Chris Sutcliffe

Chris Sutcliffe: What is Defector?

Jasper Wang: So Defector is a sports blog and media company. We launched in September of 2020. Our founding team included 18 writers and editors who were all previously at Deadspin, but they quit very publicly in November of 2019. This is sort of the spiritual successor. We are cooperatively owned, with no outside funding at all and the website has a metered paywall with subscriptions starting at $8 a month.

Nice. There’s so much already there to dive into. I know that everybody quit very publicly, but what was the impetus for that mass exodus of people?

For those who have followed the various Gawker twists and turns over the years, Gawker went bankrupt after the Hulk Hogan-Peter Thiel trial. It got sold off to Univision as Gizmodo Media Group. At some point, it was then sold to a small private equity fund, and rebranded as GO Media.

At that point, the new leadership at the company who continue to run GO Media today, there were just significant conflicts between the overall leadership and then the editorial direction of several of the properties, but probably most acutely, that conflict was experienced at Deadspin.

The inciting incident was there was a memo that went out that asked the team to write exclusively about sports. Our group of writers and editors famously have diverse interests. If you go to our About Us page, we write about sports and politics and pop culture and weird stuff on the internet. The executives really took issue with the weird stuff on the internet in particular. As a poke in the eye, the staff put up only non-sports stories for a day.

That’s the kind of protest I can get behind, that’s fantastic.

Yeah. The interim editor in chief, Barry Petcheskey, was fired immediately for his insouciance. The rest of the staff quit within 48 hours after that.

It’s interesting, as well, that you’ve touched upon this idea that it was the staff who knew what the audience wanted better than the owners and the higher-ups. I do remember, as you said, that there was a huge amount of non-sports-related content on there. Deadspin was one of the blogs that I would regularly visit across the networks. I would bounce between Jezebel and Kotaku and Deadspin. I remember they had that eSports-focused niche vertical within Compete.

I suppose that speaks to this idea that, ultimately, it was a passion project for the staff, and it wasn’t necessarily that for the higher-ups. So what impact did that decision have on how the company is organised now? Why is it employee-owned?

Yeah, so the operating model and the business model, both of those come directly from just knowing our own audience. If we take the business model first, we are subscription-supported, because we knew there was a rabid group of readers.

Is that millions? No. But is it tens of thousands, maybe even hundreds of thousands? Yes. And so the quickest way to get some cash flow was to ask people to pay subscriptions directly. We had 10,000, paid subscriptions within 24 hours of announcing the project. We’re at about 39,000 total paid subscribers right now.

We’ve been able to expand the newsroom by a couple of people, we’ve been able to pay everybody a workable salary. We’ve announced policies around freelancers, online harassment productions, that we’re quite proud of. Overall, we’re feeling really good about where we’re at on the business model side. What you were getting at is that the operating model is also very different.

As we’re entirely employee-owned, I think if you looked at the newsroom side, you would say, ‘Oh, this is actually pretty conventional.’ Tom Ley is the Editor in Chief, we have a set of editors, we have staff writers, Tom sets the editorial vision, the editors assign stories, commission freelance pieces. That’s all fairly conventional, which is not to say that Tom isn’t always looking for ways to improve the process and experience within the newsroom.

But again, if you look at it, you would say, ‘Okay, I basically get how this works.’ If you look at the operations of the business, it’s very different from other media companies or other companies in general, I guess. I’m the business leader, but I only have one full-time person and one part-time person on the business team.

We have an array of outside partners and vendors, outside legal counsel, accounting, bookkeeping, HR partners, obviously all of our tech is outside. So I manage across all of those. But our editorial staff – all of them – are expected to participate in the operations of the business. And so depending on the week, or the person, I’d estimate they spend somewhere from 5-20% of their time thinking about ‘business decisions’ that they otherwise wouldn’t in their editorial role.

It’s interesting as well, I think, that a lot of the places that would advocate for a strict division are the ones that would then say, ‘any media organisation that tries what you have done cannot be self-sufficient, but from my understanding, you are self-sufficient?

Yeah, so a part of this is that we pay ourselves a sliding scale. Everybody gets a salary that we get paid bi-weekly, like any other salaried position. But then every quarter, we look back at the last quarter and say, ‘Okay, which of this cash can we distribute as additional salary?’ It’s pretty conservative as far as cash management goes; we’re never paying out ahead of actual, recognised profit.

But that only works if everybody is an owner or feels that they are in control of the direction of the business in some way, that they’re not going to get screwed over by some other party. We know every quarter, we’re going to look back, and we’re going to distribute some amount of money. That is, for us, the mechanism to be sustainable every quarter after quarter.

I’ve got to be honest, everything you say is bringing up two or three different questions I want to ask. I feel like I’m inevitably going to disappoint some of our audience by not asking questions around everything from how does that impact how people pitch stories? And how do people decide what to cover? How much time do people typically allocate to think about those kinds of new editorial and business opportunities?

I think the primary question, then, I think that we desperately need to ask at this point is ‘is this a one off, effectively? Do you think that Defector and the circumstances behind it are sort of a unicorn within the media industry? Not necessarily, in terms of being a huge, great, enormous success story yet, but in terms of how it is employee-owned and operated? Or is there more space for that?

When you say a similar model to ours, I think we’re asking about two separate conditions. The first is subscription-supported media and then two is cooperatively-owned media. I think the subscription support is actually trickier. We are in a unique position. I mean, it’s not so unique of a position, but it was a group up. It was a newsroom that was beloved and fell apart for non financial reasons.

Yeah.

And so we already had this following in some way. There’s an unsaid subtext sometimes, which is thatour writers, they were – lucky is the wrong word, it’s not lucky that our writers had to quit their jobs and be unemployed for a stretch while we figure this out – but it is the reality that their careers were underwritten by institutional media.

Most obviously, the Gizmodo Media Group, but also local media across DC and the Bay Area, Florida, Philadelphia, and other publications where they were at, such that they were able to develop a following that would come with us and immediately recognise the quality that they would be paying for.

We’re not that unique. I can point to the Colorado Sun and Block Club Chicago. They were started by former employees of the Denver Post and DNA Info Chicago. It happens probably more often than any of us would like, that you can reconstitute a newsroom pretty quickly.

But I think that road is much harder without that built-in audience already that you are pretty certain will be there and support you directly. So I think subscription support is hard.

Yeah.

But the second condition of cooperatively-owned, I think that is really doable. Tom Ley and I, probably once a month, we end up talking to some group of people who are interested in hearing about our story considering whether to pursue it in one form or another. I think those people get stressed out that they’ve never ‘done business before’.

Not to underplay my own role in all this, but being a business person is not some concentrated expertise that you need years and years of schooling and experience to do. It’s not medicine or law, it’s a bunch of smaller skills, of which you can assign out to different people and develop over the years. It’s project management and process management, clear communications, managing trade offs.

I understand when people are stressed out about the financial literacy and the applied legal literacy of the of the business side. But I have an outside bookkeeper and outside lawyer. I know enough to be dangerous. Editors and writers, they’ve already been building those skills, you just have to apply it to a business context, rather than a writing or reporting one.

Your tiers for subscriptions and memberships, they really do run the gamut from being $120 lowest tier is that right? No, $80 lowest tier?

$8 a month, $79 a year is our lowest here, yeah.

All the way up to Accomplice, which is the top tier.

Yes, that’s $1,000 a year.

So how did you decide on those price points? How much are you always rebalancing those scales? And, I suppose what’s more important for anybody who’s listening who’s looking at their own subscription strategy, how do you decide what benefits go into which tier there?

Yeah, great question. When we first set these prices last July, I think there were three first principles that ended up leading us to these three different tiers. One was, we knew that the commenter community at the old site was very strong. People loved hanging out down there making jokes, building community.

We just believed that we could charge extra for that. Some people don’t actually want the access to that, so make that the anchor for a slightly more expensive tier. The second principle was, we did not want to end up in a place where we’ve actually convinced all the people who are going to give us money to give us money, but we just charge too low a price and we can’t make it work.

We played around with that low price. When you look at other publications, the entry price is generally $5 a month. We just did the back of the envelope math and said $5 a month, if we can convert 30,000 people, that’s actually not enough money. So we have to just make sure we’re not shooting ourselves in the foot and make sure that that floor is high enough.

That’s so interesting. I mean, the idea that you could that subscriptions need to have enough headroom built into it, that the real, almost superfans can go above and beyond to choose how much they support? That’s something you don’t see at many media businesses.

To the point of the superfans, the long-standing joke was most of our biggest fans are just lawyers who are spending their billable hours hanging out in the comment section. And so we said, ‘hey, if you want to give us more money than this, give us more money, please’. We’ll put your name on the website and give you some other goofy benefits. And more than 100 people took us up on that. So it ended up working out pretty well.

To your question about what benefits go where, we are constantly thinking about, are we doing right by the promise that we’ve made, doing right by our subscribers who’ve given us their hard-earned money, and on the flip side, is it unfairly burdening some of our staff to deliver on these benefits?

I think increasingly the hope is we move towards things that are just purely scalable. We’re gonna add more merch, that’s easy enough to do, to send people free merch or discounted merch. It’s one spreadsheet, you load it with people’s addresses, and our drop shipper sends it out.

Or we were talking about having a quarterly meeting for subscribers, and they could dial into a Zoom and hear about the business. Again, it’s the same amount of effort for one person than it is for you know, tens of thousands of people.

I think we roughly got that right the first time through, I think there are some people on staff who would say ‘I get caught up doing some of this’, and we want to, in future years, try to get that more evenly distributed and in a more scalable way to deliver the benefits.

So where is the room for both editorial and commercial growth, do you think?

I’ll leave the editorial side alone, I really don’t break over that wall. As a reader, I love the diversity and our voices and what we cover. I would love for us to get to a point to be able to hire more staff writers and editors can make that decision on what coverage areas they should focus on.

On the commercial side, about 95% of our revenue right now comes from direct paid subscriptions. And the other 5% is a combination of merch sales, sponsorships on the site, podcast, ad revenue, and Twitch streaming ad revenue split. So in terms of growing, I think each of those places – it’s sort of an unsatisfying answer, but I do think we have a ways to go on on each of them.

For the subscriber base, I think we can still grow that. Every week or two, we get an email from someone who says, ‘I used to love reading so much of the old site, and I didn’t know about Defector but I’m glad I found out about it’. There’s still some low-hanging fruit, as it were, to just reach those people who are wondering where this group of writers went.

But we also hope our writing can reach other populations who didn’t necessarily know the origin story, and they just like the writing, and they’re willing to pay for it. I think that’s there as well. The other revenue streams, I’d love for our pipeline of sponsors to be more regular.

We’re launching a couple of new podcasts later this year that we’re excited about. With the United States opening back up, we’re hopeful we can get some traction with live events, too. All of those areas, we’re bullish on, but it is all within a context of sustainable growth, which is both meaning not investing too much cash ahead of that revenue coming in, but also not overextending our team.

We’re a small team and we can’t overextend our editorial team to be doing podcasts and flying out to events, while also fulfilling their core responsibility of writing the best blogs possible.

Again, our incentives are all aligned. We would love to have more more money through the door, there’s a lot of projects and hiring that we would love to be able to do, but we’re also acutely aware of each individual person’s available bandwidth to do more. If we can grow 10% next year, that would be incredible, but that’s not even necessarily the goal.

Yeah.

I’ve always been a big believer that culture eats strategy for breakfast. Once we set the overall business model, no single strict, ‘strategic decision’ is going to fundamentally shaped the direction of the business,. It’s so much more important that everyone feels good about how we got to that decision, and that we’re all running in the same direction. We’re all willing to execute against it together. And again, it’s not at the expense of financial success, it’s with financial success as one of a couple of factors here.

Just before we end, there are a couple of initiatives that I really wanted to highlight, because I think that they’re going to be of interest to the Media Voices audience in particular. We’ve done special episodes on everything from fair treatment for freelancers to ensuring the wellbeing of people who do work in the newsroom.

I just wondered if you could maybe highlight what exactly is going on around sort of anti-harassment and making sure that freelancers are fairly recompensed for their work at Defector?

Yes. I’ll start with the the online harassment policy. Our policy is if one of our staff gets doxxed, or otherwise harassed online, we already right now proactively pay for a service that monitors where your personal information gets posted online. We will pay for you to stay in a hotel if you feel unsafe. We will pay for our HR consultant and our legal counsel to support you.

We will encourage you to take paid time off, we will have somebody else look at your social media accounts to delete run-of-the-mill harassment and flag more serious issues to the relevant authorities. I feel very comfortable saying we have the gold standard policy here. You could imagine a version of this that is a purely budgetary problem.

Yeah, I was just about to flag that there are some companies, but for a lot of places, there’s almost no training, there’s no protection given to employees as well.

If we talked about it only in terms of financials, I actually think it’s pretty easy to make the case that this sort of policy has a long-term positive ROI, return on investment. If your journalists feel safe and supported, they are more likely to stay here, they are more likely to do fearless journalism. If you just assume small increases in employee retention and productivity, that pays for itself.

But even if you set aside that argument, and you said, ‘yes, this will cost us several $1,000 a year.’ For our staff, that’s a no-brainer. Some of them have been subject to terrible online harassment, they have seen it happen to colleagues, it’s absolutely necessary. And so again, when you are the decision maker, but you are also the frontline worker, you truly understand in your bones what this decision means and you can do right by your colleagues.

Our staff said, ‘hey, we need a freelancer policy and we’d like to work with the National Writer Unions Freelance Solidarity Project. So I said, that sounds great, let’s go do that. We talked to a number of folks on their side who are super collaborative, and they put on the table a set of conditions that I thought were just very reasonable. I did not feel like it was a negotiation, I felt like this is reasonable. This is how we want to treat people and so yes, that is all great.

Then once we ratified it and published it, I was shocked by the positive reaction that we got on it. Media loves covering media, but in reality, ailments of the broader business environment. This is one where I think this is a media-specific thing and when you brought it out, you actually say this is ridiculous. Do we think it is controversial to publish the rates that we are going to pay people and guarantee that we will pay them within 30 days after we say so?

Oh, my God, everybody listening to this podcast now is going to absolutely be pitching you stuff because we’ve had people who haven’t been paid for years.

Yeah. And our staff, they have their own horror stories. All of them have done freelancing at some point in their careers. They reassured me that it is the case that our policy is a meaningful departure from some other places’ policies, but again, I’m sitting here and saying, we’re just being more transparent, I think it’s better when everyone is on the same page about what the process is.

Again, just purely on a business decision, whatever small gains I have in cash management from stiffing you for another 30 days, and paying you 90 days or 180 days out, I think we gained so much more in having a reputation of treating our freelancers well, in the quality of the pieces that get pitched to us, in the reputational benefits, that it is a real no-brainer.

I think, implicitly, this sounds like I’m throwing shade, I’m saying other companies and individuals surely would agree with what I just said, but you get stuck in the bureaucratic nightmare of whatever entrenched processes or no processes you had at your big company. As individuals, the person who runs accounts receivable or accounts payable at any random publication surely would also say, ‘yes, I would love it if we could pay people in a more timely way’.

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