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Mediapart A Viable Model Case Solution

Solution Id Length Case Author Case Publisher
2249 1228 Words (5 Pages) Dov Alfon University Of Chicago Booth School Of Business
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The founders of Mediapart included four journalists and a financial executive, motivated with the mission to spread un-influenced, unbiased news on digital platforms. The news organization was based on a subscription-only model, which was advertising-free and operates on an online medium. The reason behind choosing this business model was that the French media was largely influenced by the French government, primarily due to the subsidiaries given to the press by the government. In 2016, government aid represented 12 percent of the press industry’s total revenue. Another source of revenue for this industry was through advertisements of companies that were mostly state-owned. Hence, due to these political influences, French media was known to be biassed and skewed in favor of the government. The public’s trust in French media was low, as they were aware of the political influence within this industry. 

Case Analysis for Mediapart A Viable Model

Therefore, the founders of Mediapart founded the idea of imparting investigative journalism which was based on political, financial, and social issues. They decided to be independent of any government subsidiaries and funding, in order to provide true and unbiased information to their audience. In order to be completely independent, the group decided not to use advertising as a source of revenue. Hence, the revenue streams were through subscription fees, which were kept at £9.

2. The main advantage in choosing this business model was that through Mediapart, unbiased and uninfluenced news could be passed on to the public. This was a gap within the industry as the French press was largely dominated by the government, mostly through subsidiaries and advertisement revenue. By breaking free and choosing to stay independent, the founders of Mediapart were free to publish various kinds of investigative content. Two important breakthroughs in the form of major investigative stories published on Mediapart led to an immense increase in their popularity, causing a major increase in their subscribers. Due to this, the organization was able to break even within two and a half years after its launch.

There were two major shortcomings that the founders had to face after choosing this business model. Firstly, they had to rely mostly on personal sources to fund the project. Additional funding of €3-5 million was required to ensure the stability of the organization for three years, after which the business was expected to break even. They had no luck from hedge funds, angel investors, and investment funds. One reason behind the refusal from these organizations was the political risk attached to Mediapart’s business model. The second drawback was when the Treasury challenged the news website’s right to pay reduced VAT in 2013. Initially, it was decided that online media will be charged a tax rate of 2.1 percent. However, in 2013, the Treasury claimed that Mediapart was a digital platform and should be charged 19.6 percent tax. The founders were infuriated and thought that this claim was part of a vendetta launched against Mediapart, because of its independent, unbiased style of publishing content. 

3. Mediapart’s profitability is real. In 2015, the organization posted a net profit of € 715,454. However, this includes the provision for taxes unpaid by Mediapart from 2008 to 2015, which amounted to € 4.7 million. In 2013, the Treasury claimed that Mediapart was required to pay tax at a rate of 19.6 percent, rather than 2.1 percent, which was paid by newspapers. When Mediapart was formed, there was no provision in tax law for online media. Hence, Mediapart and other online start-ups, with help from the Syndicat Professionnel de la Presse d’Information Indépendante en Ligne (SPIIL), determined that the tax rate for online media should be 2.1 percent, same as newspapers. However, the Treasury concluded that Mediapart was still a digital platform, and it should be charged with a tax rate of 19.6 percent, which was paid by other digital platforms like online retail websites. Hence, Mediapart had to pay the differential amount of € 4.7 million. Please, one of the founders, claimed that this was a reaction from the government, as part of its revenge against Mediapart after they had published the Cahuzac story. 

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