May 6 (Bloomberg) -- Congress should set rules so Internet companies pay “reasonable compensation” for using newspapers’ content on Web sites, the publisher of A.H. Belo Corp.’s Dallas Morning News told lawmakers.

James Moroney III, testifying today before a panel of the Senate Commerce Committee, cited concern about “the use of newspaper-generated content for someone else’s commercial gain.” Payments for content could form “a financial bulwark for local journalism,” Moroney said in a prepared statement.

Newspaper publishers including New York Times Co. and Washington Post Co. have been cutting jobs and reducing sections as advertising in their printed newspapers sinks. Times Co. and Hearst Corp. have said they are exploring ways to charge for some of their online content.

The Senate hearing was called to examine how to preserve an independent and diverse news media as the largest daily newspapers lose readers and some papers close, Senator John Kerry, a Massachusetts Democrat, said in prepared remarks. “Newspapers look like an endangered species,” he said, noting the declines of publishers’ stocks in 2008.

Online news collectors include Google Inc., the most popular Internet search engine, and Yahoo! Inc. The Associated Press on April 6 said it would pursue legal and legislative action against companies that aggregate news on the Web without sharing revenue or receiving permission.

Online Traffic

Google Vice President Marissa Mayer told senators publishers have the option to block their Web sites from appearing on Google search results. Google helps publishers by placing advertising that is relevant to readers, Mayer said.

“Google is doing its part by driving significant traffic to online news publishers,” Mayer said in written testimony.

The company only uses the first 200 characters of a given news story on its Web site, so it is using others’ content fairly, Mayer said, speaking to the Senate panel.

Senator Ben Cardin, a Maryland Democrat, said in prepared remarks that Google and Yahoo “pull their original news from the laborious and expensive work of experienced newspapers.” He has introduced a bill that would allow newspapers to become non- profits and allow advertising and subscription revenue to be tax-exempt.

Google makes “plenty of money” from the content of the Dallas Morning News, which spends $30 million annually on newsgathering, as well as other newspapers, Moroney told the Senate panel in a question-and-answer session after reading his prepared statement.

Tax Relief, Cooperation

Moroney earlier called for temporary tax relief, as well as looser antitrust rules so newspapers can cooperate with each other to cope with the decline in advertising revenue, which he said has tumbled 23 percent in the past two years.

He said to the panel that newspapers should be allowed to cooperate on setting possible price structures for their Web sites so that they can demand some compensation from Google and other news aggregation sites.

Newspapers “need to be paid” for their content, Moroney said. “Time is not on our side.” A.H. Belo this year announced 500 job cuts and reduced the pay of most of its non-union employees as advertising revenue plunged.

Loosening the federal ban on common ownership of daily newspapers and nearby broadcast stations will reap limited benefits, Kerry said.

Since December, five publishers have sought bankruptcy protection, including Tribune Co. and the owner of the Philadelphia Inquirer. Printed versions of newspapers in Seattle and Denver have been halted.

Circulation of printed newspapers dropped 7.1 percent in the six months ended March 31 from a year earlier, according to Audit Bureau of Circulations data.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Greg Bensinger in Washington at Gbensinger1@bloomberg.net

Last Updated: May 6, 2009 18:34 EDT