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Nov. 20, 2017, 9:46 a.m.
Business Models

Three years in, Discourse Media looks to membership to power its national expansion

The Canadian news industry “has been in a long, slow, painful decline, and people are ready for solutions and to see something new.”

Can a “scrappy West Coast startup” go national in an expansion based on crowd investment and a membership platform drawing on artificial intelligence?

There are a lot of ingredients in that mix. As my colleague Shan Wang noted in Nieman Lab’s earlier coverage of Discourse Media, a “full-service” digital journalism organization based in Vancouver, Discourse does a bit of everything. CEO and editor-in-chief Erin Millar co-founded the company with two fellow beat reporters to develop a space for more enterprising, investigative stories in 2014; the company now employs more than a dozen people. The founders have spent the past 18 months researching and preparing for their national, membership-supported push.

“It’s been a ton of support from every corner that I didn’t expect,” Millar said, days after announcing the expansion and opening the low-bar investing platform that encourages investment from ordinary Canadians as well as professional investors. “[The Canadian news industry] has been in a long, slow, painful decline, and people are ready for solutions and to see something new…I hope this is the industry’s turnaround.”

Millar and others in the Canadian journalism landscape have witnessed the disappearance of local news organizations, particularly those under the Postmedia umbrella. “Postmedia itself is owned by an American hedge fund,” Millar said — and the chain has seen massive layoffs. “It was important for us that Discourse is owned by Canadians and owned by the people we’re serving.”

Millar and her co-founders launched their investment campaign on FrontFundr, which allows individuals to invest for as little as $250. (The U.S.–based WhereBy.Us also recently held a crowd-investing campaign to power its expansion, raising $750,000.) Discourse says it has $446,000 pledged or in the bank already, and the FrontFundr campaign sets a separate target of $500,000, which works out to 2,000 investors pledging the minimum amount. Millar is aiming for a total of $1 million by the close of the campaign on Friday, December 22. She’s eyeing professional investors and venture capitalists, but are looking for a broad range of stakeholders.

“We needed investment capital to get us to the point where we have this membership product,” Millar said (more on that below). “We wanted to have a diverse community of shareholders to keep us honest to our values and our mission, so that we could share in the benefits when this produces dividends and potential acquisition down the road.They have the same shares that I have.” Discourse should reach profitability by 2019’s fourth quarter, Millar added, though it’s on track to increase annual revenue by 72 percent this year, to nearly $1 million.

All investors will automatically become Discourse “founding members,” the first wave of the linchpin membership program that could help provide the long-term stability and investigative journalism sustainability the company is shooting for. (Apart from holding shares, the investors will not have any additional rights.) Discourse also derives funding from foundations, nonprofits, commissions of journalism from media outlets and sharing startup lessons in workshops, conferences, reports, and consultations, but Millar is wary of relying on philanthropic support for the long term: “If that’s the money that’s going to replace the advertising model here, it’s still private money deciding what issues get focused on.” Discourse’s team is counting on people’s willingness to pay for journalism to bring in a national, committed audience. The benchmark goal is 20 investigative units (up from the existing five) and 30,000 paid members by 2020.

“I really wanted to see a model that allowed us to be more responsive to our community,” Millar said. That’s one reason she was interested in looking at an investor model. But “there’s a business case for that as well. We’re watching the shift toward subscription models across other sorts of digital content that people are now more willing to pay for.”

Pointing to paid content services like Netflix and Spotify as well as journalism success stories like De Correspondent‘s 56,000 members, El Español’s nearly $4 million raised through equity crowdfunding and The Athletic’s Canadian expansion, Millar believes there is an opportunity for a national investigative outlet dedicated to journalism-as-a-service to capture the rising generation’s financial support. Sixty percent of Discourse’s readership comes from people between the ages of 20 and 40. (“They all know how to get around paywalls,” she added.)

As Millar wrote in Discourse’s announcement of the initiative:

The concept behind our business model is simple: we think of journalism as a service. Rather than covering the same breaking news events as other outlets, we devote our resources to stories, issues and communities where there is an acute need for information, journalistic probing and storytelling. Stories like how severe court delays for child protection cases are harming families. And how the children of overdose victims struggle to access the support they need to avoid addiction.

Why is now the right time to take Discourse national? First, with over 70 percent of Canadian digital ad revenue going to Google and Facebook, the ad-based business model has reached a tipping point, and reinvention now needs to happen. Second, the way we pay for the things we value online is changing; I can imagine a world in which paid news media subscriptions reach levels similar to Spotify (50 million) and Netflix (95 million) globally. Third, the so-called “Trump bump” (a rise in subscriptions resulting from increased value in journalism to respond to today’s politics) has accelerated the shift to serving audiences. We think the $115 million Canadians already pay for digital news will grow to $345 million in a decade as the digital sector matures and supply of media products increases…

Profitable digital media outlets will emerge in Canada, and Discourse intends to be one of them. In spring 2018, we are going national by launching a revamped digital product offering the highest-quality investigative journalism to Canadians. Our new technology will enable our members to partner with a cross-country network of investigative journalists, and to be part of making an impact by taking action on issues that matter most to them.

Take note of the mention of technology connecting members with journalists: That’s the AI component of this. Millar told me the tool “at the heart of the membership project” will be in beta testing by the end of the month with a market-ready date of March, which is when Discourse will also launch the membership drive itself.

“Our readers will be able to identify the issues they care about, which sort of voices they want to be hearing from … to expand the public dialogue around issues of national importance,” Millar said. “Based on the data about what they’re consuming, we’ll be personalizing feeds to help break down silos, rather than just feeding them more information [they already want]…They really do care about the future of our country and these complex, wicked problems, and they know we have to hear from these voices to solve these things — but they don’t even know how to find them.”

For now, Discourse is focusing on bringing in more investors and pushing out more investigations along the way.

“Part of the reason we’re doing this crowd-investing campaign is to mobilize our community,” Millar said. “We know if there’s a larger number of people who want to see this thing succeed, it’s more likely that we’re going to see it succeed.”

Photo of Discourse Media’s Vancouver workplace taken by Asher Isbrucker and used with Discourse’s permission.

POSTED     Nov. 20, 2017, 9:46 a.m.
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