A. financial tools used by media groups for

A.

      Rappler           Rappler is an on-line social news website thatprides itself with news stories presented in a techno platform.  Its stories inspire community engagement and callactions for social change. Rappler is a combination of the root words”rap” (to discuss) + “ripple” (to make waves). It’s a newworld of limitless collaboration enabled by new   technology and connected by social media.1               Rappler was founded byjournalists Maria Ressa, Glenda Gloria, ChayHofileña and Beth Frondoso.  It initiallystarted as a Facebook account called “Move.PH” in 2011, now Rappler’s citizenarm, and later became Rappler when it started its own website, www.rappler.

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com, on January2012.  Its board members are former mediaexecutive Manny Ayala (chair), Maria Ressa (president), Glenda Gloria (vicepresident), and Raymund Miranda (treasurer).2          Rappler claimsit has grown its online reach with hits of up to 10 million website visitors amonth and 40 million page views a month. Its Facebook account has 3.59 million followers, while its Twitteraccount has 2.94 million followers.3  Rappler has a significant influence in theonline Filipino community.

          Rappler prides itself with a key tenet in its DNA: thesupremacy of editorial independence.4  Rappler’s shareholders and investors signedagreements that give full editorial and management control to the journalists,whose main goal is create a truly independent news organization andcrowdsourcing platform free from the influence of those with vested interests.Rappler’s OwnershipRappler Inc. is 98.84%owned by Rappler Holdings, which was set-up for international investors toinvest in through PDRs (Philippine Depository Receipts). The PhilippineConstitution bars foreign ownership of mass media.  These PDRs are financial tools used by mediagroups for international investors that give no ownership.  Rappler believes that domestic funding wouldalways bring in vested interests and bringing in international investors whobelieve in the same value as Rappler’s would be free of vested interests andgive greater independence.

  This meansthat Rappler Holdings is giving economic interest but has no direct role inrunning the company.          Rappler Holdings is 34.42% owned by Rappler journalistscombined, which form the largest shareholders. Of this, Maria Ressa owns 23.77%. In 2013, Rappler’s Board has approved an Employee Stock Option Plan thatis awaiting SEC approval.5  The founders of Rappler believe that thosewho built the company from the beginning should be given opportunity to have ashare of the ownership of the company.           Rappler’s Business Model            The business model of Rappleris quite unique.

  As a start-up andinnovative company, Rappler is in the business of data and crediblestorytelling, services that they also extend to their brand partners.  With the use of data, technology, andcontent, they shape innovative and award-winning native advertising that aimsto educate, empower, and inform the targeted audience about the latest trendsand branded topics that are worth their time and attention.            Made by a content marketing group, these branded contentare distinct from the news and editorial team. All sponsored content are clearly marked and circulated under a sectioncalled BrandRap.

6 These are presented in a techno-platformsupported by data in a way that appears like a news rather than as anadvertisement.          In short, Rappler is using its credibility andinnovativeness in news reporting to createand publish branded topics for companies. This is Rappler’s business model.  What in the business model is causing the company to losemoney, specifically cash?                  In its onlineoperations since the beginning, Rappler is not displaying ads nor solicitingany subscription to its online premium content. Nor does it sell any tangibleproducts in the way the bricks-and-mortar business of newspaper operate. It isonly relying on its branded content to earn money and from its investors tosurvive.            However, itis expending real money, specifically cash, for its editors, writers, staff, offices,and servers.  Rappler has to pay somepremium to keep its hipster staff in hipster offices.

  With higher overhead costs and lower returns,it is losing cash.  This is the reasonwhy every year, it has to rely on capital infusion just to survive.                          B.      Rappler’sCase           In the understandingof Rappler’s case, there are a number of important political and legal issuesaround the case.  The following are the mostimportant ones:  a. OwnershipIssue              Article XVI,Section 11(1) of the 1987 Philippine Constitution states that: “Section11. (1) The ownership and management of mass media shall be limited to citizensof the Philippines, or to corporations, cooperatives or associations, wholly ownedand managed by such citizens.

The Congress shall regulate orprohibit monopolies in commercial mass media when the public interest sorequires. No combinations in restraint of trade or unfair competition thereinshall be allowed.” 7                    This constitutional restriction bans any foreign ownership ofPhilippine mass media on the sole purpose of preventing any undue influence orinterference in the shaping of public opinion. Mass media has become such a powerful tool that can sway public opinioneither way.  Any such influence may constitutea risk on national security or national sovereignty.          Rappler has declareditself as an online social news website, thus it is considered as mass media. TheDepartment of Justice, in its Opinion No. 24 s.

1986, states that:”The term ‘massmedia’ in the Constitution refers to any medium of communication, a newspaper,radio, motion pictures, television, designed to reach the masses and that tendsto set standards, ideals, and aims of the masses.”8          In addition, Republic Act No. 9211 or the TobaccoRegulation Act of 2003 defined ‘mass media’ in Section 4 (f) as:”f. “Mass Media” -refers to any medium of communication designed to reach a mass of people. Forthis purposes, mass media includes print media such as, but not limited to,newspapers, magazines, and publications; broadcast media such as, but notlimited to, radio, television, cable television, and cinema; electronic mediasuch as but not limited to the internet;”9          Rappler, just like any other internet-based news website,is considered mass media and thus, covered by the constitutional restriction onforeign ownership.           The Securitiesand Exchange Commission (SEC), in its January 11, 2018 en banc decision, has ordered the revocation of Rappler website’scertificate of registration, saying it “violatedthe Foreign Equity Restriction of the Philippine Constitution, which statesthat the ownership and management of mass media shall be limited to citizens ofthe Philippines, or to corporations, cooperatives or associations, wholly-ownedand managed by such citizens.

“10            The SEC hasstated further that, “The Foreign EquityRestriction is very clear. Anything less than One Hundred Percent (100%) Filipinocontrol is a violation. Conversely, anything more than exactly Zero Percent (0%)foreign control is a violation. Here the stockholders must have prior discussionwith and approval of at least 2/3 of the PDR Holders, meaning Rappler is at thevery least under obligation to consult with Omidyar Network.  The stockholder has become, in effect, subservientto the holder.  It is neither 100%control by the Filipino stockholders, nor it is 0% control by the foreign PDRholders.

“11          Rapplerhas violated the constitutional restriction on foreign ownership when itallowed Omidyar Network to exercise control over it.  Mass Media entities in the Philippines are measuredup against the highest standards and are expected to uphold the PhilippineConstitution.  As they find faults in thegovernment, they should not be faulted for anything.  This is a credibility issue.                        b.  Curtailment of Press Freedom             Saying that the press freedom in thePhilippines was curtailed with one media entity faulted for violating the lawis a little bit stretched.             TheNational Press Club (NPC), the country’s oldest and biggest organization ofactive media practitioners has spoken.

Paul M Gutierrez, current NPC Presidenthas issued an official statement for and in behalf of NPC:”In the broader Philippine media industry, Rappler is just oneamong the thousands of media entities in the country and whose operations haveremained free.There are about 436 television broadcaststations, 411 AM radio stations, over 1,000 FM radio stations and more than 400newspapers today operating freely in the country besides those that now haveproliferated in social media and whose actual number no one really has anyidea.”Tosay that the fate of one media entity found to have run afoul with the lawtranslates to media repression in the country is stretching the argument a bittoo much,” 12           The exerciseof press freedom in the Philippines in particular, and the freedom ofexpression in general have not been threatened nor affected in light of the findingsmade by the Securities and Exchange Commission that Rappler has violated thestrict constitutional provision on foreign ownership of mass media and hasdecided to close it down.            Responsible journalism is upholding thelaw. This decision of the Securities and Exchange Commission may become ablessing in disguise as mass media outlets will now have to review how they bring in foreigninvestors in a way of policing their own ranks.c.

 Due Process             The Office of the Solicitor General(OSG), through Solicitor General Jose Calida, has asked the Securities andExchange Commission to investigate Rappler and Rappler Holdings for possibleviolation of the constitutional restriction on foreign ownership back inDecember 2016.            After more than one year ofinvestigation, the Securities and Exchange Commission handed down its decision.  Rappler has claimed that the decision washanded down to close them without giving them the chance to respond.  This has violated their right to due process.

            For me, one year of investigation is longenough.  If they feel that their rightsare violated, they can seek legal remedies. They are free to seek redress from the courts to substantiate their allegationon undue process and political harassment.

 Once the courts have declared with finality, the decision will becomeexecutory.  Until then, Rappler is free tooperate until this decision has become final and executory.             d.  Political Harassment             Rappler has been oneof the staunchest critic of the Duterte administration.  They have faulted the Duterte administration forits shortcomings.  This has been thereason why many, both here and abroad, are crying foul on what happened toRappler.  They are saying that this isthe government’s plan to silence its critics and get back at them.            The Duterte administrationhas many critics.

  A noisy press is themusic of democracy and essential for good governance.              In my observation,this is not political harassment.  Caseswere raised to media outlets, not because of their political stand, but becauseof their violation of pertinent laws. This case of Rappler has some precedentslike in the case of Inquirer and the Mile Long property amongst others.

  Other media outlets which are law abidingshould have nothing to be afraid of. This just emphasized that no one is above the law. C.      TurningRappler Around Being a start-up and innovative company, Rappler has a lot ofpotential to become compelling and financially viable. Rappler can utilizethese best practices in media and media-related technology:   1.        First,Rappler has to correct the primary reason why it was closed by the Securitiesand Exchange Commission.  It has tomodify the PDRs it have with Omidyar Network and remove any semblance ofcontrol.  This way, it can be compliantto the constitutional restriction on foreign ownership.

  It has to accept whatever penalty theSecurities and Exchange Commission will impose so it can resume back to its normaloperation.2.        Rappler’s blogand news articles have a mood meter, a web widget that people reading the blogor articles can choose to show their reactions about it.  Readers are prompted to choose amongst theeight various emotional reactions.  Thetop ten articles that received the most reactions in the last 48-hours wouldappear on the mood navigator.

  The Rappler Mood Meter, which is similar to Facebook Reactions,won the Bronze Medal for Brand Experience at the 2012 Boomerang Awardssponsored by the Internet Media Marketing Association of the Philippines(IMMAP).13Rappler can patent this and market to other platforms ormedia entities to earn royalties.3.        Rappler can modifytheir business model and start accepting advertisements on their website.  This way, they will another source of income.  The more credible and more compelling theirnews are, the more people will visit their website, more companies would wantto advertise with them.

4.        Rappler cando news podcasts on their websites as another medium of bringing the news orarticles to their audience.  They can usethis as a venue to wow their audience in their expertise in multi-mediatechnologies at tune to the changing times. This can further result to more advertisements with them.5.        Rappler canleverage their multi-media expertise on data and technology for bringingbranded content in another medium, television.

This can bring a good source ofrevenue for the company.1 https://www.rappler.com/about-rappler/about-us/385-about-rappler2 http://newsinfo.inquirer.net/960616/in-the-know-rappler-history3 http://newsinfo.inquirer.net/960616/in-the-know-rappler-history4 https://www.rappler.com/about-rappler/about-us/385-about-rappler5 https://www.rappler.com/about-rappler/about-us/385-about-rappler6 https://www.rappler.com/about-rappler/about-us/385-about-rappler7 http://hrlibrary.umn.edu/research/Philippines/PHILIPPINE%20CONSTITUTION.pdf8 http://www.chanrobles.com/ecommercedojopiniono0401998.htm#.Wmv5u6iWbIU9 http://www.lawphil.net/statutes/repacts/ra2003/ra_9211_2003.html10 http://www.sec.gov.ph/wp-content/uploads/2018/01/2018Decision_RapplerIncandRapplerHoldingsCorp.pdf11 http://www.sec.gov.ph/wp-content/uploads/2018/01/2018Decision_RapplerIncandRapplerHoldingsCorp.pdf12 https://www.facebook.com/paulino.mgutierrez13 https://www.facebook.com/rapplerdotcom/posts/314768588544415

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