Donor-funded media is a growing phenomenon. From Craig Newmark to Google, philanthropic contributions to independent media projects considered ‘worthy’ have been growing. And the funding has been warmly welcomed and enthusiastically pursued by an industry struggling to find a commercial model that can compete with the duopoly.

But there are problems with donor-backed media, from over-reliance on a single ‘fairy godmother’ financer to worries about the impact on editorial independence. Possibly the biggest issue, however, is the absence of a sharp commercial imperative to find sustainability through innovation.

In a late January op-ed for European media-news site The Fix, editor Jakub Parusinski calls for changes in independent media funding models that will speed up and scale innovation. His concern is that relatively few European players are managing to grow and become sustainable, despite years of philanthropic support.

As an alternative to donor backing, The Fix editor suggests a VC-style model of funding to bring hard-nosed commercial imperatives to independent media development.

On first look I balked – more VC funding in media? Please. God. No.

But Parusinski’s idea goes beyond inviting more money men to take yet another seat at the media table.

He proposes the marriage of a commercially driven success and sustainability imperative with some social-investment proxies on the return on invested capital; a private-sector, quasi-VC approach to growing companies that factors in a level of social good.

Commercial goals meet social goals

‘Social impact investing’ is a hybrid venture-capital/tech startup funding model that introduces a focus on societal returns alongside more traditional financial returns on capital invested.

Mixing classic commercial metrics with the need to deliver against social goals, Parusinski thinks, would work better to increase the number of truly innovative independent media projects out there than current ‘donor’ models.

The ‘social impact investment’ ecosystem has until now focused mostly on ecological or inequality-related projects, but Parusinski thinks it’s time to include media in the social impact category, solving some of the innovation issues and helping to create a healthier media landscape.

One of three structural problems Parusinski identifies with the donor funding model relied upon by many independent media operations is the poor incentive to generate revenue. Donor funding, secured on an exciting, important or worthy editorial undertaking, is seen as a stop-gap until commercial revenues deliver sustainability.

In a pseudo-commercial play, donor funding is often throttled to incentivize revenue generation. This is in direct contrast to VC funding, where second round funding would pay for the development of commercial scale. And when revenue generation falls short under the donor model, as it very often does, projects deemed worthy enough will find another donor to bail them out.

Read the rest of this article by Peter Houston on What’s New in Publishing…

Similar Posts