Reinventing the Media Investor

This report in the Center for International Media Assistance (CIMA) focuses on the Media Development Loan Fund (MDLF) and its formula for the key to building sustainable independent media, according to its managing director Sasa Vucinic. The organisation seeks investors that they categorise as "social investors", meaning those who are willing to invest in projects for the common good of society, even if it means lower returns.

As indicated in the report, larger media companies compete for financial investors on the stock market, but smaller media companies, which can function on 5% return on investment, are not in a position to offer the 18-20% return that this type of investor is seeking because the quest for profitability is not commonly compatible with the social, rather than the commercial, function of media. In fact, a commercial focus may be detrimental: "If you have to perform for the market, you don’t have time to invest in such areas as new technologies, Vucinic explained. In fact, he said, it was the U.S. [United States] media companies’ obsession with short-term profits that kept them from experimenting with new technologies and seeing this digital tsunami that was coming."

The investment partners sought by MDLF are equity partners. As opposed to functioning as a loan intermediary, the strategy is that, when the media outlet that has used MDLF funds turns a profit, it will take its stake out to reinvest in other projects. "The ideal is employee-owned news organizations willing to accept low profit margins if it means they can sustain the journalism, including salaries."

A recent investor model is MDLF's partnership with "the Swiss bank Vontobel and responsAbility, a Zurich-based social investment services provider specializing in developing countries, in a program that allows investors to put money into an account that lends 20 percent of the investment to the MDLF at 1 percent interest. The remainder is invested at prevailing market rates."

From the initial seed money offered for support at the time of MDLF's founding in 1996, "the MDLF's list of contributors to its investment pool has grown to more than 20, and the MDLF is now self-sustaining. By investing in media outlets that have turned a profit and by lending to those who have been scrupulous about repaying the low-interest loans, the MDLF has built up a nest egg of [US]$20 million and has been self-sustaining since 2008. This allows it to experiment more, take more risks, and fund still more media projects. As of the end of 2009, the MDLF’s outstanding portfolio of investments and loans stood at about [US]$38 million....

In order to qualify for support from the MDLF, applicants must have been operating legally in their home countries for at least one year and must have an "established reputation for promoting democratic institutions and practices and exercising the principles of a free, independent and responsible press," according to the MDLF website. Among other requirements, applicants must also "devote a significant part of editorial content or programming to fact-based news and documentaries, independent from the influence of the government or of any other interest group. (A list of requirements, funders, and some of MDLF’s clients can be found on MDLF’s website."

Examples of successfully funded projects - projects for which MDLF often gave not only financial support, but also helped chart their strategy - include:

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  Petit Press in Solvakia - a press that publishes 30 newspapers, founded to serve the need for independent news organisations at a time when managers and editors of the state-owned newspaper were dismissed for political reasons.
  
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  Malaysiakini, a web-based multimedia news organisation in Malaysia
  
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  The M&G (Mail & Guardian) group, Zimbabwe
  
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  KBR68H, a radio news agency in Indonesia
  

The report points out that the MDLF's business-oriented approach to supporting media is not necessarily an appropriate model for developing or supporting independent media in fragile and conflict-afflicted states, such as Somalia, Sudan, and Afghanistan, where economic and political conditions are not sufficiently stable for independent media to be sustainable.

Vucinic suggests that governments can subsidise the news, as they sometimes do for other sectors, e.g., agriculture, education, and health care, as a public good; favourable tax policies can constitute government support. He sees the future of the MDLF as "MDLF 3.0.", a parent to smaller media loan funds.

MDLF statistics include the following: MDLF’s client base spreads from Eastern Europe to Asia, Africa, and Latin America. Since 1996, the MDLF has provided independent news media outlets with nearly US$95 million in loans, grants, and equity investments. The MDLF has financed more than 200 projects for 72 independent media organisations in 24 countries, according to its website. More than 32 million people get their news from MDLF’s clients and former clients.