Last week, Overstory Media Group fired four of seven full-time journalists employed by flagship Victoria outlet Capital Daily. CEO Farhan Mohamed and reported billionaire co-founder Andrew Wilkinson soon took to social media to plead poverty, and lash out at the journalists they fired, insisting that the outlet was taking heavy losses and had no choice but to slash their workforce.
But newly uncovered cases of interference with the outlet’s editorial independence, in one case to promote Wilkinson’s own business — efforts that managing editor Jimmy Thomson rebuffed — suggest the firings may have had more to do with journalistic ethics and independence than the bottom line.
“It’s very hard for owners to avoid the temptation of using these media [outlets] as a sort of extension of their business priorities,” Ivor Shapiro, scholar-in-residence at the Centre for Free Expression at Toronto Metropolitan University, told Ricochet. “If they own them, they feel like they own them.”
Read more of last week’s coverage:
- A bold experiment in local journalism hits the rocks. By Zak Vescera in The Tyee.
- Story, over: Billionaire blows up thriving local news outlet. By Ethan Cox in Ricochet.
Ricochet has now spoken to a number of OMG sources, reviewed leaked recordings of a meeting Mohamed held with remaining staff after last week’s layoffs, and a meeting he had with subscribers this week. We’ve also been provided with multiple screenshots from the company’s internal Slack as well as a confidential pitch deck used to woo investors.
They make clear the outlet had been experiencing steady revenue growth for years and was currently profitable (although projected to see a drop in ad revenue and thus lose money this year). The firings may have been more about direction than finances, the owners’ expectations (that revenue be doubled in a matter of months) were unrealistic, and the underlying conflict was at least in part about journalistic ethics.
OMG sources also suggest that an impending unionization announcement may have been a precipitating factor in the firings, explaining the absence of a continuity plan.
Many OMG employees signed non-disclosure agreements prior to joining the company, and those that were fired were required to sign new “non-disparagement” agreements in order to receive their severance payments. In this context, sources have requested anonymity in this reporting due to fear of retaliation.
Mohamed did not respond to a request for comment for this story, including a question about whether he would be willing to waive those agreements to allow current and former staff to speak freely.
Attempts to blur the lines between advertising and editorial
A series of confrontations between Mohamed and managing editor Jimmy Thomson took place over the weeks leading up to the late January firings, in which the CEO gave orders to staff that they felt blurred the lines between advertising and editorial. Thomson and his team pushed back, citing ethical objections.
In one example, Mohamed sent a message directly to the newsletter team (bypassing the managing editor) one week before the firings ordering them to “lead” Capital Daily’s newsletter the next day with the “huge news” that Tiny, a company co-owned by Wilkinson, was going public in a merger with WeCommerce. A plug for the boss’ company that Thomson rejected, once he got wind of it, describing it as an “obvious conflict.”
One week later he was fired, along with half the organizing committee working to create Overstory’s first employee union.
“I’d call that timing highly suspicious,” says Paul Gott, a journalism professor at Concordia University and a TV news producer who has worked for several major networks over a career spanning three decades.
“It just shows perhaps the lack of business acumen, never mind journalistic acumen, of the bosses, that they would do something like that. It seems like an obvious tit-for-tat.”
A week before that incident, Mohamed had instructed newsletter staff to start thanking advertisers directly in editorial copy. Thomson objected, describing the plan as “gross” and “compromising” their journalism. The compromise he offered was that the ad team could thank advertisers in a separate box, not in the intro and not in the voice of the editorial team. Instead, the idea was scrapped altogether.
In a meeting with subscribers this week, Mohamed was asked if he ever intervened in editorial content to serve the business interests of ownership. He avoided answering the question directly, but did note that everything was “above board.”
“Suffice to say nothing shady is happening in that way.”
Gavin Adamson, an associate professor of business journalism at Toronto Metropolitan University, sees things differently.
“That’s especially bad because not only are you intervening in editorial, you’re asking them to sort of pump up the reputation of the actual ownership of the outlet. It’s purely promotional, and if you think about it it’s not only bad editorial practice, it's bad business practice.”
Last week, Ricochet reported that the outlet was making a profit of roughly $20,000 each month, and the “losses” referred to by its owners were hypothetical projected losses over the next year. On social media, Wilkinson referred to that reporting as “absurd” and “biased.” However, on the leaked recording of last week’s team meeting, Mohamed confirms many of those figures to his own staff, even as he was suggesting to journalists that the outlet was currently losing money.
Mohamed makes clear that the financial concern is over slumping advance ad sales starting in March, and the fact subscriber revenue has plateaued — fairly typical speed bumps for any growing outlet. He tells staff a looming recession is bad news for advertising, and his projections show the outlet could lose as much as a quarter million dollars over the next six months, so they need to overhaul the newsletter to make it more appealing to businesses. He says they “tried everything” with the current team, but laments the lack of support the business team has received from the editorial team. He goes on to argue that they need to “replace” the team that was fired and “hire different people.”
“This misconception that Capital Daily was the profitable piece of a company. That was somewhat true to an extent, up until a period of time. The true thing that nobody has talked about, that no one has said other than us, is that Capital Daily is set to drop about 30 to 45 per cent in revenue this year,” he said. (eds. This projection of future revenue was reported by Ricochet and others last week, quoting Mohamed.)
“We’re seeing advertisers not re-sign with us. We’re seeing readers not converting. We’re about to lose, and we’ve started losing, and we’re set to see this go really down.”
In contrast to this doom and gloom, a pitch deck used to raise money for Overstory in June of 2022 described Capital Daily as wildly profitable.
Subscriber numbers, it reports, had nearly quadrupled since 2020. Better yet, they project revenue to quadruple in four years and profits to multiply tenfold or more, blowing past $500,000 annually in a few years.
Perhaps the outlet’s financial situation did a full 180 in a few months, but it’s also possible that the truth lies somewhere between the glossy promises made while raising money and the gloomy projections used to justify firing 60 per cent of the outlet’s editorial staff.
Online speculation that the firings were related to union efforts has centred on the fact half the union’s organizing committee was fired, as well as a tweet from Mohamed saying he and Wilkinson were unaware of plans by staff to unionize. This tweet contradicted an earlier tweet from Wilkinson saying the pair had known about the union plans since early last year. Asked to explain the discrepancy in a meeting with subscribers, he argued they were both right.
“The short answer was no. We didn’t know that they were trying to unionize at this moment. Last year, yeah, I heard some rumblings about it.”
OMG sources also tell Ricochet that two employees in the sales department were approached by members of the union organizing team in the week before the firings, and told it was their last chance to sign union cards as the union would be announced imminently. Organizers had long suspected members of the sales team were passing information to Mohamed, sources say.
Company sources suspect it was always the plan to clean house, but they say that plan was rushed into action over fears the union would entrench a managing editor who didn’t take orders from the business side and an editorial team whose loyalties were with their editor instead of management.
‘It will kill your business’
“That’s a line that can’t be crossed, because once you cross it your news basically becomes valueless,” says Paul Gott, the journalism professor at Concordia.
He points out that pushing for coverage of a company you own has gotten a number of Canadian media personalities fired over the years.
“So when the boss is doing it, shouldn’t it be the same way?
“I think Andrew needs to sort of reconsider what he’s doing… having no credibility will actually not get people to read (your outlet) and it will kill your business. It makes no sense in any sort of way, and that’s what happens when management tries to use their expertise to run something that they have no idea how to run.”
OMG sources described these two incidents as part of a pattern of interference in editorial decisions that had been ongoing for some time but seemed to ramp up in recent months, as Mohamed’s concern about slumping advance ad sales grew more acute.
“The effort by the sales side to intervene on editorial is about as old as the news industry itself,” adds Gavin Adamson, the professor of business journalism at Toronto Metropolitan University. “But the fact that ownership was trying to intervene on editorial in this instance just sort of underlines that they didn’t have much experience with news and real journalism.”
“It is the very essence of good journalism, this independence from the sales and business side. Whether it’s ethical or not, that’s one word you could use, but it’s just not smart if you’re trying to run a good journalism business.”
“It’s not that uncommon for for-profit media outlets to promote their owner’s business interests,” adds Shapiro, who is currently writing a book on press freedom.
“But what you have described to me seem to be examples of going beyond the somewhat nuanced… Crossing of the line tends to be more subtle.
“It may not be coincidental that this story has an element of union busting, because what we’re missing in this country is any consistent expectation that publishers and journalists alike recognize and are bound by professional standards in journalism.”
The Chipotle of news
In June of last year, OMG created a pitch deck to help them raise $5 million to fund what The Logic described at the time as an “aggressive North American expansion plan.”
It describes Capital Daily as a “phenomenon,” read by one in five people in Victoria and the city’s paper of record. “Most surprising: it’s profitable.”
The deck, a copy of which has been obtained by Ricochet, gushes about how they have consistently sold out of ads and signed up tens of thousands of subscribers. “Local news isn’t dead after all,” it proclaims.
The document specifically points to the absence of unions as a selling point for their model, deriding legacy outlets as being “on life support” and describes a “billion dollar monopoly opportunity lurking in local news.”
“Chipotle is an incredible business,” the deck states, “It spends about $1,200,000 to open a location, which within two years typically earns $800,000 in profit per year. We’re going to do the same thing with local news.”
Invest $350,000, get paid back in three years, the pitch promises. Then you can start earning. Fifty communities at scale should produce $35 million in annual revenue within six years.
Underwritten content, typically sponsored content that masquerades as news, makes up a large chunk of revenue in these rosy projections, and the expectations for growth are downright unreal. But it puts some of Mohamed’s concern into context, considering this is what was sold to investors.
“We need to double our revenue,” Mohamed urged on the call with employees. “This is what we need to do over the next six months.”
“They were way too optimistic for the growth outlook for that kind of content,” says Adamson.
A community betrayed
“You keep saying we need to make changes, but what?” An OMG employee is blasting the boss in an all-hands meeting following the firings. “I still don’t know. We had a team that was putting together the newsletter every day, and they’re all gone... So now we have Michael (an intern) and Nina doing the newsletter seven days a week?
“What are you thinking?”
Listening to two meetings Mohamed had over the past two weeks, one with remaining staff and the other with subscribers, there’s a common tone that’s hard to explain in text.
It’s outrage, yes, and anger. But it’s also something closer to betrayal. Capital Daily was a shining city on the hill. A beacon for what local journalism could be in the digital age. Staff quit other jobs to come here, and subscribers poured their money and love into an outlet that they felt ownership over. As long as Thomson was there they trusted him to hold the line, and protect them and the outlet from the worst impulses of its owners. It was theirs, all of theirs, and it was beautiful.
Now he was gone, and the future was all of a sudden uncertain.
It’s Wednesday afternoon in Victoria, and Mohamed has convened subscribers to hear him justify the firings. Despite being given just a few hours notice on a weekday afternoon, and the invite not going out to all the outlet’s subscribers, a dozen die-hards are on the Zoom call. Mohamed has been fielding increasingly frustrated but polite questions for over an hour, and as the meeting winds down he sounds tired and perhaps a little sorry for himself.
“It’s been a challenging week,” he sighs.
“We should have just done this from the start. We should have just talked to all of our readers. Quite honestly, this is the type of stuff I wish the Cap Daily team was doing more often, and so if I have to spearhead some of that myself, then I’ll do that, and…”
“Hang on, Farhan.” A subscriber who has been unfailingly polite to this point interrupts him mid-sentence, her voice cracking with emotion.
“The Capital Daily team was extremely responsive. I’ve written to numerous reporters — and you wouldn’t have seen that because up until a while ago I didn’t know what your email address was — and they are very responsive. They show up, they’re at events, you can go talk to them at the farmer’s market, they are active on Twitter, they interact with people… It is inaccurate to say that they are not doing that kind of stuff.”
“You said a moment ago you wanted people’s honest opinions, so I’ll give you a summary of mine. What I see online is… you and Andrew attacking people. You said you weren’t a dick. What I see, and I assume it’s you typing it (on Mohamed’s personal Twitter account), that’s real asshole behaviour.”
“I really hope the Capital Daily does rise from the ashes, as someone who lives in Victoria, but I am really doubtful about it. It sure does not feel good.
I am grateful for your time today, but I don’t have a lot of faith in this going forward.”