From the AP, April 11-18

Newspaper executives discuss how to capitalize on Internet's growth

Newspapers can transform one of their main financial threats — the Internet — into a lucrative opportunity by pursuing sometimes risky online experiments and partnerships, a group of industry executives said April 17.

The Internet worries newspaper publishers because more readers are turning away from print media and connecting to the Web. The trend is driving more advertising to the Internet, threatening the newspaper industry's robust profit margins.

"We have to be willing to take a lot of swings with the bat and realize we are only going to make contact a certain amount of the time," said Hilary Schneider, a Knight Ridder senior vice president who oversees the company's online operations.

Executives from the San Francisco Chronicle, The Bakersfield Californian and the Billings (Mont.) Gazette also joined a panel that kicked off the Newspaper Association of America's annual convention, which continued in San Francisco through April 19.

Adapting to the challenges of the Internet will require newspapers to protect their existing franchises even as they pour more money into Web sites and other Internet ventures, said Ian Murdock, the San Francisco Chronicle's business manager.

Publishers who successfully navigate the transition will be pleased with the payoff, Schneider predicted. The Internet is "hugely profitable," she said. "The revenue that comes online goes disproportionately to the bottom line."

Bakersfield Californian Publisher Ginger Moorhouse concurred. "Our margins online are better than our newspaper's. It's not encumbered by a lot of things that are baked into daily paper."

San Jose-based Knight Ridder Inc. has engineered one of the industry's most aggressive Internet expansions, often working in partnership with two other large publishers, Gannett Co. and the Tribune Co.

The three newspaper companies created the online job advertising service CareerBuilder.com and recently combined to buy a controlling stake in Topix.net, a Web site that indexes thousands of local news stories.

Many newspapers see such sites as threats, but executives from Topix.net, Google Inc. and the Yahoo subsidiary Overture Services Inc., who appeared on another panel, urged them to expand their newspapers' reach through online partnerships.

Last year, Knight Ridder's online holdings produced an operating profit of $36 million, more than doubling from $15 million in 2003.

Although they've been growing rapidly, Internet operations still represent a sliver of Knight Ridder's sales, which are mostly generated by newspapers in 28 U.S. markets. The company's online sales rose 39 percent last year to $114 million — about 4 percent of Knight's total revenue.

Online ads last year accounted for 2 percent to 5 percent of most newspapers' revenue, said Rob Runett, director of electronic media communications for the Newspaper Association of America. The newspaper industry collected $1.5 billion from online advertising last year, a 27 percent increase from last year, outpacing the industry's overall ad growth of 3.9 percent, Runett said.

Executives participating in the April 17 forum said they can envision online ads accounting for 15 percent to 20 percent of their revenue within five years.