Saturday morning, May 16

Host: Martin Reynolds, The VOICES Project, Bay Area News Group

Attending: Michael Stoll, SF Public Press

Reynolds: Will explore the acquisition of profitable legacy media outlets by nonprofits. We’ll focus on newspapers in this instance but there could be other opportunities. Get a sense of the research out there. What might be a property ripe for this? It could be big or small.

Planning by June 15 a convening call of interested participants from Pocantico gathering. In the meantime, we’ll research past proposals for acquisitions by Media Workers Guild and others:

*Speak to key sources who can provide context and director before call:

• Community foundations
• Media finance consultants
• Union people
• Tax professionals
• Large donors

This is really about assessing the viability of this approach.

Outcomes: Improve the quality of local news by changing the mission from just making money to enrich for-profit companies … to supporting and sustaining journalism and community information.

Reynolds: In a specific market that I’m very familiar with, the organization has continued to be profitable even though there have been year-over-year declines. My experience has been with a number of these markets, there is still great opportunity there for viable business if you embrace some of what we’re talking about. There is some real potential there.

Michael Stoll: There is the possibility of foundations making program-related investments that would and could be involved in buying a profitable business.   This has been talked about at different properties. It would be good to survey them to find out why they did not work. Smart people thought about making it almost work and it didn’t.

Taking the lead on this will be Martin Reynolds, Senior Editor – Community Engagement, The VOICES Project, Bay Area News Group; and Michael Stoll, Executive Director and Editor, San Francisco Public Press

The Pocantico participants Kevin Davis, formerly of Investigative News Network, Craig Aaron of FreePress and Ricardo Sandoval-Palos of the Fund for Investigative Journalism pledged to help with this. Michelle Garcia, freelance journalist and filmmaker, also agreed to assist where she could in some of the research. There is a nice collective group to explore this.

Who Does What by When?  

Action Steps:

1. James Head – East Bay Community Foundation – Michael Stoll
2. Chris McKay – Ownership Associates – Finance consultant for media – Martin Reynolds
3. Carl Hall – Martin Reynolds
4. Mark Carter – Get contact from Bain Capital
5. Clint Riley – Sued the Chronicle twice
   1. Molly de Aguiar, from the Geraldine R. Dodge Foundation will talk to folks at the Silicon Valley Foundation on our behalf.

Friday afternoon, May 15

Host: Martin Reynolds, The VOICES Project, Bay Area News Group

Attending: Michael Stoll, SF Public Press

What needs to happen

The idea:

A rich person buys it, takes it from private sector and then turns it over to the public sector. Need to make it appetizing for owners of these assets to give them up.

Why it could work:

• You’re not cutting to make quarterly profits.
• Make it easier for the organization to stay afloat.

Need answers to these questions:

What is the value in the legacy media that might be prospects?

Why would a rich individual give someone the money to do this?

• Need to rally the richest of America, preferably those who have social conscience and perhaps have a stake in the local community.
• Have to come up with a very appetizing reason for financiers to put up the money.
• Must make the case that there is value in taking something out of the private sector and putting it into the public sector.

More likely to convince individuals than many foundations that are growing endowments but giving away less and less.

Could we get Congress to pitch into something like this?

Example: CalMatters raised $2.5 million, hired a bunch of reporters who have names and then going to build an audience. It’s starting from scratch and will likely blow through $2.5 million. What if she would have raised $20 million and bought the SacBee?

What are the assets?

• Archive
• Circulation list, current and old
• Advertising base, a terrible website, traffic and brand recognition

Other options besides newspapers:

• Radio has an even lower price point, and radio often comes with multiple signals and those are very valuable assets. The model could be scaled at the low bandwidth signals and scale that up.
• Free Speech Television – Started off as a channel satellite companies had to give.
• What if that were able to be turned into a 24/7 platform.
• Link TV is a good example of one channel that is doing good work.
• The C-Span and other are of those, university-based radio and publications.

Downside:

• Buying a newspaper would be a much more expensive proposition.
• So in order to buy distressed newspaper products, someone is going to have to eat the debt.
• Hybridizing the model, the media company is for-profit but the news gathering is non-profit.

Funding options for exploration:

• Media Development Investment Fund, NYC
• Trying to keep media free by giving loans, costs are higher, harder to secure.
• There are a lot of people who say they want to do social-mission lending.
• Low cost, low margin assets, have a digital and analog strategy for content and monetization.
• Start this effort in smaller, underserved markets and prove out the model and scale to larger markets with bigger outlets.

Substantial network of social investors who might be open to supporting such an effort.

Always admonished the players in town, but the some argue that “these are the people we’re writing about.”

Ethical Conclusion:

The funder/buyer would have to pay for a complete transaction and not sit at the board table.

Yeah, but that’s like raising a kid and then allowing him to loud talk you in front of important guests. Is a billionaire really going to be willing to do that?

Important in the approach:

Part of this being successful is to look for journalists or people involved in media business who know particular communities. No swooping in. People need to be from the community, at least on the editorial side. The business side could be different.

In independent media space too many people are expecting people to do jobs they are not equipped to do.

Key Questions/Concluding thoughts:

Would need to know what the cost of acquisition would be and the time it would take. And whether could you put funding together to let it operate independently.

For profit sales, web, marketing team, but a content team working for the non-profit side.

Examine the cost basis of legacy media so we can assess whether this makes sense.

Unlike with new media, there is no way to determine what has history financially.

Philanthropist, we get painted by the source of the money, but that might be a subset of funders that has less potential.

Mary Babcock Reynolds Foundation that is very dedicated to a region, have funded a lot of activists, but be able to address systemic problems of media deserts, might put up some funding, and direct you to other funders.

One thing would need to do is assemble some small team of people, media company valuations to help determine what the opportunities be in these spaces? Are there arbitrage opportunities out there?

Should be convening people who have done significant Media Acquisition work.

Railroads got eminent domain, but what is potential with lobbying to get laws passed to get current owners and holders of troubled assets and in exchange get really sweet tax breaks.

That could open up a whole wave of publicly owned media outlets.

Owned by a b-corp, not profit driven but mission driven.

Indy media is all small ball. Play big ball and still keep our morals. Tends to get really caught up in minutia and need to think big and bold.

After this discovery period, determining the quality of asset, could you think through structure enough to really see if it could work? Some very conscious effort to set up the governance in a way that allows them to be entrepreneurial and serve the community?

Current owners of these assets want out and we want them to do it in a way, what do they need to do to give up that asset? It’s almost like we have to start using techniques that developers use to get what they want.

Friday morning, May 15

Host: Richard Logan, The Reva and David Logan Foundation

Participants:
Robert Rosenthal, Center for Investigative Reporting
Ricardo Sandoval-Palos, Fund for Investigative Journalism
Kevin Davis, KLJD Consulting, formerly with Investigative News Network (INN)
Jay Harris, Public Intelligence, Inc., formerly with Mother Jones
Richard Tofel, ProPublica
Linda Jue, G.W. Williams Center for Independent Journalism

Note taker: Ricardo Sandoval-Palos, Fund for Investigative Journalism

(Note-taker’s note:  This version is not contemporaneous or a verbatim re-creation of our gathering.  I am hitting the highlights, focusing on the part of the discussion that highlighted the tips start-ups and non-profits need to get off the ground and stay above water.)

Main points: Essential advice on a checklist of things prospective commercial and non-profit independent media operations need before the lights are turned on for the first time.

• Understand what you DON’T KNOW about your business, and about people, money and time management.
• Learn it, rent it or hire it to the original team, so the “don’t knows” become a natural part of the original team.
• Learn how to LEAD. And this means knowing your own limitations and how you can best add the needed knowledge to your team before you begin.
• This is especially true when it comes to business side management and SOCIAL MEDIA.
• Don’t forget your “MARKETING/COMMUNICATIONS”. Someone on the team needs to be PR savvy and know how to market and communicate your product, your stories and your overall mission.
• And, you cannot start any of this without first knowing and intimately understanding your AUDIENCE/COMMUNITY. Who are you targeting? Why? Are you limiting your options/possible revenue by not fully understanding your community?
• With all this in hand you must then make sure that each of the three lines is robust enough to support 100 percent of your TOTAL OPERATIONAL COSTS (if there is an economic downturn or a failure of one or both of your other sources).

This is a formula that not only allows an enterprise to begin, but allows you to scale (or not scale up and stay small, niche).
Conversation highlights:

Logan: If you’re looking to start something that goes beyond the home-based freelance gig, you need some basics of business beyond the journalism. You need to be able answer questions about all manner of insurance, accounting, managing budgets and all the other required legal and administrative duties.

Harris: But first you do need that great idea to start with.  And you need the passion to push that idea – without the two you are nowhere.

Davis: While at INN posed the following as an example of a non-profit start up:
–Suggest a head-count of at least five people; Three in editorial and two on the business side.
–The breakdown would be manager/editor/reporter, and on the business side, someone who manages the enterprise as though it were a business, and someone to liaison with the money.

Rosenthal: So then you get into the brass tacks of what you need.
In our world, non-profit investigative news operations, what’s most important is to have a good development team on board, someone who comes to the table with a good list of contacts in philanthropy and wealthy donors. Then you also need someone who is the “closer”, who can go to these contacts once a relationship is built and you’ve pitched – to seal the deal.

And, don’t forget that in the realm of development, you also need to have either people working on Public Relations, Marketing and Communications, or a sharp individual who can do all three.  You don’t want your editorial people trying to do this part-time for their own stories and projects, and your business people are not likely to be able to do the job with the kind of focus it needs.  But it’s vital, given that you need to get yourself and your work out into social media and on radio, TV and in print. It all brings eyes and ears back to your sites and that is essential when you talk to investors and donors about the kind of impact your stories have generated.

Davis: Of course, all this starts with the right CEO.  You actually do need someone who runs the entire organization.  Sometimes it’s not you, as the founder or original investor.  But it’s got to be someone who knows how to get their hands dirty on all fronts. Someone able to meet with donors and investors and then apply the funds to the right enterprise; someone who’s responsible to the auditor and to the board. And it has to be someone who goes to an editorial meeting, right after meeting with the development team and your PR/Mar/Coms folk.

Rosenthal: On the Development team leader or individual, you need that person to be someone who can own the challenge of finding money to keep the enterprise going. You (we) are the great journalists, but more likely than not, you will have no clue about what the hell you’re doing on the business side.

Which begs the question: How do you lead? There is a lot of success out there today, but it is difficult to identify a formula that works for everyone.

Harris: Comes down to needing someone to lead your team who knows how to close all the loops in your operation; someone who may be called upon to do some fill-in work on any one of these matters.

Davis: The reality is that there are a lot of small groups that have started, all trying to keep journalism alive. And we’ve told them that what you need to start with is a board with the leadership skills to help your mission.  If you’re out of synch with the board, nothing happens.

Logan: But what is leadership?

Rosenthal: It’s someone open to collaboration in key areas such as 1) Journalism…goes without saying. 2) Understanding bsuiness 3) Employing technology (not just journalism technology, like how to run a Word Press blog.) And you have to blend it all within a support system that goes from the board down to interns.

Harris: BUT DOES THIS ALL MAKE A DIFFERENCE ON A BOTTOM LINE? You still have to attract an audience and someone has to pay you so you can pay your people and keep the lights on, and even pay yourself.

Rosenthal: We do make a difference, yet the public still largely distrusts the media as a whole. The question becomes how we can tap into all that, collectively, and deliver a message from here, as a group?

Davis: The problem may be that our own marketing seems often to be aimed more at funders. But they (the funders) actually want to know how you are aiming at your community and audience.  Have you identified that before you launch?  If not, there’s trouble ahead pretty quickly.

Rosenthal: There are also too many folks going into ventures just with great ideas. That’s not enough. You need to have identified the sources of revenue for your operation. Lots of people overlook that important step.

Davis: Some organizations can work as viable mom and pop operations. Yet even the small ones have to ask just how sustainable their idea is. But for them it may not take much, especially if they’re not interested in becoming a larger enterprise. But for those that do want to grow, the obvious questions become how to you elevate your game? How do you grow your audience? So you need to think of the audience as your primary source or most leveragable asset for revenue.

Rosenthal: As a group, independents are always looking for ways to economize — to get services that might be too expensive for them to do on their own. So should we provide back office services?  Should we create a clearinghouse? Clearinghouse ideas have not worked so far.

Davis: Yes, even though people hoped they would work.

Rosenthal: We had our own hopes. It was a big goal, but it was tough.  Our California Watch Platform was good stuff. People did pay us. But in the end they didn’t want to pay, but wanted to give us stuff to put out there. For them CIR had become like a wheel-and-spoke entity.  But we found that great journalism alone is not enough to draw sustainable funding.

With Reveal, however, it was a platform that we did not initially feel comfortable with. It is about collaboration and commentary and we had to bring in talents that we didn’t have.  It did give a chance for some branding, though.  And that’s another thing a start-up should seek. How do you get the audience and have them know it’s you.  For us, it was important that they support/recognize Reveal and not think it was CNN or NPR coming at them. And now, we’re getting the numbers of outlets and entities coming to us to participate. Like Netflix and others. It’s crazy (good).

Davis: So there is the other lesson when you consider what it is that you need to start a non-profit. You have to identify how your collaborations and products will generate separate revenue streams. You want THREE separate revenue streams identified — each of which, if need be, could provide up to 100 percent of the funding your venture needs. That ought to be the goal. This is why you need someone on board with you, from the start, who has that business acumen – a CFO who can identify those revenue streams for you; a communications expert to get that out and could help with the development side so you can reach donors – the people who could be touched by your product, who care about public service journalism.

Logan: Yes, but you still have to engage the audience. How does that small organization engage and then sustain that engagement to survive?

Davis: Even if you’re just one-inch wide, you still have to be miles deep (i.e. very specialized). You have to have the authority and power. In the entertainment world, it’s the studio that creates products. For a CIR, it’s like a studio now and has created a brand with Reveal.

Rosenthal: Independent journalists can coalesce – start up – around interest areas and create content that is at least resonant with a community and audience that you have identified; all the while you or someone remains in charge and tends to the business aspects.

Harris: And you want to be able to show the IMPACT you’re having on your audience. How you’ve made or are making a difference. This will also help you when say you’ve identified an audience that can help sustain you.

Logan: You could say that as funders, we make investments in civil society to get organizations to the point where they’re making an impact.

Harris: This brings me back to the disconnect. Often in independent journalism, we know we need to do something, but then we drop the ball or can’t really afford to go out and find the expertise that can do that thing for you – the expertise in specific areas.  Maybe you can rent it, or find a place where you can tap into the expertise without having to invest in something full-time.

Rosenthal: Another thing you need to start up, something we all think we know a thing or two about and therefore don’t to worry about: social media. We think we know how to do social media, but it’s changing and growing all the time, and new opportunities come up as fast as the one you just learned no longer works the way you thought. You need someone who’s on that around the clock.

Davis: And that’s a tough spot for independent media because we’re having to compete for talent in that world and we can’t compete right now with what others are able to pay.

Harris: That’s why it’s important that we generate some market dynamics here so that competition somehow continues to push innovation. There are a number of talented thinkers here, who could push innovation.

Tofel: Two things come to mind. Out-of-the-box thinking on revenue streams and on ideas that will lead to revenue. And, a successful operation is able to take advantage of technology to help spread its work, and to develop ideas and stories and that drives up IMPACT.

At the end, Linda Jue came over and gave us all a good example of how great intentions and good plans don’t always lead to sustainable fruit. She described the goal; the rise and flattening out the Independent Publishers Association – which was one of the first groups to approach funders on behalf of independent journalists. It was a nice cautionary tale of how a great idea, even with distribution channels and 500 members, was unsustainable in the end