Social Capital to the Rescue of the Fourth Estate: A Playbook for Converting Good Will into Economic Support
By James Breiner
[Citation: Breiner, J. (2017). Social Capital to the Rescue of the Fourth Estate: A Playbook for Converting Good Will into Economic Support. #ISOJ Journal, 7(1), 107-128.]
Digital media entrepreneurs often lack the financial capital necessary to launch and sustain their operations and appear to be unattractive investments. However, there is ample theoretical work about how businesses and organizations harness social capital through networks to secure financial capital. Also, new digital media can become attractive investments when their social impact is measured. Examples of media organizations from Europe, Asia, and the Americas show a variety of ways social capital can be activated and realized. The theory and practice offer ways for the Fourth Estate to recover some of the influence it has lost during the digital revolution.
New digital media can become attractive to investors when their social impact is measured. Examples of media organizations from Europe, Asia, and the Americas show a variety of ways social capital can be activated and realized. The theory and practice offer ways for the Fourth Estate to recover some of the influence it has lost during the digital revolution. This paper will offer recommendations for aspiring digital media entrepreneurs based on theory and practice.
French sociologist and anthropologist Pierre Bourdieu laid some of the groundwork for expanding our view of economics in his essay “The Forms of Capital” (1986). There he described how social capital and cultural capital have economic value that is often overlooked and not measured. Just as economic capital represents a stored value of “accumulated labor,” social and cultural capital represent an investment of time and energy by individuals and families. The economic value of this capital often goes unrecognized because it presents itself in the guise of friendship, kinship, language, culture, educational credentials, or professional experience, he argued.
“Social capital is the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition,” Bourdieu wrote (1986, para. 19). “The volume of the social capital possessed by a given agent thus depends on the size of the network of connections he can effectively mobilize and on the value of the capital (economic, cultural, or symbolic) possessed in his own right by each of those to whom he is connected” (1986, para. 20). When applied to media entrepreneurs, this form of capital might be described as “connections” or “reputation” or “experience,” and the size of the entrepreneur’s network, as well as that of their connections, would matter greatly in the prospects for growth and sustainability. Cultural capital, as Bourdieu (1986) defined it, is embodied in a person and can be “institutionalized” through educational qualifications. It could also be cultural products and processes (a television camera and how to operate it), one’s language and ethnic rituals, or one’s experience.
Cultural and social capital, Bourdieu (1986) wrote, are “disguised forms of economic capital” and “produce their most specific effects only to the extent that they conceal (not least from their possessors) the fact that economic capital is at their root” (para. 28). Or, as Johannisson (1988) puts it, “In personal networks, the ties are relationships of trust. Unlike contractual relationships, these have no books recording the exchanges. Imbalances are not immediately regulated but are stored, supplying a motive for maintaining the relationship” (p. 84).
Another key difference from economic capital, whose value is fixed when there is monetary transaction between two parties, social and cultural capital have an indeterminate value that is realized only when an agent attempts to convert them into economic value through contracts or commitments. These forms of capital presuppose “an unceasing effort of sociability, a continuous series of exchanges in which recognition is endlessly affirmed or reaffirmed” (Bourdieu, 1986, para. 23). They take time and effort. Investing time and effort in accumulating social and cultural capital is thus a high-risk activity, Bourdieu (1986) said, because there is no guarantee of a payoff. The network members might be ungrateful or indifferent to another member’s gifts or gestures of friendship and kinship. Also, developing one’s cultural capital might not pay off. For example, is there more potential reward for spending eight years training to be a doctor or working in business?
Although Bourdieu (1986) treats social and cultural capital as distinct, and also uses the term “symbolic capital” at times when referring to a person’s reputation, many scholars conflate all of these terms under the general term of social capital (para. 19). In this paper, we will refer to social capital as the stored value of all the interpersonal relationships and inherent traits of individuals that have not been involved in a direct economic or contractual exchange.
Media Gain Capital as Brokers
Following on the work of Bourdieu (1986), Burt (2005), a network theory scholar, proposed that the agents who broker information and bridge gaps between networks with few or weak connections can accumulate increased social capital. These “brokers” have access to information from the separate networks, and they in effect control the distribution of information within each of the networks. So, for example, an entrepreneurial media organization like the Texas Tribune, which we will describe in detail later, acts as a broker between communities as geographically distant and ethnically different as El Paso and Dallas, providing information of concern to both about Texas business, economics, politics, and policy. The publication accumulates social capital by bridging the gap with information but also by connecting the groups through cultural events, political forums, and conferences. In Burt’s (2005) theoretical framework, this publication, as a broker of trusted information, earns additional social capital when the gatekeepers to the closed networks in each community—in this example, the chambers of commerce, social clubs, and cultural organizations of San Antonio and Dallas—create value for the broker by distributing the information within that network.
In a study of regional newspapers in isolated areas of rural Australia, Hutchins (2004) drew on the work of Digital Age theorist Manuel Castells (1996) to describe how these media managed to accumulate social and economic capital with their readers by interpreting the flow of information about national and international issues. Castells (1996) proposed that a major societal shift was under way in the digital age toward decentralized networks and away from centralized, hierarchical states and bureaucracies. Hutchins demonstrated that local media were actually accumulating social capital by connecting their audiences with these other networks and interpreting the meaning of national and international events for them.
Social Media and Social Capital
Although it would appear that social media such as Facebook and Twitter offer a useful tool for acquiring social capital, they are double-edged swords. At the moment, the large media organizations in most of the developed world are hedging their bets with a strategy that combines giving away their content to social media (distributed content) to expand their reach while attempting to preserve the value of their brands with their own applications and websites. Notable is the Washington Post’s commitment to putting all of its editorial content on Facebook’s Instant Articles platform with no link back to its own website (Breiner, 2016a).
The theory is to convert an ever-larger number of people to pay a small amount and thus increase revenues. A counter strategy is that used by several media profiled in this article, namely Eldiario.es of Spain, Mediapart of France, and De Correspondent of Holland, which convince a relatively small number of people in their countries to pay a relatively large amount—from around $66 to $110 a year—as a means of converting their social capital into economic results. Based on findings of the Reuters News Report 2016 study of media consumers in 26 countries, both strategies can make sense, depending on the situation of the media organization. On the one hand, “Most consumers are still reluctant to pay for general news online, particularly in the highly competitive English-speaking world (9% average), but in some smaller countries, protected by language, people are twice as likely to pay” (Newman, 2016, p. 7).
The trade-off for media organizations that opt for expanding reach through social networks is that they may be diluting their brands, which are social capital. As Newman noted:
The growth of news accessed and increasingly consumed via social networks, portals and mobile apps means that the originating news brand gets clearly noticed less than half the time in the U.K. and Canada. In countries like Japan and South Korea, where aggregated and distributed news is already more widespread, the brand only gets noticed around a quarter of the time when accessed through news portals. (2016, p. 7)
Social capital generated from external networks is of critical importance to entrepreneurs because they are introducing a brand-new product or service to the marketplace (Gedajlovic, Honig, Moore, Payne & Wright, 2013). Gedajlovic et al. cited Coleman (1990), who argued that social capital “is a collective good that results in increased sharing and solidarity among actors in the network collective that would be otherwise unattainable” (Coleman, 1990. p. ?). The key phrase for entrepreneurs is “otherwise unattainable.” Their external networks are essential.
Measuring Social Capital for Investors
In recent years, a new type of investing has emerged called venture philanthropy or social impact investing, whose investors are concerned with not only economic returns but also positive social impacts. The Brussels-based European Venture Philanthropy Association, with more than 200 members, has produced a series of guides and handbooks (2016) about how to invest and how to measure non-economic impact. But for this study, a relevant example is the Media Development Investment Fund, based in New York. It makes investments in “independent media around the world providing the news, information, and debate that people need to build free, thriving societies” (MDIF, 2015). The organization has provided $153 million in financing and professional consulting to 100 businesses in 39 countries.
MDIF measures its media investments on their sales, reach (users, readers, viewers, listeners), and financial viability (cash flow, assets, debt, growth, management), as well as the impact on holding authorities accountable and revealing corruption. And unlike an NGO or foundation, MDIF promises its investors a financial return. (Breiner, 2017a)
In this study, some of the metrics developed by MDIF will be used to gauge how effectively entrepreneurial journalism organizations activate the social capital in their networks and transform it into economic capital. Many of these media organizations are not primarily interested in delivering profits to shareholders but rather social benefits in the form of a free and independent press. They measure their effectiveness by their impact on society through holding the powerful accountable. This is their strategy for attracting investors, sponsors, and subscribers. In this respect they are recognizing that the media industry is not just a source of profits.
For much of the past century, the media, or the Fourth Estate, was also an industry that could provide enormous economic benefits to investors because of the monopolistic nature of their businesses. However, with the collapse of that model and the rise of digital media, the Fourth Estate needs new economic models. Pew Research’s annual State of the Media reports have tracked the declines in detail. In the United States, 18,000 newsroom jobs have been lost since 2006 (Pew Research, 2016). In Spain, 11,100 journalists have lost their jobs and 100 media outlets have closed since 2008 (PR Noticias, 2014). Similar trends have been observed in other countries. In the United Kingdom, sales of newspapers have declined by 40% in the past 10 years (Sillito, 2015). In Holland, with a population of only 17 million, daily newspapers have lost three million readers (Dutch Journalism Fund, 2015, p. 6).
Case Studies in the Conversion of Social Capital
The following section highlights eight examples of digital media startups that have accumulated social and cultural capital and translated it into economic capital. The table below compares them using some of the key performance indicators cited by social-impact investors.
Key Performance Indicators by Publication
Perhaps the best place to start is with the French digital news startup Mediapart. The founders were well known journalists who believed that the best way to produce independent journalism online was to use a subscription-only model and accept no advertising. In their manifesto they declared that French media were no longer independent of political and business interests and were not doing investigative journalism, which prevented them from “performing their democratic duty to inform the public,” as recounted by the Dutch scholars Wagemans, Witschge and Deuze (2016, para. 45). The authors emphasized that Mediapart’s founders wielded considerable amounts of social capital in terms of their connections, name recognition, and reputation. When Mediapart launched in 2008, the founders had raised about $4 million in initial capital, half of which was their own money. Of the initial team of 25 journalists, 19 were promised a three-year contract at the same salary as the job they had to leave in order to join Mediapart. This helped convince journalists who were hesitant to join this risky startup.
But it was journalism ethics, not just money, that drove the founders. Edwy Plenel, who had been editor-in-chief of Le Monde, left that newspaper over censorship of one of his investigative pieces by the board chairman representing the new owners (Wagemans et al., 2016). It was Plenel’s advocacy for independent journalism that helped persuade others to make the leap into the unknown, according to interviews conducted with Mediapart’s founders. Plenel mobilized his symbolic capital—prestige and recognition in the field. As the authors said, “Charisma is also a form of symbolic capital. Furthermore, intellectual capital (creative ideas) and cultural capital (particular knowledge and skills, the ownership of cultural goods, recognized authority or expertise) play an important role as personal traits allowing one to build and maintain a personal network” (Wagemans et al., 2016, para. 29). One can hear an echo of Johannisson: “the key to entrepreneurial success is found in the ability to develop and maintain a personal network” (1988, p. 83).
In interviews with Wagemans and his team, Mediapart’s founders described the typical mistakes of digital media entrepreneurs, such as the failure to hire people to oversee technology, finance, and marketing. They stumbled through a process of trial and error, and they needed all of the $4 million in startup capital to cover their losses. In its first two years of operation, Mediapart generated $5.7 million in revenues, but expenses exceeded revenues by $4.9 million. They broke even in the fall of 2010 (Mediapart, 2016). Mediapart has been reinvesting its profits in the operation. By the end of 2015, the publication had 118,000 subscribers paying $12 a month or $120 a year. Its staff grew to 65 employees, 39 of them journalists. It has added videos (three million views in 2015) and an application for smartphones and tablets. In its annual report, Mediapart said it is battling the French government over a claim for $5.2 million in back taxes and penalties. Mediapart had paid taxes of 2.1% on revenues, the rate normally applicable to the press, rather than the 19.6% rate for other businesses. The government insisted on the higher rate. Mediapart showed an operating profit of $3.6 million for the two years 2014-15, but after making a provision for the tax dispute, it had an operating loss of $440,000 for those years. It is appealing the tax assessment and fines.
Part of its website, called Le Club, is free and open to the public so that users can comment on articles, publish blogs, and interact with other users and the journalists. This activity has helped extend the brand beyond the paywall. The publication also sponsors debates, festivals, and rallies as other brand extensions.
Conversion Through Crowdfunding
Holland and Spain offer two outstanding examples of how notable journalists converted their social capital into economic support through crowdfunding. Like an initial public offering, crowdfunding involves soliciting financial support from the public at large. Unlike an initial public offering, which is highly regulated and activated through securities exchanges, crowdfunding is almost unregulated and is activated mainly through online social networks.
De Correspondent, a Dutch-language website, launched in 2013 after raising $1.7 million from a crowdfunding campaign that promised a different kind of journalism.
Publisher Rob Wijnberg, previously editor of a newspaper aimed at young adults, was surprised that he and the other founders managed to get so many people to pledge $66 each for a one-year subscription to a new online publication (Witschge, 2015). The main selling point he emphasized during a nationally televised fund drive was that the publication provide in-depth reporting, news analysis unconnected to political ideology, and no advertising in order to maintain editorial independence.
Two years later, editor Ernst-Jan Pfauth said one of the secrets for activating this network of Dutch citizens was “to start a movement, not a publication” (2015a).
We told our audience that we wanted to start a publication that would serve as their daily antidote to the hypes of the day. A publication that ignores what happens only today and focuses instead on the things that happen every day. We promised our readers that we’d help them understand the world around them better. That’s what they signed up for. Not saving our jobs. (para. 9)
His comments buttress the observations of Wagemans et al. about the importance of a sense of mission and charisma in activating a network. The startup team of 13 had grown to 31 by the end of 2015, and the number of subscribers exceeded 47,000 (Pfauth, 2015b).
A startup in Spain, El Español, followed a similar pattern. Its founder was a well-known journalist, Pedro J. Ramírez, who had been forced out as editor of one of Spain’s leading newspapers, El Mundo, which he had founded in 1989. As with Plenel at Le Monde, Ramírez ran afoul of his board, which wanted him to go easy on the ruling party (Sánchez León, 2015). He exacted a measure of revenge by hiring away some of El Mundo’s top people for his new venture.
In just 2-1/2 months in 2015, Ramírez’s project broke De Correspondent’s world record for crowdfunding of media by raising $4 million from 5,600 contributors. Ramírez personally invested $5.8 million of his own money from his severance deal with El Mundo. A variety of other investors provided another $9 million, so the publication launched in October of 2015 with total startup capital of $18.7 million from a variety of investors (Dircomfidencial, 2016). Clearly the prestige and charisma of Ramírez helped him gain so much capital so quickly. He was also promising journalism that would be independent of political influence. In the early days of fundraising, he said at a journalism conference, “What’s happened in recent times is that the people in the business role in media have transformed themselves into a type of political commissar for politicians and the powers that be. The political and business powers have taken advantage of this to impose censorship on the newsroom” (Breiner, 2015a, para. 12). Ramírez said he would have had difficulty convincing investors and the public to invest in El Español if it hadn’t been for the success of digital media like Eldiario.es, El Confidencial, InfoLibre, and other digital forerunners in Spain. He described the new trend of journalists founding their own media as a throwback to the nineteenth century in Spain when editorial people, not business people, usually ran newspapers.
Ramírez was paying top salaries to lure talent from other media and eventually build up his staff to 103; in the first nine months of operations, salaries ate up $3 million, Dircomfidencial reported, citing the company’s official filing with the Commerce Registry (2016). The company had revenues of $2 million but lost $2.5 million in that first period.
With both De Correspondent and El Español, nationally known journalistic figures tapped into a network of individuals with whom they had mostly loose ties to secure crowd-funding resources in the millions of euros. They activated a latent network of individuals who responded to a promise of journalism free of political influence and ideology. In the case of De Correspondent, the revenue goals were more modest, and the funding model, completely subscription based, put a limit on the potential revenues. By contrast, Ramírez had much bigger aspirations for El Español; he wanted to compete with national publications like the one he had founded. He used a more traditional business model based mainly on advertising. So Ramírez had to tap a source of capital from deep-pocketed investors and endure the questions from those investors about when and how the publication would turn a profit, as described in Dircomfidencial (2016b).
Ramírez mentioned Eldiario.es as one of the trailblazers that had opened the way for him in Spain. It is true that eldiario.es shared many characteristics of El Español, but it also had significant differences.First, the similarities. It had a charismatic founder who was the main activator of social capital in the person of Ignacio Escolar, who had worked in television and as the founding editor of the daily newspaper Público (Breiner, 2017a, para. 16). Escolar, who is a generation younger than Ramírez, left Público and launched Eldiario.es in 2012 with $440,000.
Unlike Ramírez, Escolar decided to start with a small staff and grow organically as revenue increased. Also, Eldiario.es is owned by the journalists themselves, who have been re-investing any profits in growth and improvements. The ownership structure differs in that respect from El Español, which has a significant percentage of shares in the hands of outside investors who are expecting a financial return on their investment. Escolar has made financial transparency about ownership and finances a selling point and part of his strategy to identify his brand with journalism that is independent from any political party or special interest (Escolar, 2016). Part of that differentiation is the publication’s program of raising money from its “socios” or partners. They pay at least $66 a year to get access to the news a few hours ahead of everyone else as well as ad-free pages, discounts, and invitations to events. “And they allow us to remain independent,” Escolar said (2016, para. 4). Those partners, who totaled 19,200 in mid-2016, brought in about a third of Eldiario.es’s revenues. Although advertising brings in more than the partner revenue, no single advertiser comes close to bringing in what the partners do, so none has enough leverage to influence editorial decisions, he said. Escolar has made a habit of making a no-apologies promotion of the partners program when the publication has a major scoop, inviting readers to participate in this project of independent news.
The strategy is working. Escolar announced that the publication finished 2015 with revenues of $2.6 million, up 33% on the year, and a profit after taxes of $235,000. The staff has grown to 54, and they have gained a reputation for investigative journalism that uncovers corruption among political and business elites, who traditionally have been protected by a compliant press. Escolar’s message of public service through independent journalism has allowed him to hire and keep journalists who might earn more elsewhere. And his skill as a businessperson has made the operation grow. Journalism is not a business; it’s a public service, he said. “But it is a public service that has to be profitable” (Breiner, 2016b, para. 12).
Another entrepreneurial star in digital media is Malaysiakini, based in Malaysia, which was profiled for the Center for International Media Assistance (Carrington, 2015). Since its founding in 1999 by two former print journalists, Steven Gan and Premesh Chandran, it has survived cyber attacks, lawsuits, the arrest of its editors, financial ups and downs, demonstrations, and government attempts to censor its content. In 2016 it was reaching an audience of 8.6 million visitors a month, and its value proposition has been an unflinching commitment to telling the truth about the ruling powers. Annual revenues reached nearly $1.5 million in 2014, enough to employ 40 reporters. It also received early stage financial and training assistance from the Media Development Investment Fund, Open Society Foundations, and National Endowment for Democracy (Carrington, 2015, pp. 5-8). The funding from Open Society made the publication the target of mass protests late in 2016 by pro-government supporters, who accused Malaysiakini, Open Society founder George Soros, and the U.S. government of collaborating to overthrow Prime Minister Najib Razak, who was involved in a corruption scandal (Naidu, 2016).
A unique feature of its business model was that it published in four languages—Tamil, Chinese, Malay, and English—but only the English version was behind a paywall because that audience was the one most able and willing to pay. Subscriptions reached more than 16,000 at about $40 each annually. In this way, the founders recognized that they had different types of social capital at their disposal—one for building a base of readers who wanted to see the powerful held accountable and another that had the financial resources to back the editorial operation. As Malaysiakini has grown, it has expanded into video products and business news. Gan and Chandran have innovated constantly and sought new opportunities to grow their audience and financial support.
A sign of the social capital they have generated was the fact that at their fifteenth anniversary celebration they raised $500,000 by selling bricks for their new headquarters.
Texas Tribune, U.S.
One of “the most aggressively entrepreneurial” digital startups of the many in the U.S. is Texas Tribune (Batsell, 2015, p. 14). It has used the social capital of its two founders—one a journalist and one a software investor—to build a significant media organization focused on state government policy and politics in one of the country’s largest states.
Batsell describes how software investor John Thornton decided in 2009 to put up $1 million to support a nonpartisan news source that would promote “civic engagement and discourse on public policy, politics, government and other matters of statewide concern” (p. 7). He hired Evan Smith to lead the operation as CEO and editor-in-chief. Smith, previously editor of Texas Monthly magazine, is a tireless promoter and eloquent speaker. He activated a latent network of people and organizations concerned about the loss of coverage of local news and politics caused by newsroom layoffs. The following year, Thornton gave a second $1 million with the stipulation that it be matched by other donations. The Tribune grew from 17 employees in 2009 to 50 in 2015, 35 of them journalists. It boasted of “more fulltime statehouse beat reporters than any other news organization in the United States” (Batsell, 2015, p. 4).
In its second year of operation, the Tribune found it was not raising revenue fast enough to be weaned off foundation grants, so it hired Texas Monthly’s publisher, April Hinkle, who had two decades of experience selling advertising, to take over revenue generation. This hiring followed the pattern suggested in social capital research that successful entrepreneurs acquire the social capital that they lack in order to develop a successful organization. Like Mediapart, Texas Tribune needed additional marketing and sales expertise to make itself sustainable. The Tribune also hired an events planning expert from the New Yorker, and event revenue rose to more than $1 million in 2013. By the end of that year, the Tribune was generating 45% of its revenue from sponsorship and events, 34% from philanthropic sources, 13% from membership, and 8% from syndication, subscriptions, crowd-funding, and other sources (Batsell, 2015, pp. 7-10).
The publication broke even in its third year and had revenues of $6.5 million with a tiny profit in 2015, according to its annual report (Texas Tribune, 2016). Like other publications studied in this paper, the Texas Tribune has innovated constantly to tap into new networks and acquire more social capital. It has distributed its material free to more than 100 media partners to expand its reach and social impact. The publication has made a business and marketing tool of its databases of state employee salaries, political campaign contributions, and state prison inmates’ convictions and sentences. These databases have attracted three times the traffic of the news stories. The Tribune also aggressively markets its journalism and public service awards as its evidence of community service.
La Silla Vacía, Colombia
Digital media entrepreneurs operating in Latin America face an entirely different set of challenges in attempting to convert their social capital into economic support. First, there is little infrastructure of foundations, NGOs, and private capital accustomed to investing in independent media. Second, the region has a tradition of closely linked political, business, and media interests that monopolize the economic capital and make it difficult to tap into social capital. The most receptive networks for an entrepreneur with a mission of independent journalism and exposing corruption are often people without much money or social capital. Among the untapped reservoirs of social and cultural capital are the region’s universities as well as NGOs from Europe and North America (Breiner, 2017b, forthcoming).
Juanita León managed to overcome all those obstacles and tap into several sources of social capital when in 2009 she founded La Silla Vacía (“The Empty Chair”), a website focused on doing independent investigative journalism on how political power is wielded in Colombia. She has told her story to the online magazine Cromos (2015) as well as detailing the sources of financial capital on the publication’s website under preguntas frecuentes (frequently asked questions).
León had accumulated significant social and cultural capital as former editor-in-chief of the influential weekly La Semana and as a Harvard Nieman Fellow (2007) in the United States. When she won an Open Society fellowship of $100,000 in 2009, she combined that with an equal amount from her family to launch La Silla Vacía with two other journalists. One of the biggest obstacles she faced was her own friends, who urged her not to start the publication. They wanted to protect her from what they assumed would be an embarrassing failure. They predicted that the public would have no interest in politics and that the existing media would crush her. Another issue León faced was that some journalists who had said they were interested in joining the team in the end decided it was too risky to leave safe jobs with traditional media (Cromos, 2015).
In 2016, La Silla Vacía had paid staff of 13, 11 of whom were journalists, plus an administrator and a director of business. Revenue sources were: 22% advertising; 50% from international NGOs such as Open Society Foundations, Ford Foundation, and the National Endowment for Democracy; 8% from its club of supporters called Super Amigos; and the rest from alliances for specific projects such as education, leadership, gender issues, and debate forums at universities. In 2014 León reported that revenues and expenses totaled about $40,000 a month, the vast majority for salaries.
In 2016, she and her team won the prestigious García Márquez journalism prize for their coverage of the peace process in Colombia. They also won in 2013 in the innovation category for their multimedia coverage of victims of Colombia’s armed struggle. León has been outspoken about the need for journalists to innovate constantly in the new digital environment. The biggest mistake, she said, is to keep doing things the same way they always have without recognizing the interactive, multimedia nature of the web. León sees La Silla as a laboratory to test innovations in the production and distribution of news. The publication has developed extensive databases of the most powerful and influential people in the country—los Superpoderosos—showing their network connections through family, business, educational background, professional associations, and political ties. It would be quite easy to go bankrupt doing investigative journalism in Colombia, she said, because it offends so many of the people and organizations who have the resources to be sponsors or advertisers (Breiner, 2014).
Nómada of Guatemala
Martin Rodríguez Pellecer is only in his early 30s, but he has founded two notable digital news media organizations in Guatemala—Plaza Pública and Nómada, the latter launched in 2014 (Breiner, 2015b). In the literature about social capital and entrepreneurs, those who have done it once are the ones who are most likely to try it again and also the most likely to succeed because of their experience in this risky, unpredictable world of startups.
Rodríguez got his start as an entrepreneur when the Jesuit university in Guatemala City invited him to advise the student newspaper, and he converted it into an investigative journalism site called Plaza Pública. After directing it for three years, he decided to leave and start his own project, Nómada. In the “about us” section of the Nómada site is a kind of manifesto and value proposition condensed into nine words: independent, fresh, iconoclastic, optimistic, esthetic, feminist, investigative, avant garde, and nomad.
We nomads don’t know what the future holds, but we know it is better. And that we will build it with our own hands. And that we have to get moving to change things. And that the world needs us to get moving. And for this we came into the world. (Breiner, 2015b, para. 9)
Rodríguez demonstrated his grasp of the necessary mindset for an entrepreneurial journalist in an interview with Breiner:
The most difficult thing for a journalist is to think like a capitalist, to realize that you have to invest and put money on the line. You have to be flexible; you can’t wed yourself to just one thing. You have to have lots of eggs in different baskets. No successful capitalist has just one line of business; all of them have lots of businesses. (2015b, para. 3)
Rodríguez has cobbled together an annual budget of $240,000 from a variety of sources, including loans, grants, advertising, consulting, research and events. The grants come from outside Guatemala: Hivos of the Netherlands, Open Society Foundations, and the government of Norway, among others (2015b, paras. 5-7).
All that supports a payroll of 16 full-time people, many of them relatively young and willing to work for modest salaries while learning higher-level reporting skills.
Nómada recently published a list of 47 “megabusinesses” that take advantage of a law allowing them to pay very little in taxes. In many cases, these businesses are also doing substantial business with the government (Olmstead, 2015). The publication’s aggressive reporting has won it recognition in its brief lifetime, a fact which it promotes on its website and in social networks.
Given the precipitous decline in the number of full-time journalists employed by traditional media, which was caused by a collapse of their business model, all parties interested in a vibrant independent press have been searching for solutions. One of the main discussions in the profession has centered on developing new business models and identifying new revenue sources for entrepreneurial media ventures based on digital platforms. One of the overlooked resources for these new ventures has been the social capital that the entrepreneurs can marshal to support their projects.
The theoretical work by scholars such as Bourdieu (1986), Johannisson (1988), Coleman (1990), Castells (1996), Hutchins (2004), Burt (2005), Gedajlovic et al. (2013), Hess (2015), Witschge (2015), and Wagemans et al. (2016) provides a framework for developing strategies to activate the latent social and cultural capital the entrepreneurs have in their networks and convert them to economic resources for their ventures. Because the social capital they have accumulated is not recorded somewhere in a book, in the way that economic transactions are, social capital is often difficult to identify and activate. The value of social capital that lies within networks depends on continuous investment of time and energy on the part of an entrepreneur. Because social capital is disguised as friendship, kinship, shared interest, favors, gifts, or professional credentials, the parties on either side of the relationship may place different values on that capital. These uncertainties make investment in social capital a highly risky activity that requires special strategies and tactics. The eight startups from seven countries that are chronicled in this paper show a variety of different strategies based on the unique characteristics of their founders and the media markets they are working in.
Based on the experience of the eight startups described in this article, some conclusions can be drawn about essential elements of successful strategies to convert social capital to economic capital and, ultimately, to social impacts.
The founders need to have recognition and prestige both within the journalism profession and in their media communities. In eight of these entrepreneurial ventures, the founders had a positive profile that identified them with credible, reliable news sources. Nómada’s Rodríguez in Guatemala did not have the recognition of millions of people enjoyed by the founder of El Español, nor did he attract the millions of dollars of investment of his counterpart in Spain, but he was able to attract enough to launch a credible publication doing notable investigative work. In the case of La Silla Vacía in Colombia, the founder’s reputation was sufficient to attract economic capital from outside the country, but the local business and political culture made it difficult at first to convert the social capital into labor (potential employees were reluctant to sign on to a risky new venture) and economic support from within the home country. Founder Juanita León had to innovate strategies to tap into a network of supporters (Super Amigos) and readers interested in specific topics (leadership, education) to generate financial support.
Founders need to sell the mission and the vision; passion and charisma count. Investors and subscribers need a strong motivation to support a new venture. As Pfauth of De Correspondent suggested, “start a movement, not a publication” (2015a, para. 9). De Correspondent managed to raise its startup capital through a television campaign and continues to attract new paying subscribers at a steady pace. The promise of an independent media voice free of influence from political parties was a strong selling point for several of the media studied here, particularly in Europe and Latin America. Escolar of Eldiario.es used his publication’s scoops on corruption as a platform to promote “partnerships” of $66 a year. A commitment to media independence also helped several of the publications raise money from private foundations and social-impact investors.
Connecting networks with weak ties to each other accrues social capital to the media organization. With reference to Burt’s concept of the social capital that accrues to information brokers who bridge the gap between closed networks, all eight of these entrepreneurial journalism organizations positioned themselves as independent analysts, interpreters, and providers of unique content unavailable to their target audiences from any other source. For publications with a particular geographic focus, connecting their audiences to a larger world of political, economic, and social policy offered them an advantage.
Weak social ties are better than strong ties for entrepreneurs seeking to maintain independence. Several of the eight examples presented here took steps to avoid being controlled by their suppliers of economic capital. De Correspondent and Mediapart accept no advertising, no government subsidies, and no foundation funding. De Correspondent and Eldiario.es were owned and controlled by the journalists themselves in order to avoid the kinds of conflict between journalistic and editorial interests that had led their founders to leave previous employers. However, Malaysiakini, Texas Tribune, La Silla Vacía, and Nómada all depend on foundation funding to a greater or lesser extent, which makes them vulnerable to a sudden reduction in support. Most were developing strategies to offset this vulnerability. Vulnerable in another way was El Español, which raised about half of its startup capital from private investors, who were expecting an economic return. Those investors showed signs that they might insist upon changes in strategy if profits were not forthcoming in the foreseeable future, thus illustrating one of the risks that come with the capital (Dircomfidencial, 2016b).
Entrepreneurs need to develop metrics of social impact to justify continued economic support from subscribers and donors. Several publications have made a case for their social impact by citing the awards they have received from journalism groups and social-purpose organizations, notably La Silla Vacía, Texas Tribune, and Nómada. Eldiario.es has pointed to how some of its scoops have led to changes in legal or administrative procedures as well as to prosecution of officials for corruption. Although some journalists, particularly investigative journalists, frown on entering contests and award-seeking, this type of social capital is probably recommendable for entrepreneurial organizations.
Social media is a double-edged sword. As we saw earlier, a brand can reach new audiences through social media, but a large percentage of users that consume content through Facebook, by far the most widely used by news consumers, are unaware of the news organization that produced that original content. Their brands are diluted.
As shown by the varying strategies of the eight media studied here, there is no single formula for a news organization to activate its social networks and convert its social capital to economic capital in the form of monetary or labor support. Each one has to experiment to find its own sweet spot. As is always the case for entrepreneurs, the road ahead is not clearly defined. What is clear is that the success of entrepreneurial journalists will depend on their flexibility, innovation, and ability to identify opportunities through trial and error. It is a highly uncertain, risky activity in terms of the required social investment of time and energy. The payoffs, however, can be great for the entrepreneur and the community.
Any study that focuses on only eight media from seven countries has limited applicability. Media markets differ significantly in terms of such things as willingness to pay for digital news, use of social networks to obtain news, and trust in journalists, as Newman observed of media in 26 countries (2016, p.7). Those factors play a significant role in the ability of startups to generate economic capital by activating their latent social capital.
In order to make more general recommendations about the best ways to nurture emerging digital media, a much more comprehensive census is needed of digital media on a country-by-country basis, especially in the emerging markets of Latin America, East Asia, South Asia, and Africa. Each country—and, in most cases, each province, region, or municipality—has its own unique economic, political, language, and cultural profile that affects a media entrepreneur’s ability to carve out a niche and achieve sustainability. As mentioned earlier, regional and local media have cut back coverage in the United States, Great Britain, Spain, and Holland, all of which affects civic engagement and participation in the democratic process. A body of research on digital media of a more granular nature, with specifics on strategies of business models, innovation, marketing, and distribution, would give media publishers better tools for creating the next generation of news media.
At the moment, given the relatively small size of the digital media entrepreneurs in terms of their market share of audience and their share of media revenues, their impact appears to be small. For those who support a vibrant Fourth Estate, their growth cannot come too soon.
James Breiner is a visiting professor in the Faculty of Communication at the University of Navarra in Pamplona, Spain, where he teaches Media Economics, Multimedia Communication, and Digital Journalism. He launched and directed the Center for Digital Journalism at the University of Guadalajara, Mexico. He was one of the co-creators of two online courses on entrepreneurial journalism, in Spanish, for the Knight Center for Journalism in the Americas. He has also done consulting work for the Poynter Institute, Fundación Nuevo Periodismo Iberoamericano, International Center for Journalists, Crain Communications, and American City Business Journals. Articles from his website, Newsentrepreneurs.com, have been republished in seven languages by IJNet, as well as being shared by Mediashift, the Global Investigative Journalism Network, and the International Consortium of Investigative Journalists.
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