A UK/US Model being tested
Posted 10 April 2009 - 07:58 AM
April 9 - CanWest Global Communications Corp. [CGS-T] has taken a $1.2-billion writedown on its newspaper assets and may now be in danger of violating another lending agreement with its banks as the company faces a standoff with lenders and a sharp drop in advertising revenue.
CanWest, which owns several major daily newspapers across the country and the Global Television network, said Thursday that it was lowering the value of its newspaper assets to $1.6-billion.
It is the second time CanWest has taken a writedown at a time when many media companies are lowering the book value on assets due to reduced predictions of future revenue. CanWest wrote down the value of its TV assets a few months ago, while rival CTV also booked a $1.7-billion writedown on its broadcast operations.
.....now faces an April 15 deadline to make a $30.4-million interest payment to its bondholders.
......It is assumed by Bay Street analysts the company, Canada's biggest media company, will not make that payment, since its senior lenders have first call on the cash contained on CanWest's books, and would likely block such a payment to other creditors.
Should the bondholders not receive their interest payment, they would be in a position to demand immediate repayment on about $761-million worth of notes, which could force the company into receivership unless a settlement can be negotiated. The bondholders are negotiating as a group and are said to be seeking a solution that would keep the company out of insolvency.
.....If big media are falling apart, one solution could come from an innovative business model being tested in the U.S. and U.K.
These days, the word "robust" doesn't spring to mind when you think about the big-business model of media ownership. Newspapers are dying in the U.S. TV stations are shutting down in Canada. It's anyone's guess how bad it's going to get.
.......some people are looking closely at a model that would combine charitable capital and private capital in a hybrid that could support journalism.
....In the U.K., they're called Community Interest Companies, or "CICs," and they've been around for several years.
In the U.S., they're called Low-Profit Limited Liability Companies, or L3Cs, and they're just getting started.
......Both models have characteristics of both for-profit and non-profit companies. Both fall within a broad concept called social innovation.
There's nothing like CICs or L3Cs in Canada today; our laws don't allow for such structures. But there are a number of people in this country who are working to change that.
Cindy Grauer, a Vancouver management consultant, former CRTC commissioner and longtime Liberal party activist, thinks hybrid businesses could work very well with Canadian media.
"........designed to be really community based, they really lend themselves to starting a newspaper" for example, she said.
.......A hybrid business model could allow foundations to invest in a community project, rather than simply give it a grant. The enterprise could sell advertising, but its profits could be limited and the owners could be prevented from flipping it to make money.
"Community ownership is what it is," said Grauer. "But right now you can be either for-profit or you're not-for-profit. There's very little in the middle."
......The L3C concept has already attracted the attention of groups in the U.S. that are proposing the structure be used to promote journalism. If a free press is essential to democracy, they ask, doesn't that mean good journalism has a social benefit?
Entire article is found here
Posted 10 April 2009 - 10:40 PM
Posted 11 April 2009 - 07:19 AM
Interesting stuff, thx for posting, Susan... (PS: the http://www.cicregulator.gov.uk/ link times out - or is doing so right now, anyway. Did it work for you earlier?)
Yes it worked fine hmmm...probably temporary. Here is another link that is linked to that site..provides a bit more info http://www.companies...onal/cics.shtml
Posted 12 April 2009 - 12:35 PM
B.Haven - another site...Paper Cuts - US based but interesting.
The model of L3C/CIC structures has been used for decades in forms other than media throughout Europe and the US (private/non-profit hybrids). However that business structure, as mentioned in the TYEE article, does not exist at all in Canada - so to even consider this, legislation and tax law would need radical change first, Federally and Provincially.
If the L3C model for media does take off (and one can look at 2 groups of former Seattle PI staff starting up in the next few months) we could see online media especially move out of Canada.
One of the new Seattle based groups is planning a regional online news site that would cover Portland Ore. to Vancouver BC. Based in Seattle under a L3C structure they would use contract writers, editors and journalists - they could easily bypass CRTC scrutiny, and if it takes off locally (within BC), out compete Canadian media who cannot take advantage of this type of business model.
It will be interesting to follow..
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