Plan to Fix Journalism With Cryptocurrency Draws Skepticism - WSJ

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0 Comments By Benjamin Mullin Benjamin Mullin The Wall Street Journal Biography Benjamin Mullin @benmullin [email protected] Updated Oct. 10, 2018 5:32 p.m. ET The Civil Media Co. bills itself as a solution to some pressing problems in modern journalism, pitching a new cryptocurrency that would help news consumers support quality information and weed out bad actors.
So far, the effort isn’t going smoothly. Consumer demand for the new so-called token that the company is selling has been weak ahead of an Oct. 15 deadline, and major news organizations have rebuffed partnerships with the company. Meanwhile, a Civil co-founder said its business plans are fundamentally flawed.
“We never held any pretense that introducing a blockchain-based network for journalism would be easy,” Civil Chief Executive Matthew Iles said in a written statement. “We don’t know if the token sale will work, but the goal here is to build a network and distribute tokens to people who want to play an active role in that network.”
The startup based in Brooklyn, N.Y., is aiming to apply the tenets of blockchain—the digital ledger that underpins cryptocurrencies such as bitcoin and ether—to build a new journalism economy where participants can suppress misinformation and promote real news.
Civil has raised more than $5 million from a blockchain venture firm, ConsenSys, and is aiming to sell 34 million of its “Civil Tokens” for between $8 million and $24 million. The Securities and Exchange Commission hasn’t issued a blanket ruling on whether such token sales are subject to regulatory approval, but Civil has stated that its token sale isn’t aimed at investors or speculators.
Daniel Sieberg in an undated photo, during an appearance on NBC’s ‘Today’ show. Mr. Sieberg co-founded Civil and has since raised concerns about the startup’s ability to follow through on its plans. Photo: Peter Kramer/NBC/Getty Images Civil is planning to donate the proceeds from the token sale to the Civil Foundation, its sister nonprofit, which will make grants to news organizations and conduct research about the future of journalism. Token holders will be able to vote on which publications meet Civil’s journalistic standards and can join the network.
Over the past year, Civil has sought partnerships and tried to sell its tokens to the New York Times; the Washington Post; Dow Jones & Co., the News Corp subsidiary that publishes The Wall Street Journal; and Axios, among other publishers, according to representatives for the companies. Civil offered a variety of partnerships that included buying its tokens and integrating Civil’s blockchain publishing technology into their content management systems. None of those partnerships have come to fruition.
Forbes on Tuesday said it became the first major media brand to start testing Civil’s blockchain technology. Civil gave Forbes tokens as part of the agreement, according to a person familiar with the matter.
In August, Civil and the Associated Press announced a licensing deal for Civil’s partner newsrooms, which includes a provision for collaboration on blockchain-based technology.
Employees at the Washington Post familiar with Civil’s proposals said the startup pitched the Post multiple times to no avail. Civil suggested the Post allow readers to pay for some of its journalism with Civil tokens, according to people familiar with the matter. But the wisdom of potentially substituting subscription revenue with one-time token payments wasn’t clear to Post executives.
“Our concern was: Are readers going to understand it?” said Joey Marburger, the director of product at the Washington Post.
Civil’s proposal doesn’t require news organizations to forgo subscription revenue, according to a person familiar with the matter.
Great Expectations Civil's plan to raise $32 million in token sales was revised down in August. As an Oct. 15 deadline nears, Civil isn't anywhere near its minimum target. Initial goal
$32 million
Revised goal range
$8 million to $24 million
If at least $8 million isn’t raised by Oct. 15 the token sale will be canceled*
$2.1 million
Raised as of Oct. 10
*The company may allow token holders to keep their money in the sale under different terms.
Source: the company
On Wednesday, Civil said the token sale has attracted commitments of $2.1 million from more than 2,300 purchasers. If Civil fails to generate at least $8 million by the Oct. 15 deadline, the sale will be canceled and all money returned.
However, regardless of whether the company hits that $8 million target, Civil could offer existing buyers the option of keeping their money in the sale under new terms, the person said.
Civil created 100 million tokens and is selling only 34 million, retaining one-third for company employees, advisers, the Civil Foundation and the company itself. The company also hopes to sell blockchain-based publishing software to news outlets. The remaining tokens are earmarked for Civil’s partner newsrooms and other strategic partn...