L3Cs on Chicago Tonight

When the Chicago Sun-Times declared bankruptcy March 31, 2009, I discussed the future of Chicago’s newsrooms on WTTW’s Chicago Tonight with colleagues Chi-Town Daily News Editor Geoff Dougherty and Northwestern Digital Media Professor Owen Youngman. They made some great points about what is to come here and I made a few points about the L3C business model and the Chicago Newsroom of the Future. Here’s the clip.

I also mentioned the L3C and Chicago’s Newsrooms of the Future on a segment on ABC Channel 7 News.

The Emerging Ecosystem of News Delivery

Steven Berlin Johnson over at OutsideIn, which I wrote about in June 2007 for the Chicago Sun-Times, brought wonderful clarity to the situation of legacy news operations yesterday at a presentation at South By Southwest. He envisions an evolving news ecosystem and with clarity places newspapers as a foundational gathering operation. He also cautioned that it is important to move forward to a vision rather than cling to the old.

But in times like these, when all that is solid is melting into air, as Marx said of another equally turbulent era, it’s important that we try to imagine how we’d like the future to turn out and set our sights on that, and not just struggle to keep the past alive for a few more years.

Steve says so well what I have been stumbling around trying to articulate here in Chicago. In evidence of the beauty of the Web, I was able to read his comments and see a video of him presenting the day after he did it – glorious access to information!

At a Poynter Institute event here in Chicago yesterday, the reality Steve describes was coming sharply into focus in the discussion. It is so sad that newspapers and some other legacy media do not see the preciousness of their brands and how important it is to preserve THAT so that they can have a place in the new ecosystem. Could be that they think their brand is a logo and marks, not something organic that emerges from the way that they operate.

Newspapers don’t need to go more deeply into the “swamp” of disinformation or useless eye candy to have a role in the new forest. They need to do a LOT more of what they do well — good local reporting — and spread cooperatively through their value systems to work with partners. Unfortunately, some newspapers like the Sun-Times where I used to work have been sucked dry of their newsroom resources by their business operating model. The Sun-Times is operated by a hedge fund, and all it wants is a dollar return. Hedge funds don’t value one bit the social return that is evident in a well-done newspaper newsroom.

It’s one reason why I am on the soap box for theL3C hybrid for news businesses. It’s great to hear Steve’s vision and here in Chicago, many of us are working to develop a healthy new ecosystem. Below is Steve’s flow chart for news delivery. You can watch a video of the presentation here.

Steven Berlin Johnson’s News Flow

A sample newspaper L3C

newspapers.jpgI write in the Huffington Post—Chicago February 9 about the potential for newspapers to incorporatebe set up as a new type of corporation business, an L3C, low-profit limited liability company.corporation. This would allow them to meet their community purpose, and qualify for foundation money while providing a return for private investors committed to the social good. Here’s a sample of what a newspaper L3C might look like, according to Robert Lang, who developed the structure.

Sample Newspaper
Project Goal
Purchase and restructure the Community’s Newspaper as a locally based independent newspaper with a focus on community service and news targeted specifically toward the local market. The emphasis includes the recognition that newspapers are the only business specifically recognized in the U.S. Constitution and the information provided is vital to the proper function of a democracy. The newspaper is also an important engine of the economy of the area and is an vital source, through both news and advertising, of information significant to the commerce of the area. Additionally, many of the cultural and nonprofit venues depend on a healthy vibrant newspaper for dissemination of information regarding their services. Lastly, government at all levels needs newspapers for the same dissemination of necessary information.

L3C Advantage –
The operation can be a profitable, self sustaining venture by expanding its role and restoring many services that have been reduced or cut. It will be profitable enough to maintain and purchase equipment as needed and to explore and develop ways to use and integrate new media with the newspaper model. But as an L3C it will not be under pressure to generate unreasonable level of profits or diminish services in order to increase profits or service highly leveraged debt. The L3C structure will permit the paper to direct its effort to providing the kind of community service the subscribers, advertisers and other stakeholders have a right to expect. It can operate as a public service vehicle rather than emphasize the maximization of return on investment model that has become so common in the industry and is ruining newspapers all over America. As an L3C, it will, by law, be charged with placing community service ahead of profit.

Amount of Investment Required -To Be Determined

Possible Members of L3C

Equity or First risk tranche
Foundations through PRIs and tax deductible donations by individuals to Community Foundations turned into PRI investments by Community Foundations. Community Foundations in particular have a stake in the successful operation of a local community newspaper since in many ways it is vital to the basic spirit and health of the community served by the Community Foundation.

Mezzanine tranches
Employees, local businesses such as auto dealers or restaurants, local merchants and banks, supermarkets and other national chain retailers and theater chains all of whom depend on the viability of the paper for delivery of their message to local customers. Local individuals and investors who see the value in a viable local community even if the return on investment is not spectacular. An example might be a large local employer that needs a strong, prosperous, cohesive, vibrant local community in order to enhance their ability to attract the best employees to come to our community to work there. The community often makes a difference as to the level of compensation a large corporation has to pay since prospective hires may demand higher pay if they perceive the need to leave a community for some of the services they will desire or to compensate for a lower quality of life.

Senior tranche
Foundations through Mission Related Investments of endowment, State and local Pension Funds, insurance companies, foreign sovereign wealth funds and other very large scale institutional investors who are looking for very secure long term income paying investments with a return compatible with the risk.

Members not making cash investments -to be determined

Management Structure
A hired professional staff reporting to a management board which may include members of the present management structure.

Structure of investment
Stability of the project for the long run indicates an all equity transaction. It is obvious that certain groups such as the local members of the Newspaper Guild will have a relatively small financial stake in relation to their role in say over the quality of the product. Other investors such as local businesses will put in more dollars for substantially less day to day control. Others such as pension funds will be far more passive investors.

Projected Sales, Expenses, and Gross Profit -tbd

Projected investment and Return per Tranche-tbd

Unique socially beneficial aspects of this project
The newspaper means many different things to many different stakeholders. The key to the success of the newspaperas an L3C will be the drafting of an operating agreement that assures all the stakeholders that the paper will live up to their expectations and yet permits those in charge to be able to make the needed business decisions on a day to day basis without having to clear each and every decision with the various stakeholders. It is going to require new thinking to some extent on all sides. The advertisers, for example, will have to understand that they are investing to be sure of the success of a tool necessary to the marketing of their products. The management will have to understand that the employees are the most valuable asset, while the employees will have to make tough decisions sometimes that are important to the viability of the paper and think like the owners they will be. But once an operating agreement has been crafted a newspaper as a pillar of the community will finally be a reality.

Bobbing for bits on the media streams

Sally’s World, July 2003
www.worldwit.org

By SALLY DUROS

Lately, those who make a living as pundits have been busy clicking and clucking and clattering keyboards and uttering bellicose profundities about one, single-syllable word: Facts. The questions about fact morphing into fiction float and bob about like so many balloons buoyed by the media winds.

Me – I’m not chasing any balloons because I take as fact very little of what I read or see broadcast in any of the media streams. I am one of those people who thought the Barry Levinson film, “Wag the Dog,” was a thinly veiled documentary.

Instead I ride the media currents to see what is bobbing on the horizon of the public mind. What’s happening today is a simple matter: The media soufflé has flattened and with the collapse of the puffery – within corporations, government, and media outlets – we are rushing to fill the void. I’m enjoying the “whooshing sound,” and looking forward to seeing what kind of omelets we’re left with.

Label me wacky or label me a cynic (perhaps both!), but for me a fact begins with that which I can personally touch, see, smell, taste, and hear. I then apply the gut test – my intuitive sense – to create an impression aligned with my value system, cultural wants and spiritual beliefs. Some of my criteria are tangible and some are intangible. And then, when I’m done I still don’t have a fact. I have my belief. One of my core beliefs is that we are all – each of us – a spinmeister of sorts.

I liked the tale that was being spun by master storyteller Judy Wicks, owner of Philadelphia-based White Dog Cafe, co-chair of the National Business Alliance for Local Living Economies (BALLE), and chair of the Social Venture Network (SVN). She was speaking at a kickoff meeting for a new organization here called Sustainable Chicago.

Wicks says that upon waking every day, she looks in the mirror and says: “Good Morning Beautiful Business.” You have to like a woman who has two cabins in the woods, one named “Happy House,” and the other named “Fart Freely.” What began as a home-based coffee shop in 1983 is now a restaurant that seats 200 and grosses $5 million a year, with a commitment to fun, food and social activism.

What was most persuasive about Wicks was that her tale came right from her heart. I could tell because I had heard it before – from entrepreneurs of all political stripes and others involved in building local economies. That is, that business is really about relationships, relationships with certifiable, verifiable, living, breathing real people.

“A large factor in our success is that we are a real community-based business,” Wicks said. “We share values with our customers.”

“Living and working in the same community has given me a great sense of place, which is really important for building local, living economies,” Wicks said. “When you work and you live in the same place there is a very short distance between decision makers and the person who is affected by your decisions because every day you see your customers that you serve, every day you see your employees that you work with. And you live in the community and you see your neighbors (and the impact of your decisions.)”

That’s the kind of real world fact-checking that resonates for me, and helps me spin my personal vision of a perfect world. It also occurred to me that that’s the kind of fact-checking you get, and you can create through your local WorldWIT email discussions and real world events.

WorldWIT was ahead of the game in understanding that the strength of the new email tools of the web could help women with a friendly point of view, women from the same work/life integration tribe, women in the same cities and regions, share information with each other, and then create real world networks.

When you post a question to a local discussion list, like ChicWIT, you can receive a dozen or more replies. You can pick and choose what information to follow up on based on your own criteria. Even better yet, you can attend a networking event and meet the helpful individuals who communicate with you through the lists. And if something happens and you have to change jobs and move to another city, you can use the same WorldWIT resource to check out your new hometown.

Before the rush to make the Web a commercial force, there was a web that was a community of people. Hobbyists and techies and those who were simply curious built the web by putting up special interest sites, basically as communications tools that said, ” Hi, there – look what I’ve done!” That was about it. If you were on the web around 1995, you will remember when Yahoo was just a page of favorite links, a daily record of what was new on the web, put up by a couple of guys who thought the information-sharing was really neat. It was a community, and the sites were places where like attracted like, where you could find your tribe.

During the days of the dotcom gold rush, some of us lost site of the tribal energy because some financial wizards got the idea that there was money in huge global markets and numbers of eyeballs. Perhaps there is. But in my opinion, that is not the richest or deepest well.

The under tapped frontier is the landscape occupied by WorldWIT, where the locals knock on each other’s doors to find the answers to the burning questions of the day, the answers that simplify our everyday lives.

When we send our request to the WorldWIT universe, we are inviting friendship and collegial exchange. We are building trust and creating relationships. We – friends, neighbors and colleagues – are finding and becoming trusted sources for each other. And that is a great way – and the only way – to do business with each other. And that – to me – is a fact that I count on.