship'' with ``key, larger news organizations.'' On the table is direct payment, revenue sharing and traffic exchanges aimed at increasing Web audiences for both Yahoo and its content providers.
Budde declined to address rumors that Yahoo has been trying to put together a partnership with the Bay Area's largest newspaper companies: Hearst and MediaNews, which recently teamed up to buy four newspapers formerly owned by Knight Ridder, including the Mercury News.
Rafat Ali, publisher of the media blog Paidcontent.org, noted that there are multiple experiments under way and it is hard to predict what models will work out. ``Everybody is throwing everything against the wall,'' Ali said.
David Payne, senior vice president and general manager of CNN.com, said he's not interested in pursuing compensation from search engines, but in figuring out how to rise higher in search results.
``Right now this is all a game about who is going to get the best audience and keep them longest,'' he said.
CNN already partners with Yahoo, which sells advertising displayed on CNN's Web site, where 50 million news videos are streamed each month. In December, CNN also rolled out a paid video service. CNN (Pipeline) provides four live video streams, delivered to any computer desktop for $2.95 a month.
Payne said the balance of power between content providers and Internet companies tends to swing like a pendulum. ``Working with portals is key with our business,'' he said. ``They are huge providers of audience, and we want to find a way to keep that balance in the right place.
``The Internet is nothing without content.''
Contact Elise Ackerman at eackerman@mercurynews.com or (408) 271-3774.
