Monday, October 12, 2009

Media Giant SouthComm a Cog in Venture Capital Enterprise

An Enclave commenter prompted me recently to take a deeper look into the financing of the parent company of two of Nashville's main newspapers, SouthComm, Inc. What I have found most intriguing in that search is how media giant SouthComm itself looks dwarfed by the venture capital company that owns it and how SouthComm could profit from Tennessee tax breaks if its corporate guardian, Solidus General Partner LLC is selected by the Governor's Office in a statewide competition.

Solidus is not a journalism outfit, but a venture capital company, that is, an investment firm that may provide seed money, but more importantly it stimulates and manages passive third-party investments to help soften the high risk of early-stage and potential growth businesses. Venture capital is historically associated with the "dot-com" boom of the mid- and late-1990s, during which it reached its high watermark, but then it crashed with the bursting of the dot-com bubble in 2000. According to Wikipedia, by 2003 the venture capital industry had withered.

Consistent with the "" legacy of venture capitalists, SouthComm purchased The City Paper in 2008 and converted it from hard copy newspaper to provider of online content to compliment its other "niche" publications. This year SouthComm purchased the Nashville Scene with promises that combining news rooms will "yield dividends in local beat coverage of politics, schools and neighborhoods." That has yet to be seen. Local Scene reporter Caleb Hannan is gone as is City Paper reporter Nate Rau.

One of SouthComm's contributing writers, Bruce Barry insists that the SouthComm purchase of the Scene looks like a good thing for the Scene. Whether the purchase is a good thing for readers has yet to be seen in my opinion. The reporters and editors who are still around after the consolidation are probably whipped and thankful for their Solidus-backed SouthComm paychecks in an era of journalist layoffs and declining media revenues. Hence, it is up to readers to hold them accountable for actually following through on the promise to provide more local beat coverage of news events.

Readers face a stern challenge. A glance at the list of companies besides SouthComm inside the Solidus portfolio (as of 10 months ago) suggests that critical, quality, delving journalism may not matter as much as venturing money and earning investments in many high-risk start-ups:
  • American Hometown Publishing Inc.
  • American Sentinel University (American Learning Solutions Inc.)
  • Capital Confirmation Inc.
  • ChangeHealthcare Inc.
  • Dalcon Communications Systems Inc.
  • Documentary Channel Inc.
  • Giant Photos LLC
  • J. Alexander's Corp.
  • Kodi Klip Corp.
  • MedFusionRx LLC
  • Motricity Inc. (AKA/FKA PowerByHand, PalmGear, Pinpoint)
  • New Constructs LLC
  • OnFocus Healthcare Inc.
  • Plumgood Food LLC [liquidated in 2008]
  • Spirit Broadband LLC
  • The Restaurant List
  • TrackPoint Systems LLC
  • Tricycle Inc.
The tough test for us is to stay organized and to watchdog SouthComm's venture empire for cracks in reporting. We are also up against a new interim executive editor, Liz Garrigan, who has expressed contempt of unconventional attempts (through non-media blogs, for instance) to disseminate information that the mainstream media refuses to report or to hold the media accountable for such omissions.

So, Solidus is assuming high risk with the start-up concept of consolidating local news reporting under the SouthComm banner. Mitigating that risk may mean that we see less hard news and more fluff consistent with the set of companies in the Solidus portfolio. But it also might mean tax breaks from the state government to subsidize more capital. I'll consider the problems associated with that in my next post on SouthComm.

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