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A.      
Rappler

 

          Rappler is an on-line social news website that
prides itself with news stories presented in a techno platform.  Its stories inspire community engagement and call
actions for social change. Rappler is a combination of the root words
“rap” (to discuss) + “ripple” (to make waves). It’s a new
world of limitless collaboration enabled by new   technology and connected by social media.1 

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             Rappler was founded by
journalists Maria Ressa, Glenda Gloria, Chay
Hofileña and Beth Frondoso.  It initially
started as a Facebook account called “Move.PH” in 2011, now Rappler’s citizen
arm, and later became Rappler when it started its own website, www.rappler.com, on January
2012.  Its board members are former media
executive Manny Ayala (chair), Maria Ressa (president), Glenda Gloria (vice
president), and Raymund Miranda (treasurer).2

          Rappler claims
it has grown its online reach with hits of up to 10 million website visitors a
month and 40 million page views a month. 
Its Facebook account has 3.59 million followers, while its Twitter
account has 2.94 million followers.3  Rappler has a significant influence in the
online Filipino community.

          Rappler prides itself with a key tenet in its DNA: the
supremacy of editorial independence.4  Rappler’s shareholders and investors signed
agreements that give full editorial and management control to the journalists,
whose main goal is create a truly independent news organization and
crowdsourcing platform free from the influence of those with vested interests.

Rappler’s Ownership

Rappler Inc. is 98.84%
owned by Rappler Holdings, which was set-up for international investors to
invest in through PDRs (Philippine Depository Receipts). The Philippine
Constitution bars foreign ownership of mass media.  These PDRs are financial tools used by media
groups for international investors that give no ownership.  Rappler believes that domestic funding would
always bring in vested interests and bringing in international investors who
believe in the same value as Rappler’s would be free of vested interests and
give greater independence.  This means
that Rappler Holdings is giving economic interest but has no direct role in
running the company.

          Rappler Holdings is 34.42% owned by Rappler journalists
combined, which form the largest shareholders. 
Of this, Maria Ressa owns 23.77%. 
In 2013, Rappler’s Board has approved an Employee Stock Option Plan that
is awaiting SEC approval.5  The founders of Rappler believe that those
who built the company from the beginning should be given opportunity to have a
share of the ownership of the company.          

Rappler’s Business Model

           

The business model of Rappler
is quite unique.  As a start-up and
innovative company, Rappler is in the business of data and credible
storytelling, services that they also extend to their brand partners.  With the use of data, technology, and
content, they shape innovative and award-winning native advertising that aims
to educate, empower, and inform the targeted audience about the latest trends
and branded topics that are worth their time and attention.

            Made by a content marketing group, these branded content
are distinct from the news and editorial team. 
All sponsored content are clearly marked and circulated under a section
called BrandRap.6
 These are presented in a techno-platform
supported by data in a way that appears like a news rather than as an
advertisement.

          In short, Rappler is using its credibility and
innovativeness in news reporting to create
and publish branded topics for companies. This is Rappler’s business model.  

What in the business model is causing the company to lose
money, specifically cash?     

            In its online
operations since the beginning, Rappler is not displaying ads nor soliciting
any subscription to its online premium content. Nor does it sell any tangible
products in the way the bricks-and-mortar business of newspaper operate. It is
only relying on its branded content to earn money and from its investors to
survive.

            However, it
is expending real money, specifically cash, for its editors, writers, staff, offices,
and servers.  Rappler has to pay some
premium to keep its hipster staff in hipster offices.  With higher overhead costs and lower returns,
it is losing cash.  This is the reason
why every year, it has to rely on capital infusion just to survive.                        

 

B.      
Rappler’s
Case

 

          In the understanding
of Rappler’s case, there are a number of important political and legal issues
around the case.  The following are the most
important ones:  

a. 
Ownership
Issue

 

             Article XVI,
Section 11(1) of the 1987 Philippine Constitution states that:

 

“Section
11. (1) The ownership and management of mass media shall be limited to citizens
of the Philippines, or to corporations, cooperatives or associations, wholly owned
and managed by such citizens.

The Congress shall regulate or
prohibit monopolies in commercial mass media when the public interest so
requires. No combinations in restraint of trade or unfair competition therein
shall be allowed.” 7

         

          This constitutional restriction bans any foreign ownership of
Philippine mass media on the sole purpose of preventing any undue influence or
interference in the shaping of public opinion. 
Mass media has become such a powerful tool that can sway public opinion
either way.  Any such influence may constitute
a risk on national security or national sovereignty.

          Rappler has declared
itself as an online social news website, thus it is considered as mass media. The
Department of Justice, in its Opinion No. 24 s. 1986, states that:

“The term ‘mass
media’ in the Constitution refers to any medium of communication, a newspaper,
radio, motion pictures, television, designed to reach the masses and that tends
to set standards, ideals, and aims of the masses.”8

          In addition, Republic Act No. 9211 or the Tobacco
Regulation 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. For
this purposes, mass media includes print media such as, but not limited to,
newspapers, magazines, and publications; broadcast media such as, but not
limited to, radio, television, cable television, and cinema; electronic media
such 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 on
foreign ownership.

          The Securities
and Exchange Commission (SEC), in its January 11, 2018 en banc decision, has ordered the revocation of Rappler website’s
certificate of registration, saying it “violated
the Foreign Equity Restriction of the Philippine Constitution, which states
that the ownership and management of mass media shall be limited to citizens of
the Philippines, or to corporations, cooperatives or associations, wholly-owned
and managed by such citizens.”10

            The SEC has
stated further that, “The Foreign Equity
Restriction is very clear. Anything less than One Hundred Percent (100%) Filipino
control is a violation. Conversely, anything more than exactly Zero Percent (0%)
foreign control is a violation. Here the stockholders must have prior discussion
with and approval of at least 2/3 of the PDR Holders, meaning Rappler is at the
very least under obligation to consult with Omidyar Network.  The stockholder has become, in effect, subservient
to the holder.  It is neither 100%
control by the Filipino stockholders, nor it is 0% control by the foreign PDR
holders.”11

          Rappler
has violated the constitutional restriction on foreign ownership when it
allowed Omidyar Network to exercise control over it.  Mass Media entities in the Philippines are measured
up against the highest standards and are expected to uphold the Philippine
Constitution.  As they find faults in the
government, they should not be faulted for anything.  This is a credibility issue.

                        

b.  Curtailment of Press Freedom

 

            Saying that the press freedom in the
Philippines was curtailed with one media entity faulted for violating the law
is a little bit stretched.

            The
National Press Club (NPC), the country’s oldest and biggest organization of
active media practitioners has spoken. Paul M Gutierrez, current NPC President
has issued an official statement for and in behalf of NPC:

“In the broader Philippine media industry, Rappler is just one
among the thousands of media entities in the country and whose operations have
remained free.

There are about 436 television broadcast
stations, 411 AM radio stations, over 1,000 FM radio stations and more than 400
newspapers today operating freely in the country besides those that now have
proliferated in social media and whose actual number no one really has any
idea.

“To
say that the fate of one media entity found to have run afoul with the law
translates to media repression in the country is stretching the argument a bit
too much,” 12 

          The exercise
of press freedom in the Philippines in particular, and the freedom of
expression in general have not been threatened nor affected in light of the findings
made by the Securities and Exchange Commission that Rappler has violated the
strict constitutional provision on foreign ownership of mass media and has
decided to close it down.

            Responsible journalism is upholding the
law. This decision of the Securities and Exchange Commission may become a
blessing in disguise as mass media outlets will now have to review how they bring in foreign
investors 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 and
Exchange Commission to investigate Rappler and Rappler Holdings for possible
violation of the constitutional restriction on foreign ownership back in
December 2016.

            After more than one year of
investigation, the Securities and Exchange Commission handed down its decision.  Rappler has claimed that the decision was
handed 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 long
enough.  If they feel that their rights
are violated, they can seek legal remedies. 
They are free to seek redress from the courts to substantiate their allegation
on undue process and political harassment. 
Once the courts have declared with finality, the decision will become
executory.  Until then, Rappler is free to
operate until this decision has become final and executory.            

d.  Political Harassment

 

            Rappler has been one
of the staunchest critic of the Duterte administration.  They have faulted the Duterte administration for
its shortcomings.  This has been the
reason why many, both here and abroad, are crying foul on what happened to
Rappler.  They are saying that this is
the government’s plan to silence its critics and get back at them.

            The Duterte administration
has many critics.  A noisy press is the
music of democracy and essential for good governance. 

            In my observation,
this is not political harassment.  Cases
were raised to media outlets, not because of their political stand, but because
of their violation of pertinent laws. This case of Rappler has some precedents
like in the case of Inquirer and the Mile Long property amongst others.  Other media outlets which are law abiding
should have nothing to be afraid of. 
This just emphasized that no one is above the law.

 

C.      
Turning
Rappler Around

 

Being a start-up and innovative company, Rappler has a lot of
potential to become compelling and financially viable. Rappler can utilize
these best practices in media and media-related technology:

 

 

 

1.        
First,
Rappler has to correct the primary reason why it was closed by the Securities
and Exchange Commission.  It has to
modify the PDRs it have with Omidyar Network and remove any semblance of
control.  This way, it can be compliant
to the constitutional restriction on foreign ownership.  It has to accept whatever penalty the
Securities and Exchange Commission will impose so it can resume back to its normal
operation.

2.        
Rappler’s blog
and news articles have a mood meter, a web widget that people reading the blog
or articles can choose to show their reactions about it.  Readers are prompted to choose amongst the
eight various emotional reactions.  The
top ten articles that received the most reactions in the last 48-hours would
appear 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 Awards
sponsored by the Internet Media Marketing Association of the Philippines
(IMMAP).13

Rappler can patent this and market to other platforms or
media entities to earn royalties.

3.        
Rappler can modify
their business model and start accepting advertisements on their website.  This way, they will another source of income.  The more credible and more compelling their
news are, the more people will visit their website, more companies would want
to advertise with them.

4.        
Rappler can
do news podcasts on their websites as another medium of bringing the news or
articles to their audience.  They can use
this as a venue to wow their audience in their expertise in multi-media
technologies at tune to the changing times. 
This can further result to more advertisements with them.

5.        
Rappler can
leverage their multi-media expertise on data and technology for bringing
branded content in another medium, television. This can bring a good source of
revenue for the company.

1 https://www.rappler.com/about-rappler/about-us/385-about-rappler

2 http://newsinfo.inquirer.net/960616/in-the-know-rappler-history

3 http://newsinfo.inquirer.net/960616/in-the-know-rappler-history

4 https://www.rappler.com/about-rappler/about-us/385-about-rappler

5 https://www.rappler.com/about-rappler/about-us/385-about-rappler

6 https://www.rappler.com/about-rappler/about-us/385-about-rappler

7 http://hrlibrary.umn.edu/research/Philippines/PHILIPPINE%20CONSTITUTION.pdf

8 http://www.chanrobles.com/ecommercedojopiniono0401998.htm#.Wmv5u6iWbIU

9 http://www.lawphil.net/statutes/repacts/ra2003/ra_9211_2003.html

10 http://www.sec.gov.ph/wp-content/uploads/2018/01/2018Decision_RapplerIncandRapplerHoldingsCorp.pdf

11 http://www.sec.gov.ph/wp-content/uploads/2018/01/2018Decision_RapplerIncandRapplerHoldingsCorp.pdf

12 https://www.facebook.com/paulino.mgutierrez

13 https://www.facebook.com/rapplerdotcom/posts/314768588544415

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