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AOL, Seattle Times in city guide

When Microsoft's Sidewalk launches in Seattle, it will have plenty of competition from other players, including the city's metro daily.

When Microsoft's (MSFT) Sidewalk launches tomorrow in Seattle, it will have plenty of competition from other players, including the city's premier metropolitan newspaper.

The Seattle Times and America Online (AOL) have inked a deal that gives the AOL members access to Seattle Times content through AOL's own localized content site, Digital City.

The Digital City program is AOL's effort to provide localized content to its users. It currently can be found on AOL's proprietary service but is moving to the Web.

This partnership marks the first deal in the Digital City affiliates program. Digital City has full-fledged sites with media partners, but in the affiliate program, it uses affiliates in the same way television networks use theirs. Instead of launching an entire Digital City site in Seattle, AOL will link to the Seattle Times' Web site (which will be presented within AOL frames). In return, the Times' site will link to Digital City when it launches on the Web. The sites will share advertising revenue, but both sides refused to discuss details of the agreement.

The business philosophy behind the partnership is obvious: The Seattle Times potentially gets access to millions, but probably thousands, of new readers. AOL also gets to give its readers local information from a trusted source without having to invest in providing its own content.

"It's a nice marriage," said Paul DeBenedictis, president and CEO of Digital City. Expect other agreements with newspapers and broadcasters, alike, he added.

Microsoft, on the other hand, is creating its own content on its localized site, Sidewalk. The first Sidewalk launches tomorrow in Seattle. As with all Sidewalk sites, Seattle's will focus exclusively on arts and entertainment rather than on local information across the board. (See related story)

Newspapers are worried. The Times had been talking with AOL for several months, but the timing of the announcement is not completely coincidental, acknowledged Michael Fancher, senior vice president and executive editor of the Times.

Microsoft is only one of many companies trying to take away billions in local ad dollars that traditionally have belonged to newspapers, who are not about to let others eat their lunch. "If Internet competitors can take away a huge portion of our classified revenue, our economic base is under attack and that's not something we can allow to happen," Fancher said.

That's why the Times launched its own site complete with entertainment listings and online classified ads. It plans to bolster its site with the kind of technology, such as mapping and searching capabilities, that will be featured on Sidewalk, Fancher added.

"We're not going to sit here and allow anybody to take away the role we have provided in this community for 100 years."

Fancher said that Net companies and newspapers have different motivations. "Our motivation is to protect our ability to do quality journalism." Of course, he noted, the paper has to make money too.

Yet it's the news organizations that will be more willing to stick with the Internet. For companies entering the local content market online, their primary motivation is the bottom line, he said. And when they don't make money, they'll pull out.

Even though Microsoft has more staying power because of its incredibly deep pockets, Fancher said that in the end, if the software giant doesn't make money, it too will leave.

"Most of the people who will come to compete on entertainment information, if they can't turn a profit in a reasonable amount of time, will give up. We won't."