• Lab
  • AndroidForMobile Foundation at
    HOME
              
    LATEST STORY
    Bad news from Mashable, BuzzFeed, and Vice shows times are rough for ad-supported digital media
    ABOUT                    SUBSCRIBE
    April 8, 2016, 10:46 a.m.
    Business Models

    From AndroidForMobile Reports: Do we need a new kind of nonprofit structure to support news as a public good?

    “What must be recognized is that the news media provide a public good, just as universities and other contributors to the knowledge economy of the 21st century do. For that reason they deserve special treatment by the government.”

    Editor’s note: There are lots of new stories to read in the of our sister publication . , an excerpt from her new book , the French economist calls for a new legal structure for media organizations that reflects the role of news as a public good.

    Some observers argue that the media themselves are responsible for the worrisome situation they find themselves in because of their many mistakes and their failure to adapt to the new world. My diagnosis is somewhat different: The media have not hit on the right economic model because they have failed to comprehend the nature of the crisis and therefore continue to react with outdated reflexes. Most debate is focused on “the death of print,” but what matters is not the medium but the message. The most important issues of quality content and the organizational structure of the media have been neglected.

    In short, the question is not whether the media should be subsidized. It is rather whether they should be granted a favorable legal and tax status in recognition of their contribution to democracy — a status comparable to that long enjoyed by many other participants in the knowledge economy. Some see the interest of billionaire investors such as Jeff Bezos, Pierre Omidyar, and John Henry as the harbinger of a new golden age: Once again, newspapers will be flush with resources and staff.

    But if the media of the future must depend on wealthy investors for their financing, many dangers lie ahead. It was in part the settlement of the estate of the Italian publisher that plunged the newspaper Libération into the crisis in which it finds itself today. That is why it is preferable for media companies to be organized as foundations rather than joint-stock companies: In a foundation, heirs cannot dispose freely of capital they inherit. The investment is irrevocable, hence permanent.

    With many news outlets now mired in crisis, it has become imperative to think of new models for the media. The one I propose is based on crowdfunding and power-sharing. I hope that it may serve as a new economic and legal template for the media of the 21st century, a template that combines aspects of both a joint-stock company and a foundation. Let us call this new entity a nonprofit media organization (NMO).

    To begin, it is useful to recall some mistakes of the past, starting with the experience of newspapers that have become publicly held corporations. Going public proved to be a mistake both for the newspapers themselves and for democracy. In the first five years after the Chicago Tribune went public, profits rose at the rate of 23 percent per year while gross revenue increased at a rate of only 9 percent; this performance was achieved by slashing expenditures drastically. The drive for higher profits affected not just newspapers but radio and television outlets as well (some television stations have operating margins above 50 percent), and the imperative to produce quality local news fell by the wayside.

    To put it bluntly, shares of news media companies should not be publicly traded. This is particularly true in the United States, where publicly held companies have a fiduciary responsibility to their stockholders to maximize profits. This legal obligation conflicts with their moral responsibility to “serve the general welfare” (as indicated in the of the American Society of News Editors). Similarly, because universities have a moral responsibility to educate and engage in research, it is hard to imagine them as publicly traded profit-maximizing corporations.

    In the United States, the United Kingdom, Ireland, and Germany, newspaper companies have experimented with a variety of innovative formulas over many years. Many nonprofit media organizations have emerged. In Germany the largest media conglomerate, Bertelsmann — number one in Europe and one of the largest media companies in the world — is owned by the Bertelsmann Foundation. This structure has in no way impeded Bertelsmann’s growth. Bertelsmann, with 110,000 employees, occupies a significant place in the media landscape in France, in Europe, and in the United States, where it is the majority shareholder in Penguin Random House, the largest publishing house in the world.

    Foundation status alone does not determine how media companies are governed. Should power be strictly proportional to shares of capital? If so, what countervailing powers can exist? In a typical joint-stock company, whoever owns the most shares also has the lion’s share of the voting rights. This is a problem, because a dominant shareholder can see to it that the company serves his or her own economic or political agenda rather than the public interest.

    Let’s survey some existing models of nonprofit media organizations to gain a better idea of their advantages and limitations.

    Photo of law books by used under a Creative Commons license.

    POSTED     April 8, 2016, 10:46 a.m.
    SEE MORE ON Business Models
    SHARE THIS STORY
       
    Show comments  
    Show tags
     
    Join the 45,000 who get the freshest future-of-journalism news in our daily email.
    Bad news from Mashable, BuzzFeed, and Vice shows times are rough for ad-supported digital media
    The rapid growth of Google and Facebook continues to take its toll on digital media companies.
    Asking members to support its journalism (no prizes, no swag), The Guardian raises more reader revenue than ad dollars
    The Guardian revamped its ask and its membership offerings — moving from 12,000 members in the beginning of 2016 to 300,000 today.
    Beating the 404 death knell: Singapore news startups struggle to cover costs and find their footing
    Political news reporting doesn’t seem to be holding up well as a business in the city-state. And it’s even harder when you’re seen as “alternative” media.