Nieman Foundation at Harvard
After a splashy $2.6 million crowdfunding campaign (one that cost $1.8 million to run) to launch a New York–based site — which, it gradually became clear, would actually just be an English-language site based in The Netherlands — De Correspondent is shutting down said English-language site, The Correspondent.
The Dutch press first reported the news.
The Correspondent will shutter as of December 31, 2020. Dutch employees confirmed the news to me and the memo sent to staff — including financial details — is below.
“I felt like it was a betrayal, and we had raised funds on false pretense,” The Correspondent’s first U.S. employee told me last year. De Correspondent’s founders, Ernst-Jan Pfauth and Rob Wijnberg, at first pushed back — insisting that they had never promised their U.S. office would actually be in the U.S. — before finally apologizing.
[“I felt like it was a betrayal, and we had raised funds on false pretense.”]
De Correspondent successfully publicized itself as an advertising-free, member-funded “unbreaking news” site, claiming to be highly transparent about everything from its reporting process to how membership fees were used. For that, its founders received a glowing reception in the U.S., pulling in funding from Knight, Craig Newmark Philanthropies, and nearly $1 million from Omidyar Group’s Luminate for a U.S. launch. In the summer of 2020, Omidyar and the Dutch Democracy & Media Foundation contributed another $900,000.
This past September, The Correspondent wrote on its site:
Since we are an advertisement-free publication, all of The Correspondent’s net revenue consists of membership contributions. We started publishing on 30 September 2019, and the total sum of new membership fees that members contributed that year was €124,000 (around $139,000). The average annual membership fee is €43 (around $51) and the average monthly membership fee is €4.20 euros (around $5).
The Correspondent hasn’t reached a break-even point yet, but we are growing rapidly with hundreds of new members joining every month. We are very grateful that we can build upon this momentum thanks to funding by our partners Luminate (founded by The Omidyar Group) and the Dutch Democracy & Media Foundation. They have expressed their faith in transnational journalism by funding us with an additional €800,000 (c. $900,000).
Our goal is to build a self-sustaining, fully member-funded journalism platform by the end of 2022, but we can only make that happen if the members who joined us during the 2018 crowdfunding renew their membership this month.
Most of those members — who under De Correspondent’s “Choose What You Pay” model could pay as little as $1 — didn’t renew. The Correspondent had about 55,000 paying members in 2019 and today claims 20,000.
“When we raised a new round of funding in the summer, we identified three individual worst-case scenarios for The Correspondent,” De Correspondent cofounder Ernst-Jan Pfauth wrote in a memo sent to staff Thursday (published in full below). “1) less than 30% of renewals with the founding members, 2) an increase of churn and 3) lower average membership fee. By the end of October it became clear all three scenarios had happened at the same time: We fell 3% short of our worst case-renewal target of 30% due to failed payments. We’re seeing an increase in churn, up to 25% for annual members, with many members citing financial problems and the covid-19 pandemic; We saw that the average membership fee that members pay is lower than anticipated (43 euros instead of 70 euros)…These three developments led to a projected loss of 900,000 euros in 2021, against only 1 million euros in revenue.”
The Correspondent had projected it would bring in $555,000 in its first year.
The Correspondent had exactly one U.S.-based journalist — Eric Holthaus, who reported on climate. But his last day was November 30, 2020.
Here’s Thursday’s staff memo.
Hi everyone, thank you all for joining us on such short notice. We were in talks until yesterday late afternoon with SDM and Luminate about what I’m about to share, and we couldn’t send out invites before getting their approval on some final details.
I have some very sad news to share and it breaks my heart to say this:
As of January 1st, we have to stop The Correspondent’s activities, because of its financial situation.
I will first explain why we had to come to this decision, then what it means for our TC colleagues, the next steps in the coming two days, what it means for DC and then recap. I’ve written out notes that I’ll be reading from, to make sure I inform you in the most accurate way. Afterwards you can ask all your questions.
Some of you may unfortunately have already seen this in the news. For reasons that mystify me, the Dutch Union for Journalists has shared the news while we were talking to the TC staff, citing from the confidential letter we sent them yesterday. In the letter we even explicitly mention the confidentiality and they haven’t checked publishing with us. They have apologized for this.
But it does mean that we didn’t have the opportunity to tell you personally, which is really painful.
When we raised a new round of funding in the summer, we identified three individual worst-case scenarios for The Correspondent: 1) less than 30% of renewals with the founding members, 2) an increase of churn and 3) lower average membership fee. By the end of October it became clear all three scenarios had happened at the same time:
We fell 3% short of our worst case-renewal target of 30% due to failed payments.
We’re seeing an increase in churn, up to 25% for annual members, with many members citing financial problems and the covid-19 pandemic;
We saw that the average membership fee that members pay is lower than anticipated (43 euros instead of 70 euros);
These three developments led to a projected loss of 900,000 euros in 2021, against only 1 million euros in revenue. To even just make ends meet, we would have to do 50% better than last year with half of the current team and resources.
I would like to emphasize that Rob, Sahar, Sebastian and I have explored every scenario we could think of to continue The Correspondent. We have explored continuing with a smaller team, by cutting salaries and even by merging TC in its entirety with De Correspondent. None of these scenarios turned out to be financially viable.
This is partly due to the fact that of the current membership base, 2 out of 5 TC members are based in the Netherlands. 1 out of 5 TC members are also DC members, which increases the risk of cancelations in the longer term for this group, as Dutch members already have free access to TC through DC. This is an enormous Achilles heel for more editorial integration, especially since DC members represent 27% of TC’s revenue.
In the end, we saw no other way of doing 50% better with half of the resources and had to conclude all options were unsustainable from a financial perspective.
Two weeks ago we came to the conclusion that the right, yet extremely painful, choice was to shut down The Correspondent in a proper manner, and as soon as we could. We couldn’t share this earlier, because we needed to discuss all the details with the investors beforehand. By doing this, we avoid bankruptcy, which would have been inevitable on the path that we were on, and would consequently leave less on the table for a proper compensation to the TC team and our members. The debts of SDM, Luminate and the founders will not be serviced.
In other words, this is the only way we could make sure we can still offer the TC team a fair settlement.
As a consequence, their positions will end as of 1 January 2021. This is also the date we will stop publishing new articles and sending out our newsletters. The TC colleagues will all be offered a severance package in accordance with Dutch labor law — regardless of if they are an employee or a contractor.
Right after our morning meeting with the TC team, we had individual meetings with all of them to discuss the specifics of this package and to offer them the opportunity to ask any questions they might have about their personal situation.
We are extremely saddened to have to say goodbye to our TC colleagues. They have done an absolutely amazing job in a year of global unrest and personal hardship.
It wasn’t an easy 18 months for any of them. Starting an international journalistic enterprise, modeled after a Dutch one, with a distributed team led to many challenges.
With the covid-19 pandemic dominating our lives and international headlines non-stop for the past year, it proved extra difficult to provide an ‘antidote to the daily news grind’ that was relevant enough for readers in over 140 different countries.
Everyone gave it their all, and it has led to brilliant articles, audio stories, newsletters, transnational chats and superb member service.
The TC team was a bright shining light in times of increasingly dark headlines, and we are incredibly proud of the journalism they have made and the spirit they have brought to the team.
From the bottom of my heart, I say to them, and everyone who helped them, thank you.
I will now share more information about how we’re intending to close down The Correspondent.
All published articles will remain available online, but there will be no new articles as per the new year.
It’s good to know that all members will receive a full and automatic refund for the remainder of their membership.
We want to give you — and the TC team in particular — the opportunity to process this news today and most of tomorrow, before we share the decision with our members and the public at 5 o’clock [NOTE: THAT IS, UNTIL THE UNION BROKE THE NEWS]. Please don’t share the decision publicly before this time, so the TC team can choose the right words for this important moment together in a collaborative meeting tomorrow morning.
We chose to share the news at the earliest moment, so the TC colleagues will have as much time as possible to find new work. And we will help them to the best of our ability to find new job opportunities.
What does this mean for De Correspondent?
As you are aware, several DC colleagues also worked — mostly part-time — on TC, such as the membership team, the creative team, the board and the developers. Their hours were always invoiced by DC.
With TC shutting down, these hours will come back to DC’s budget, meaning we will have a projected increase of costs in 2021 of around €544,000. To be clear: these are costs of DC employees coming back on the DC payroll full time, and who then will be working full time for DC again.
These DC colleagues can in 2021 focus more time on DC and that will represent value (a better site, more attention for membership growth), which we project will translate into additional member growth and book sales.
We will not fire anybody on DC payroll because of this increase in costs – nor do we need to.
It is very likely there will be negative press concerning this news.
If you get any press inquiries, please make sure to refer them to [X].
TC will be portrayed as a failure, which particularly in Dutch press will be associated with DC as well. How much of this will stick, and for how long, is hard to say up front. Some of it will, but on the other hand DC is a well-functioning sustainable company, with a very solid reputation; bad press will eventually wither away and once we start taking new steps forward, positive stories will emerge again as well. Most of the negative attention will most likely be aimed at Rob and me as founders.
In the coming days, we will refer to journalists to the published letter on TC, since we are now completely focused on winding The Correspondent down in a responsible way. Next year, when we are ready to reflect on what happened, we intend to share our lessons learned.
In doing so, our attitude (as founders, and as an organisation as a whole) will be what it always is, and which is fully in line with our core values: we will be honest, transparent and self-reflective.
Our attitude can be summed up in a simple phrase: those who never fail, never tried. We tried and we will keep trying great, risky and exciting new things in the future. Some of those will fail as well, and lots of them will be successful. Learning from both is how you grow as an organisation and as people.
Just to recap, the most important next steps:
You can ask any question in the dedicated channel #tc-questions
I will email you all the text I’ve just shared, and attach the draft letter to the members
Tomorrow at 11.30am there’s a review session for the TC team about the letter to TC members
We will post the letter online at the latest 5pm AMS time / 11am US East Coast time. We will also post it on DC and mention it in Saturday’s daily and the weekly.
December 31st will be the last day of publishing for The Correspondent and the last day of work for the TC colleagues
If you get any press inquiries, please make sure to refer them to [X].
A previous version of this story stated that Democracy Fund donated money to The Correspondent. It actually gave a grant to NYU to fund the Membership Puzzle Project, which worked with The Correspondent but also with other newsrooms.
