"Tip of the Iceberg." Is This the Journalism Funding Model of the Future?

photo: dizain/shutterstock

photo: dizain/shutterstock

One of the big takeaways from a recent study from the Shorenstein Center on Media, Politics, and Public Policy on funding trends in nonprofit journalism was philanthropy's inadequate response to the collapse of the news industry.

The issue here isn't a lack of funder concern or effort. Many have stepped up mightily to fill the gaps, and a post-election "Trump Bump" in donations rolls on. Rather, the problem is one of scale and scope: Funders simply can't shovel money fast enough into an industry whose print advertising revenue has plummeted by billions of dollars. 

News out of New York City, however, provides cause for guarded optimism.

According to the New York Times, a start-up called the Civil Media Company plans to use blockchain technology and crypto economics to start 1,000 publications nationwide by the end of the year. One of its first outlets, the Colorado Sun, will have a conventional website whose data will be written permanently into the secure digital ledger known as the blockchain.

Expenses for the Sun will be covered by a grant from the Civil Media Company, whose sole investor is ConsenSys, a Brooklyn-based blockchain software technology company founded by the Canadian entrepreneur Joseph Lubin. Lubin is also a co-founder of the Ethereum, a virtual currency and blockchain database platform.

Matt Coolidge, a co-founder and the head of communications for Civil Media Company said the company has raised $1 million so far.

I'll explore how Civil's model could transform the journalism sector in a moment. But first, some relevant context surrounding the challenges facing hometown news outlets is required.

Last year, I reported that Randall D. Smith, the founder and chief of investments at hedge fund Alden Global Capital, made millions by purchasing and shuttering or downsizing “distressed” local newspapers. According to the Nation, since 2004, speculators have bought an estimated 679 hometown newspapers that reached a combined audience of 12.8 million people.

In 2010, Alden Global Capital acquired MediaNews Group, the owner of the Denver Post. 

Fast-forward to March 2018. The Denver Post laid off nearly a third of its newsroom staff. A month later, the Post published a scathing editorial titled "As vultures circle, the Denver Post must be saved." Here's a particularly powerful excerpt:

Here in Colorado, Alden has embarked on a cynical strategy of constantly reducing the amount and quality of its offerings, while steadily increasing its subscription rates. In doing so, the hedge fund managers—often tellingly referred to as "vulture capitalists"—have hidden behind a narrative that adequately staffed newsrooms and newspapers can no longer survive in the digital marketplace.

The sentiment here underscores the larger market-driven obstacles for funders looking to prop up regional news ecosystems and "news deserts." How can these outlets thrive when gobbled up and "leveraged" by cost-conscious hedge funds? And if these outlets are bled dry, is it realistic to expect civic-minded donors to step in and rescue them? 

Indeed, earlier this year, a group of regional investors gathered $10 million in pledges to purchase the Denver Post, though nothing has come of it yet. Rumors also swirled that the billionaire Phil Anschutz "might pluck the Post from the bargain bin." He ultimately passed. 

About a month after the Denver Post published its editorial, three of its top figures, including its former owner, resigned.

The good news? Some of the editors and reporters who left the Post will now be working with the Civil to form the Colorado Sun. "It is absolutely exciting," said Larry Ryckman, a former senior editor at the Post, who will serve as the editor of the Sun. "We have been so eager to get moving."

To see why they're so eager, let's now turn to how Civil's operating model.

As part of its plan to fund new media entities, Civil plans to unveil a new token this summer called CVL, a form of cryptocurrency. According to the Times, people who purchase the token "will have a say concerning the projects hosted by Civil—meaning that they can vote on whether one of its websites violates the company’s journalism standards, which are outlined in the Civil Constitution."

Civil's strategy obviates the kind of editorial meddling from hedge fund overlords or majority investors that compelled the Denver Post's editors to quit in protest. It's also infused with the kind of collaborative, community-oriented approach to journalism embraced by funders like the Knight Foundation.

"We hope that Civil is going to become this publicly owned domain for journalism that anyone who’s interested in the promise of sustainable, independent journalism around the world should be in possession of, to maintain and support it," said Civil's chief executive, Matthew Iles.

Iles recently detailed Civil's plans for building the first "truly decentralized journalism platform" in a piece on Medium titled "Civil: Self-Sustaining Journalism." It consists of "newsrooms" and "stations"—"blockchain-based marketplaces where citizens and journalists form communities around a shared purpose and set of standards, financially support factual reporting and investigative work, and substantially limit misinformation through effective collaborative-editing methods."

"My hope," Iles said, "is that people will see the Colorado Sun as the tip of the iceberg. I’d like to think that if your local news organization is struggling, or if you believe that independent journalism is important, but you don’t yet really know what to do about it, I’d like you to see how Civil can be home for ideas."

By the end of June, Civil will have started 13 newsrooms throughout the country.

Another interesting element of Civil's model is the fact that, for the time being, it's behaving more like a VC than a long-term institutional funder. Civil didn't disclose how much of the $1 million raised went to the Denver Sun. But according to the Times, once the initial round of funding runs out, the outlet is on its own. 

Obviously, many issues remain, the most prominent being donor suspicion of blockchain technology and cryptocurrency. The first concept is confusing and nascent. The second is perceived as overhyped and risky. These are reasonable assessments, given the current state of the affairs. Earlier this month, Ethereum co-founder Charles Hoskinson predicted the cryptocurrency market would crash and then consolidate. A few weeks later, the valuation of the market dropped by over $19 billion over a 24-hour period.

That being said, we've seen some movement in terms of bringing blockchain technology into the mainstream. Blockchain technology firm Ripple recently committed $50 million to the University Blockchain Research Initiative, a collaboration among 17 universities to support and accelerate academic research, technical development and innovation in blockchain, cryptocurrency and digital payments.

Will findings eventually compel mainline journalism funders to bankroll Civil's approach? Time will tell. But that may not necessarily be a deal-breaker. As noted, Joseph Lubin's ConsenSys is, at least for now, the sole investor in Civil. According to Forbes, as of February 2018, Lubin's net worth stood between $1 and $5 billion. I suspect we'll be seeing more support from him in the future.

At the end of the day, journalism's struggles can be traced to the cruel but inevitable arc of technological innovation. Sites like Craigslist, Facebook and Google decimated print advertising. The proliferation of fake news online has eroded public trust. Social media has whittled the market for in-depth, hard-hitting investigative reporting.

Civic's model argues that many elements of this wave of innovation, such as "the recent invention and development of blockchain, cryptocurrencies and cryptoeconomic business models" can be configured as lifelines to struggling regional newspapers. It's akin to what Fast Company once called "business judo"—using your opponent's strength as weapons against him.

If anyone can appreciate what Civic's trying to accomplish, it's the Colorado Sun's new editor and refugee from the world of venture capitalist journalism, Larry Ryckman. Commenting on his discussions with Civil's Iles, he said, "It felt good to talk to somebody who was trying to do what felt like the right way to support local journalism in a new funding model."