Yahoo Newspaper Consortium: Harmful Or Helpful?

Instead of offering a helping hand to newspapers suffering from declining readership and ad revenues, the Yahoo (NSDQ: YHOO) Newspaper Consortium could extract still more pain from its members, or so a largely negative article by Reuters suggests. The article follows several reports including Deutsche Bank’s relatively sunny view last month that the consortium’s 19 newspaper publishers would most likely see their online revenues gain 40 percent at first, then temporarily drop 25 percent, before growth returns by 2010.

Some of the publishers in the Yahoo group, which includes Lee Enterprises, Hearst, McClatchy, Cox Newspapers and Media General, tell *Reuters* that the alliance has boosted traffic and increased advertising thanks to the connection with Yahoo’s HotJobs. But the piece appears to assume that publishers will blindly accept consortium membership as their only option. Amid the caveats, there’s a suggestion that aligning with Yahoo is a worthwhile step for newspapers still trying to find their way in the digital age.

One interesting point, however, comes after noting that Gannett (NYSE: GCI) and Tribune (NYSE: TRB) have avoided the consortium to devote themselves to creating a display ad network on their own. The article quotes Eric van Miltenburg, Yahoo’s GM in charge of the consortium, who claimed that Yahoo is having “good, positive” discussions with both Gannett and Tribune and is attempting to allay their concerns.

Among the possible threats, according to Reuters:

Inflexible Terms: It’s not clear how long the consortium’s members are locked into their deals with Yahoo. Similarly, it’s not known how the ad revenue is divided between Yahoo and the newspapers.

Yahoo Takes All?: In addition to the option of aligning with HotJobs (or not), the newspapers also have the opportunity to tap Yahoo’s search capabilities, while agreeing to share their content on Yahoo’s portal. Gannett was said to be worried about giving Yahoo too much of its content, and providing readers with less reason to go their newspapers’ actual sites. Van Miltenburg insisted there’s no “bait and switching” going on, adding that the portal is even more likely to send new readers to the local sites.

Missed Opportunities: Partnering with Yahoo could be preventing local newspapers from teaming up with social nets like Facebook and MySpace, which are more a part of consumers’ lives than portals. Also, by joining Yahoo’s group, publishers are making a risky bet that Yahoo will ultimately beat *Google* at ad serving.