Blended capital is key for independent media in Europe

Blended capital is key for independent media in Europe

By Patrice Schneider, Chief Strategy Officer.

On September 15, 2021 in her State of the Union Address, European Commission President Ursula von der Leyen announced that the Commission would deliver a Media Freedom Act. She declared:

“Information is a public good. We must protect those who create transparency – the journalists. That is why today we have put forward a recommendation to give journalists better protection. And we need to stop those who threaten media freedom. Media companies cannot be treated as just another business.  Their independence is essential. Europe needs a law that safeguards this independence …”

Indeed, providing a policy environment that secures a free flow of quality information is a critical part of ‘democracy’s information infrastructure’ that provides transparency, accountability and an informed citizenry that has a say in how it is governed.

So, while a law is required to guarantee the independence of independent news media, another component is needed to maintain this infrastructure: access to the right type of capital.

After 25 years of using financing to support independent media, we have identified three characteristics for this funding that we have brought together in a new and concrete experiment for financing media in Europe. We believe it can offer lessons for supporting media in other parts of the world.

Mission-aligned capital

As declared by President von der Leyen, media companies cannot be treated as just another business. In some parts of Europe, in countries suffering a democracy deficit, the lack of access to capital without strings attached to editorial remains a critical barrier to the development of viable independent media companies. Many of these companies require capital that also provides mission-driven governance to help balance the protection of the societal value of the company and its need to be financially viable.

Strategic media growth investment

To flourish and carry out their social role, in addition to mission-aligned capital that respects their editorial independence, companies need to be supported by state-of-the-art media expertise to drive economic growth. They need strategic support that allows them to effectively address the challenges posed by rapid technological change in the market and take advantage of opportunities that exist for forward-looking media.

Lessons from the impact investment sector 

In a visionary prediction 28 years ago, Neil Postman described the danger of surrendering some of our civic functions to technology. Technology should be “understood as a great Faustian bargain. Technology Giveth. And Technology taketh away’. If we understand that tale then with every new technology, we should ask what will it give us? What will it take from us?”.

One effect that the digital disruption has had is the collapse of the private Fourth Estate business model, summarised historically as two basic revenue streams:

  • Advertisingthe digital disruption has eviscerated this revenue stream, with the GAFA platforms (Google, Amazon, Facebook [now Meta] and Apple) taking most of the ad market.
  • Subscription sales the rise of subscription models and paywalls has begun to inject fresh money, but many experts agree with Alan Rusbridger’s assertion that “we are fooling ourselves if we expect people to meet the real, direct cost of providing the news”.

And one cannot omit news media consumption patterns. In the last decade, a technological revolution has transformed the news media business and the way people access news and information across the world.

The urgency of finding a replacement to this business model is best expressed using Clay Shirky’s diagnostic: “The old model is breaking faster than the new stuff gets put in place.”

From our experience, the funding of such a new model may need to be concessionary, as promoted by the growing impact investment sector. The main reason independent news media companies are ‘not like any other business’ is that they provide a critical social value for democracy. Their demise would carry a huge societal price.

Moreover, media markets in some European countries are distorted in favour of state-owned or crony-owned media. Capital needs to be provided on a concessionary basis to level the playing field.

With the boom in impact investments that aim to marry financial and societal value in areas such as the environment and social housing – and a total impact investment market estimated at more than US$500 billion – there are lessons to be learned from the growing number of mission-driven funds that can be applied for the provision of information for the common good.

Plurality of capital

Media plurality gives a voice to minorities, free-thinkers and marginalised groups. It expresses their concerns and defends their rights. Democracies are by nature a product of social and political diversity. They reflect the will of the people, an accommodation of divergent viewpoints and contrasting opinions. A wide range of broadcasters, publishers, channels, titles and programmes are needed to provide this diversity. A free marketplace of ideas ensures competition and enables pluralistic debate.

But the time has come to explore the need for a plurality of capital that invests in this key democratic infrastructure.

To maintain a media company’s independence and credibility, debt, equity and grant financing needs to be free from government influence given the potential power and perception of influence that comes with being a creditor or owner. Funding should be blended with several types of funders (foundations, commercial companies, family offices looking for impact or mission investing and even, with very clear safeguards, public funding) on a hands-off basis through grants or investment in an independent intermediary organisation or fund with an independent decision-making process.

Pluralis: Appropriate capital to promote plurality

In a uniquely European experimentation, MDIF has partnered with a number of European foundations, news media companies and impact investors to create Pluralis, a blended, multiple-stakeholder investment facility for independent media companies to provide access to the right capital.

Its mission is to build robust independent media businesses in the long-term, strong enough to hold governments to account, expose corruption and provide a platform for democratic debate. It is providing ‘no-editorial-strings-attached’ equity that helps secure independent ownership of media companies at risk of takeover and compromise.

In addition, Pluralis will provide these media companies with media management and technology advice and assistance to strengthen and grow their business so they can thrive in the long term.

With so many parts of the world seeking new ways of funding independent information, we believe that Pluralis and its experimental blended capital approach that for the first time brings together capital from philanthropy, reputable European media companies and impact investors is a promising innovation to fund the news, information and debate that Europe needs to build free, thriving societies. We believe it will provide a model for interventions around the world to tackle the global challenge of media capture.

25 years logo

This article is part of our series, ‘25 things we’ve learned’, marking MDIF’s 25th anniversary.