“If you do not have enough financial means, you start making compromises.”

Sasa Vucinic is the founder and chief executive of IndieVoices and V Media Ventures. Starting out as a journalist and editor in Belgrade, he co-founded the Media Development Loan Fund in 1995 to assist independent media start-ups in politically restricted environments. He served as managing director of MDLF until 2011.

In search of the ideal media investor

Sasa Vucinic credit ZOBAER AHMED

Journalism’s product and production process are undergoing dramatic transformations. Yet, its ownership structure has barely changed in more than a century, notes media investor Sasa Vucinic. Vucinic, who was editor-in-chief and general manager of B-92, an independent radio station in Belgrade during the reign of Slobodan Milosevic, has spent almost 20 years consumed by the challenge of placing independent journalism on a secure financial footing. He talked with Media Asia editor Cherian George about his plans to match-make worthy public-interest journalism with investors who want to make a social impact in addition to reasonable financial returns.

CHERIAN GEORGE:

Tell us a bit about B-92 and that moment in time. What led you to go down that route?

Sasa Vucinic:

It was a very specific moment in time. The country was getting into a very weird transition and the media got completely controlled. In that environment, this one tiny radio station came out of nowhere, started broadcasting on 15 May 1989. Authorities at that time just did not pay attention; they thought this is a tiny little thing. Before they knew it, it was too popular to be dealt with, to be closed.

CG:

And you were broadcasting out of Belgrade, and not from outside the country?

SV:

Yes, it was broadcast out of Belgrade. Programmes were made by people who were walking around, which I think was one of the strengths. I believe that programmes that shoot for three points from one country to another do not really have too much of an influence.

CG:

The main threat to survival at that point would have been more political than economic, I suppose?

SV:

I think that there were two different threats. One was political, and there was nothing we could do about that. We just wait for it to be closed—or not. Actually, we could do one thing: the more popular we got, the bigger the insurance policy we had. And at some point, the authorities actually pulled the plug, but it created demonstrations of couple of hundred thousand people; so some two days later they actually plugged it in again, pretending that it was a technical issue.

But I thought the bigger threat was the economic threat. Because you can only be as independent or as big as your account, and unless you can pay your bills, there’s no talk about independence. I see, since those late 1980s, all the governments of the world having absolutely brilliant understanding of that rule. If they want to deal with anybody who they do not like, that is how they strangle them. They strangle them in silence, by cutting off their revenue sources. It’s like in water polo: you see their hands up, like “I do nothing”, and meanwhile, under the water, lots of things are happening.

CG:

Is this something that you recognised from the start in B-92, that it was important to get the economics right?

SV:

It was absolutely clear from Day 1. I think it is absolutely clear to anyone who is lucky—or unlucky—to run a media company. A media company is like a social security system. It can spend as much money as you can throw at it. There’s always something else that you can do, always two more correspondents you can put in, always more people to throw in on an important topic.

Every morning, you come in and you have to make a triage. There’s a newsroom pulling for a little more equipment or more people, and then you have to pay bills, you have to pay interest. If you do not have enough financial means, you start making compromises.

CG:

You moved on to help set up the Media Development Loan Fund (now the Media Development Investment Fund). What was the vision behind that?

SV:

The MDLF was literally the outcome of my B-92 experience— understanding how important economic independence is, how important it is that you get your finances right. I got this idea that somebody should establish a World Bank for media. We eventually got George Soros: convinced him that it is a good and worthwhile idea. He never thought it would work, but we made it work. Over 16 years, before I left, we managed to give about $100 million in different forms of financing, including in I think 25 different countries in the developing world. At that time it was pretty revolutionary, that media companies in developing world would actually repay loans.

CG:

Instead of taking the grant route.

SV:

Everybody whom I was trying to convince about the idea was saying, “Why would they repay you money? Why would they go to that trouble to pay back?” Being one of those who understood how important it is to get funding, I understood two things about media people. One, among everything that they own, reputation is the highest asset that they have, and that is something they don’t want to gamble on. Unless they repay, they would probably have to leave the business. So that is one incredible incentive for them.

Second, the mindset of journalists is practically made to be ideal borrowers. The only thing that a journalist knows is that you know practically nothing really well. There is always somebody in the world who knows it better than you do. So, if you write something about justice systems, you find the best expert in the country. If you talk about finance, you find the best finance expert.

If you manage a company, if you do not know how to do, it you’ll look around. You have the mindset that is open to getting input from other people. And that is an absolutely perfect mindset for somebody to be an ideal borrower. Having those two together, I was convinced that people would repay. It turned out that our repayment rate was 98 percent.

I had cases that I’ll never forget. During the NATO bombings of Montenegro, we had a client in Montenegro. The guy calls me one day before the first of the month and says, “Look, we have trouble here. There are bombings. The banks are closed. I have your money, but I can’t send it through the bank. How about I put somebody in a car with cash and drive to Budapest and you come to Budapest to collect it?”

I’m like, you must be kidding me, just wait another month, the bombing is not going to last forever. He said okay. And then two weeks later, I got a call from somebody in Budapest saying, I’ve got cash and we are ready to repay. I have a lot of stories like that.

CG:

Tell us about your next venture that you’ve been working on for a while now.

SV:

I think MDLF was revolutionary at that time; the idea of independent media in the mid-90s was pretty new. The world was full of legacy big conglomerates and the barrier to entry was incredibly high, so you couldn’t really start a media company unless you had huge quantities of capital. Most of the loans we gave at that time were for printing presses, for big infrastructural stuff.

But then times changed and media got fragmented. Now I think the needs are not for printing presses. It’s for smaller amounts of money. It’s more for knowledge and experience than for actual funding. So I created this dual thing, with two different parts. One is called Indie Voices, which is a crowd-funding site for independent media. Basically, if you have a media project that is worthy and you can attract enough of your core audience to fund it, you put that project out there and people will fund it. That deals with this whole layer of smaller projects that big foundations don’t fund because these projects are so small that they are totally invisible on their radar screen.

CG:

These are basically investigative projects rather than media platforms?

SV:

The beauty is, we expected one thing and we got a totally different thing. We got this beautiful spread of everything you can imagine. So, everything from a documentary about Hong Kong, to translating a book about the biggest corruption scandal in Indonesia, to National Geographic photographers putting their photography books together. From collecting money to provide legal defence for journalists arrested in Ethiopia, to an independent TV station in Ukraine. So we’ve got a much more diversified set of projects, and all of them are below $50,000.

CG:

And that follows the grant model?

SV:

Well, for now. It will have three phases. In the first phase it will be a grant model. The next phase that we’ll probably look at sometime in December will be small lending. Some of these guys have needs for small loans that aren’t huge. The big breakthrough we expect somewhere towards the end of the year is where we also offer equity. Those are the three parts that we see in the Indie Voices project.

On the other side of the spectrum, together with Marcus Brauchli, who used to be a top editor of Washington Post and Wall Street Journal, I am trying to put together something that we define as the “ideal media investor”. Rather than starting from a financial point of view and being investors who invest in anything, including media that is lucrative, we start from a different point of view, that is, what does the ideal media investor look like? And we are trying to put that together.

So we are trying to create an investment company, not a fund, that will stay in these investments for a very, very long time, not for just a couple of years. They’re trying to be forward-looking, to help companies that they invest in to jump into their digital future.

CG:

The ideal media investor would, for example, place a premium on professional ethics and standards?

SV:

Absolutely, absolutely. So we have a whole set of standards. What are the companies that you would actually invest in? Those would have to be high quality, professional, fact-based, responsible media companies that are in there for providing a public service to communities or societies in which they operate.

CG:

One of the difficult things that the journalism industry has had to confront is the apparent unwillingness of the market to support quality journalism. Would you conclude that journalism is a case of market failure?

SV:

I actually think that the answer must be a little bit more nuanced. Those that write about celebrities and have huge circulations, they’re perfectly happy with the market, the market exists for them, and it’s a love we should not interfere with. Now, if we consider that as one marketplace, the problem is that we have at least two more.

On the opposite side of that spectrum would be a marketplace that provides funding for media that will never be financially self-sustainable. A good example of that would be minority media in most countries, media for kids, anything that is educational. The state has an interest in the people to be educated, so they subsidise that. The big foundations in the West are big players in that market. That is a kind of second market. It does not work great, it’s not very efficient, it has its weaknesses, but the idea is that those projects apply for grants, and there is somebody supplying those grants—be it big foundations, or the government in its different forms, development agencies.

There is a third market, which I think is the most important. When we talk about serious, socially relevant media, that is where that media should be. They cannot be in the market where returns are 25% a year. They also should not be subsidised completely, because that creates a bit of business laziness. So, there should be a third market in which long-term investors who are interested in both financial returns and social returns should be on one side, meeting media companies that are dedicated to providing a public service to their communities on the other side.

That is what Indie Voices is trying to be. We are trying to make a community of investors of that type—individuals, foundations and also groups of investors that are now fashionably called “impact investors”. That kind of impact market for media is the most needed part in the media industry at this moment.

CG:

You’ve seen over the last 25 years the many media ventures come and go. A lot with good intentions, some of them maybe undeservedly meeting a premature death. What do you think are some of the less obvious pitfalls that media entrepreneurs, editors and producers find themselves trapped in?

SV:

One is, do you think that you know what your audience wants. If you have that legacy thinking, “I know who is my audience, I know what they need”, it is just a matter of time when you will fail. I have a great example for that from Croatia. It was probably by far the best publication in that region. But then there’s this arrogance. When we started working with them, we asked, “Do you know your audience?” And they said, “Yes, these young types, 22–42, high purchasing power, that is what we are selling to our advertisers.” We paid for audience research and actually it turned out that their audience was 65 and older. And, their audience was mostly female, which they had no idea was the case. They were actually making publications for an audience that was not there. And eventually they failed, had to go bankrupt—and it was by far the best publication in terms of the quality of journalism.

The second thing is the flip side of that coin. I think the media industry these days is becoming as fast as the fashion industry. Things are changing so fast, you literally you have to be Zara to be successful. In your thinking, if you get frozen for a year, I absolutely guarantee there will be trouble.

CG:

Are there better ways to manage that change? The intimidating thing for a journalist is that you feel you have to become an expert in everything. Not only get the journalism right but also be a manager, a technology expert and so on.

SV:

You know, we have spent an enormous amount of time trying to figure out some kind of a formula that will indicate to us who is more willing or capable of a change. We couldn’t find any rule. I think it’s all in our heads. So I know brilliant 70-year-olds who are willing and capable of change, I know some incredibly conservative 20-year-olds who you can’t talk to because they are set in their ways. And the other way around. Is that person brilliant in initiating teams and understanding the need for it? Or is he an incredibly conservative dinosaur that three years from now is going to die?

CG:

You can’t tell in advance?

SV:

No, you can’t. I think it’s in the mindset. Everyone of us is capable of everything, we just need to make that move in our minds and decide how to do it.

CG:

A troubling thing for journalists is the eroding firewall. It now seems as if the modern editor needs to understand the business as well. How do you ensure that business considerations don’t overwhelm editorial integrity?

SV:

I think it’s a crucial question these days. In the old days, it was very simple. There is this group of people who wear suits and have long lunch meetings and drinks after that, who sign some contracts and bring the money. And then there’s us in the newsroom who actually create everything. We hate those guys, and those guys don’t like us, and we don’t mingle.

I think that time has passed. I think the only way to save the company is that both sides understand what the core values of the company are. There are no fire walls in existence anymore, we can’t keep them, we can’t afford to ke ep them. So I think both sides have to understand what are the core values, what is it the y are protecting and what is it they are working for.

Having said that, I find it incredibly troubling, this whole movement of native advertising. Whatever name you call this whole process of actually deceiving your audience. They think they are reading something prepared by the newsroom when actually it is prepared by the marketing department or advertisers. I think that is a betrayal of serious journalism. If I was in charge of those media companies that are getting engaged in those practices, I would probably resign rather than engage in something that I think literally goes against every principle of serious and public service journalism.

CG:

Could you elaborate on what those principles are? I guess this goes back to what you called the third marketplace. What are the stakes, and why is it so important to preserve those values, to develop funding mechanisms, and to ensure those values are enshrined in media and their products?

SV:

For me, it is self-evident. You want to know who pays your doctor, right? And if it’s not you who’s paying, it’s some pharmaceutical company, you would naturally be a little bit suspicious of the medication he gives you. It’s the same thing for the media. If they tell you to do this or suggest you do that, and you know that text is done by the marketing department of a specific company, I personally would not trust them.

So, I think that the core values should be enshrined in every news room. And one of those core values should be, enshrined in every newsroom. And one of those core values should be, under no circumstances should you deceive your audience. You have to come clean on who pays for what bills, on how do the finances flow, where do they come in, who pays for it.

And that brings me again to the issue of business model. I have to say media managers who are running those companies are not the only guilty party over there. We all, as audience, would like to have all the news for free, never pay anybody anything, and then at the same time not be deceived. Well, that is simply not possible.

CG:

Can I ask you to go back to a point you made at the beginning? You likened a newsroom to our attitude to welfare. We have an insatiable appetite to use whatever money you throw at us. What are reasonable cuts that you think newsrooms should make? At some point, cost cutting may eat into your capacity to produce responsible journalism, but how do you distinguish between cost cutting that makes you fitter, and cost cutting that erodes your values?

SV:

I have yet to meet a media company that cannot use all the money in improving or increasing their news producing operations. Now, making a connection between that and a financially sustainable media company is a big challenge. We spent the last ten years, probably, trying to do it in what I think is the wrong way. We try to reinvent the newsroom, we try to make one guy do a story for newspaper, TV, radio and blog, and all of that in 11 minutes, and six times that much in eight hours— which I don’t think is possible.

I think the key issue here is the business model, and the business model actually comes as a result of the ownership structure. We tried to reinvent the newsroom, but we didn’t touch media ownership. Media ownership is the only thing in media that did not change since the 1870s, when the big families started getting involved.

I think that this digital time requires new digital ownership. I think that over time it will resemble what I call fractional ownership. Each media company has its own core audience, with an interest in that media existing. So if you and I and 5,000 other people are interested in foreign policy, the place of Singapore in the world of foreign policy, we may actually put in a thousand dollars each, creating the initial capital, and be the owners of that magazine, because we are interested in that thing.

And then we as the owners, the shareholders, we hire a general manager and tell him, “We are only interested in returns of 5%. Don’t come back with 30. Anything above 5, please feel free to spend. But there is no way we are putting in even more money, so you have to make in between zero and 5—that is your financial goal.”

If you have that financial goal, if the newsroom knows that—and as a journalist you should feel great working for a company that wants only 5-percent returns—then both sides have to be reasonable and find a way to achieve some kind of financial sustainability for that company. That is how I see cost-cutting and right-sizing, as they say.

CG:

So in that system, journalists would still have the incentive to not overspend, and to find more creative ways to generate revenue, because they know it will actually feed back into the newsroom and not just into shareholders’ pockets?

SV:

Absolutely. I think journalists have no problem working for a company that is making a little bit of money, or making a lot of money, as long as they are making a promise that most of that money will be reinvested in that operations.

I think that every journalist would feel bad making someone else rich while pretending to provide a public service for his or her community. So that is why I think we need this idea of fractional ownership—in which journalists would be shareholders and their core audience would be shareholders. It’s not bad guys in three-piece suits, it’s actually us, shareholders, a thousand people who can all come into one room; we have the best interests of that company there, we own it, and the circle is closed.

ORIGINALLY PUBLISHED IN MEDIA ASIA AS

George, Cherian (2014). “In search of theideal media investor”, Interview with Sasa Vucinic , Media Asia 41 (2): pp. 110-118

PHOTO BY ZOBAER AHMED