Venture Capitalists Are Killing the News Industry

This is a story about the news industry.

You stand up at a conference and announce you have a brilliant, world-changing idea: a baked-potato stand.

It will be called, appropriately enough, The Baked-Potato Stand.

You tell people you’re going to sell baked potatoes, potatoes that have been cooked in a hot oven until delicious. People will give you money, and you will give them potatoes.

Baked potatoes are tasty and nutritious, so everyone sees the value in your plan. Investors give you money to buy the potatoes, the oven, the stand. Industry journals run glowing profiles of your potato-baking credentials. You sell a bunch of gift cards in advance so people can buy baked potatoes when you open.

The stand opens. You bake four potatoes and blow the rest of the money on glitter glue and cotton candy, a launch party with T-Pain, and autoplay ads on sports betting sites.

When the stand closes after one week, with lots of angry Yelp reviews from people who wanted potatoes and got covered in sparkle-slime instead, you tell the public they should have valued your product more.

You suggest interrogating the business model of baked-potato stands in general.

You give sorrowful interviews about the state of the post-potato world.

Three weeks later, you stand up at a conference. You say you’ve got a world-changing idea: a corn dog truck.

Now imagine it’s not tasty carny food you’re failing to deliver to great expense, but safeguarding OUR ENTIRE DEMOCRACY. Perhaps now you can understand how the news industry has stomped on its wiener for the past decade.

Over and over, investors pile huge sums of money into projects touted as the Next Big Thing: Uber But for News, Netflix But for News, TikTok But for News. A website, a subscription service, a millennial- or Zoomer-focused effort with big stars attached and literally no plan other than “new.”

And over and over, these ventures fall on their keys by being terrible in ways that have no relationship at all to journalism, while actual journalists are on the internet every single day trying to convince donors and funders to invest in the idea that what they do is important. Reporters are begging to keep the lights on, but somehow that’s not as sexy a proposition as “Juicero for news” or whatever the latest tech-bro orgasmatron barfs into the VC-mosphere.

The priciest recent example was the flameout of Quibi, which sounded like an adorable cartoon octopus that solved crimes but was actually a platform for “quick bites” (ugh) of information. Launched in the Myriadic Year of Our Lord 2020, when one would have thought we were all done pivoting to video, the short-video site raised $1.75 billion from Hollywood executives, online moguls, bankers, and even Google.

Newsrooms at NBC, CBS, Telemundo, and the BBC fell all over themselves to develop and promote shows for this new outlet, dedicated producers, writers, and on-air talent to the effort. Quibi then spent $63 million of its cash on ads for its own service and shut down after six months.

Two years before that, the news site Mic, which had raised more than $60 million and branded itself as the information source for millennials, shuttered with a note from its executives bemoaning the economics of news: “What you hear less about the truth is that it is expensive. Our business models are unsettled and the macro forces at play are all going through their own states of unrest,” former publisher Cory Haik wrote to employees.

Mic had, by then, spent its money on, among other things, a full floor of One World Trade Center for office space at a time when most newsrooms were downsizing their physical operations. What that had to do with the economics of “truth” was unclear.

The most recent implosion was that of Ozy, literally named for a poem about the dangers of hubris, a years-long experiment in just how many deceptive business practices could be crammed into one media corporation. Former MSNBC anchor Carlos Watson and his cohort raised more than $80 million and then used a lot of it to buy fake traffic for its podcasts and web series before crashing and burning this fall.

Journalism institutions aren’t immune from the same foolishness. When the Newseum, Washington, D.C.’s monument to freedom of the press, closed in 2019, it was widely seen as a metaphor for the public’s lack of interest in truth in general. Coinciding with some of the worst abuses of the Trump presidency, it was the perfect example for commentators to use for the downfall of the republic.

Except that the institution’s failures weren’t due to a lack of public interest—they came down to administrators who paid themselves millions of dollars and burned through an endowment worth more than $1.3 billion, taking on tens of millions of dollars in debt and overextending itself on a lavish headquarters and high-end exhibits.

These failures would just be cringe internet stories, the kind of Fucked Company–esque point-and-laugh wreck-gawking with which our information superhighway is paved, were it not for the unavoidable contrast their flashy waste provides to actual journalism funding.

Independent city rooms have popped up across the country in the past five years, most with annual budgets of $1 million or less. Small newspapers, especially those owned by corporate chains, continue to struggle, and the kind of money Ozy spent buying fake traffic to pump up its valuations would easily cover communities in desperate need of impartial news sources. ProPublica, the best-known and best-funded independent investigative journalism operation, raised $35 million in 2020, or roughly what the likes of Quibi blew on lunch.

This publication you’re reading right now, shameless plug, is reader-supported, and has yet to sink a year’s worth of funding into a rager with party favors from Tiffany, though I suppose there’s enough time left in the year for us to squeeze one in if you hit the tip jar a little harder.

The successes of journalism startups are small because the backing for actual journalism startups is small in comparison to the pallets of cash being shoved out of trucks into the driveways of every Instabro with a haircut and a handshake. And the consequences have already been deadly for democracy.

The decline of local news is tied to the rise of authoritarian tendencies and viral misinformation campaigns run by the GOP at the state and local level. As neighborhood Facebook pages replace the local daily or weekly, unsubstantiated rumors, and propaganda from local officials replaces hard facts and shared truths. And nihilism seems like a plan to too many news sages who should know better.

Don’t worry, the rise of the internet and the proliferation of thousands of “citizen journalists” will guarantee that our republic will remain well and accurately informed. Whatever happened to all those bold futurists who talked that shit 15 years ago? J-school tenure, no doubt. https://t.co/DU4tbaDMti

— David Simon (@AoDespair) May 25, 2021

High-profile failures have a chilling effect on investment in and passion for newsrooms overall. If Jeffrey Katzenberg and Meg Whitman can’t make a new media venture work, if Carlos Watson brought all his media know-how to the table and still flamed out, then clearly nothing’s going to succeed, right?

If major conglomerates with portfolios of dozens of local news outlets can’t keep a newsroom alive, why should anyone look to a few people with a small loan and an idea and think, sure, they’ve got the answer? Even if they’re the only ones who ever have?

Maybe the next time somebody with a CV full of ideas, conferences, and a motivational PowerPoint comes along to stage a really bitchin’ news disruption, investors should ask them to run a baked-potato stand for a while before committing, just to make sure they can deliver on the products they’re promising. And if they can’t, look down the street for some folks who know how to put potatoes in the oven and take them out when they’re done.