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Lenfest Institute and Digital First Media?

I’ve written before about Digital First Media, both the good and the bad, owned by Alden Global Capital, widely considered “vulture capitalists”.

Some example headlines:

I believe that Alden has a right to a reasonable profit, and as the reporting above indicates, the firm has exercised this right to cash flow at the cost of a huge percentage of its workforce. But the newsroom has rights too. Rights that are currently being violated as the company floats on without clear leadership or direction. The Denver Post staff has begun resigning in active protest of Alden’s management. Many journalists employed by DFM use Twitter to actively protest against the company. The president of Alden, Heath Freeman (also owner of Christian Laettner’s Duke jersey), was actually visited this past week by a DFM reporter at his beach house – a house staffer had to deflect the visitor based on her boss’s direction from upstairs, unseen and unconfronted.

Alden has breached the public trust that it holds in the form of its newspapers, representing in aggregate centuries of American journalism.

Yet still, it has a right to a reasonable profit. Although there is much benefit to the non-profit model for news, in a local newspaper at its finest, there’s a special dynamic that occurs when a publisher is engaged in the dual practice of selling ads and reporting news to the same community. Profit helps businesses grow and although a lack of ownership (as in non-profits) has benefit, I happen to think that encouraging more ownership among more people could lead to an even greater societal net benefit. But profit, ownership, management – these responsibilities don’t have to be intertwined.

What if Alden let another organization manage its newspaper assets as a blind trust? It would lose a great deal of flexibility in using DFM assets to leverage other companies it owns, but it would be able to wash its hands of the growing public relations crisis. Furthermore, it would give space for the strategic direction of DFM to be explored and pursued without the added baggage of hedge fund cross-percolation.

But who could manage a company like DFM? In reviewing comments by DFM employees about what would be best for the newsroom, there’s no consensus best path forward; industry rivals like Gannett and Gatehouse might be marginally better newsroom stewards but not dramatically so, and there are only so many local philanthropists willing to buy an enterprise with an outlook like the print industry (not to mention that Alden management seems extremely reluctant to sell titles like the Denver Post one-by-one).

One such organization stands out to me: The Lenfest Institute. Created by Gerry Lenfest, who had made billions selling a company to Comcast, this first-of-its-kind nonprofit organization whose sole mission is to develop and support sustainable business models for great local journalism. I had the opportunity to work with the Lenfest Institute while I was employed at Philly.com, and I was there when the transformative ownership structure was unveiled to the Inquirer, Daily News, and Philly.com newsrooms. See this diagram to understand in general how it works.

pmngraphic

To be perfectly frank, this is probably the last thing Lenfest staffers would want to pursue. They’ve got a large slate of projects already, and PMN absorbs a lot of what additional focus remains. But there is some logic to the coupling, even if not for the entire DFM portfolio. A major portion of DFM’s assets today were acquired through the Journal Register Company, based outside Philly.

In a world where big tech and alternative media make for an extremely competitive information economy, it’s exciting to imagine what might happen if the Institute were to manage a new DFM Philly Public Benefit Corporation that could own the actual assets. Alden could be guaranteed some majority percentage of operation profit through dividends or other distributions, and it could sell its shares to another entity, but it would not have operational oversight in any measure.

Collectively, the Lenfest Institute has perhaps the highest concentration of talent focused on local news in the country; by making its playbook and leaders accessible to DFM, and helping to recruit and hire senior leadership (or facilitating the creation of shared service companies between PMN and other newspaper companies).

There’s special logic to the Philly combination but if successful the model could be extended or replicated to other DFM clusters, such as Texas, New England, Southern California, the Bay Area, and Michigan.

Despite the slim likelihood of this appealing to either party, letting the Lenfest Institute operate a DFM cluster stands out as a way to not answer the question of how should Alden exit the newspaper business. If the company does not want to exit the business, and regardless of whether it simply wants the cash flow or it believes in the long-term prospects for news, there may be a way for the hedge fund to maintain its position while trading some control for an extremely reduced public exposure.

The unrest in DFM newspapers does not seem likely to quell any time soon, and whether this solution has any viability, ultimately it will take something “big” like this to help right the imbalance that currently upsets these vital local newsrooms.

What do you think? Comments are open below.

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