If the economy is bad, publish only positive business news, and funders will line up to bask in the glow. That’s the profitable formula of Ann Arbor’s Paul Schutt, who has built a small empire, including the local website Concentrate, by giving his backers nothing but pleasing news.
Issue Media Group’s online “magazines” cover most of Michigan’s big cities, but few residents would recognize the state they portray: in IMG’s world, every entrepreneur is a hero, and every business is a success.
Corporate and nonprofit “stakeholders,” including banks, hospitals, and office parks, pay IMG up to $12,000 a year to sponsor its publications. In return, the company posts their logos and ads to its virtual pages–and invites them to suggest articles for its writers to pursue.
Schutt–pronounced “shut”–says that his publications keep “a very bright line between [advertising] and editorial … [sponsors] do not get to tell us what to say.” Sponsors needn’t worry, though–even if an IMG writer happens to learn something unfavorable about them, it won’t be published.
While that editorial model won’t win any journalism prizes, IMG appears to be a business success. Schutt’s rise, in fact, could be the subject of one of his own articles: young entrepreneur makes early mistakes, becomes a successful web contractor, then graduates to “place making,” creating publications that transform the image of tarnished towns, turning them into hip places where young “millennials” will want to live, work, and consume.
Of course, an IMG writer might have to leave out some of the most interesting details. Like a lot of savvy entrepreneurs, Schutt plays with other people’s money–but it doesn’t come from the entrepreneurs and small businesses that IMG celebrates. For all the company’s focus on the “new economy,” its business model depends heavily on the old economy–in the form of government subsidies. In the past five years, state-funded groups have paid IMG more than $3 million.
Schutt grew up in Saginaw–one of the distressed cities he now is recasting as a great place for start-up businesses. He calls this “creating an alternative narrative,” and says it’s needed to balance the “old media” focus on Michigan’s industrial decline.
He earned a degree from Ferris State in business administration in 1993 and a few years later followed his wife, Megan, a social worker, to Ann Arbor. They live here with their son, Oliver. Well connected both locally and in Lansing, Schutt serves on the board of the Ann Arbor Area Community Foundation.
Schutt has been involved in online marketing and web development since 1994. He says in his twenties he “made the same mistakes” as other early web entrepreneurs, renting unnecessary office space and suffering high overhead costs.
He’s solved that problem with Issue Media Group. Though it has a presence in seventeen cities, most of them in Michigan, IMG has a full-time staff of just ten people, mostly techies, working out of a small office in Royal Oak. The thousands of articles that fill its many virtual publications are provided by editors and writers working from home on a contract or freelance basis. “It’s a new economy gig,” explains Schutt. “It’s one of two or three gigs they do, not a J-O-B.” For instance, Concentrate‘s managing editor, Jeff Meyers, also runs IMG’s Metromode publication for southeast Michigan–and reviews movies for the Detroit Metro Times.
All that is routine in digital publishing, but Schutt’s business plan is especially savvy. IMG websites are virtually risk free: they’re subsidized in advance.
Before IMG enters a city, Schutt and his partner, Brian Boyle, go to economic development forums to find “stakeholders” to sponsor it. We say, “Support us because it’s going to help your business,” Schutt told Bud Gibson, president of Michigan Innovators, in a series of interviews posted on that group’s website in 2008. IMG, he told Gibson, helps sponsors “understand how to leverage us” and emphasizes that “it’s going to be a great partnership.”
Schutt says he looks for fifteen to twenty local stakeholders, each willing to ante up $12,000 a year (less in smaller cities, he tells the Observer). Some are businesses–in August, Concentrate carried the logos of Domino’s Farms office park and Grand Rapids-based Pioneer Construction. But depending on the city, Schutt says, IMG gets about half its support from nonprofits. In August, Concentrate also carried the logos of a campus volunteer network, Lake Trust credit union, ArtServe Michigan, and the Michigan State Housing Development Authority (MSHDA).
Paradoxically, though IMG websites celebrate new, small businesses, few of them have the money for a sponsorship–and Schutt says it’s not worth his staff’s time to sell the small ads they could afford. And though it gets much of its support from nonprofits, Schutt emphasizes that IMG is “very much” a for-profit enterprise.
Schutt has a keen grasp of the bang sponsors expect for their bucks. “Advertisers want sites with high traffic that focus on topics that are relevant to their business,” he told Gibson–and upbeat features that can be reused in their own promotions. “If I wrote a story about your company dropping 50 percent in sales, you’re probably not going to put that on your website,” he explained. “But if I wrote about your company adding ten jobs [you will].”
Schutt added that because the “old media” cover setbacks to the local economy like Pfizer’s departure from Ann Arbor, “new media” like IMG don’t need to. Still, he acknowledged that it can be tough getting journalists to buy into his model.
“Journalists have been trained since J school to be the community watchdog,” Schutt told Gibson. “Even if the story is a good story, there’s always going to be a zinger at the end that’s trying to balance it. Now we [at IMG] want to know what the growth is; we don’t want to know what the growth and what the potential downside of this growth is.”
Schutt says IMG’s sponsors are “able to pitch us stories, they’re able to suggest people we should talk to [but] there’s no such thing as a quid pro quo here, where they support us so therefore we write about them …” The company’s backers, though, may not all see it that way.
“Their model focuses on generally upbeat articles, and the understanding from sponsors seems to be that they’ll get covered in a positive way,” emails Mary Morgan, publisher of the online Ann Arbor Chronicle. “It’s tough, because it creates that expectation for other media–and at least here at the Chronicle, we don’t sell coverage.”
Keeping everything looking rosy isn’t easy. Letters to the editor can be a forum for dissent, but not at IMG–its sites don’t publish them. Nor do the publications have any formal system to note corrections. Until a few months ago, in fact, readers couldn’t even comment on articles.
In an August phone interview, Schutt insisted that IMG’s stories aren’t always “positive.” Instead, he clarified, “we don’t cover losses.” He pointed to a Concentrate story about obstacles to building denser housing in Ann Arbor as an example of an article that discusses both positives and negatives.
As it happens, denser housing in Ann Arbor is a cause promoted by IMG’s most important patron, MSHDA. Schutt’s been tapping Lansing for money for more than a decade, and with the state experiencing its worst economy since the Great Depression, his just-good-news formula has never been more welcome.
Documents obtained by the Observer through the Freedom of Information Act show that Schutt’s former company, The Collective, had contracts with the Michigan Economic Development Corporation as far back as 2001. Quasi-independent but supported by state and federal funds, the MEDC paid The Collective $484,665 in 2001 and 2002, primarily for building websites and doing tech work. As late as 2004, the year Schutt sold The Collective, it received $86,000 for website maintenance and $19,500 for a “Cool Cities workshop.”
Schutt founded IMG in 2005 and by 2006 had websites running in Detroit and Grand Rapids. That fall, MEDC gave the company a $394,000, no-bid contract to “create occupational cluster and lifestyle microsites as well as regional economic development partnerships to increase in-state and out-of-state awareness regarding Michigan opportunities of C-level executives, business owners, investors, thought leaders and talent to create interest and demand for Michigan.” IMG used the money to expand across the state.
In the next few years, MEDC agreed to pay IMG an additional $980,000. The money was used to continue IMG’s website expansion; to “collaborate with MEDC local partners” (such as Ann Arbor’s SPARK); and to support Travel Michigan (an MEDC promotion) with a cultural website called Filter D.
But how do stories about small businesses and cultural attractions help a state slammed by massive job loss, disinvestment, poverty, and recession? “These are the things that remake communities–new cafes or infill housing–not big employers,” Schutt contends. By creating more buzz, he says, his websites improve the business and cultural climate in the towns they cover.
Asked for evidence to prove his assertion, Schutt points to a Gallup study of twenty-six cities, which found that the highest GDP growth came in cities whose residents had the most love and passion for their community. Coverage that makes people love their communities, he argues, should also make them more prosperous. Of course, the study doesn’t say which came first and meant most: the love, the coverage, or the prosperity?
All told, MEDC funded IMG to the tune of $1.4 million between October 2006 and October 2009. It’s not clear why the relationship ended. Schutt denies there was any falling out, but by the time the last MEDC contract ended IMG was already getting funds from MSHDA. The authority, whose mission is to promote affordable housing and community redevelopment in Michigan, has since paid Schutt’s company more than $2 million.
The IMG-MSHDA connection is cemented by the relationship between Schutt and MSHDA official Gary Heidel, who last year became the authority’s executive director. In August 2010, MSHDA official Joe Borgstrom, a sometime critic of the agency’s payments to IMG, asked to see the contract between the authority and the company. MSHDA communications director Mary Lou Kennon replied: “There is no contract that I know of. It’s an investment/sponsorship as I understand it from Gary [Heidel].”
In response to a question from the Observer, Kennon says the money was neither an investment nor a sponsorship. “MSHDA characterizes the email exchange as a miscommunication, not a disagreement,” she says, “The correct terminology is ‘media buy.'”
A “media buy” traditionally means a contract for advertisements, which in MSHDA’s case could mean the logos and ads appearing on IMG sites next to stories compatible with the agency’s interests. But Schutt and MSHDA explain that in IMG’s case, the “media buy” also includes “value added” features.
From the FOIA documents, it appears that IMG used MSHDA’s cash to support its websites in Detroit, Lansing, Grand Rapids, and Ann Arbor and to expand elsewhere in Michigan. It also started a partnership with public radio’s Michigan Now series (another MSHDA beneficiary), promising 200 stories a year to “reinforce New Economy messaging” for use on public radio stations.
At the end of 2009, IMG proposed a “marriage of philosophies”–a full IMG/MSHDA partnership, at a price of $75,000 a year–to promote “place making” through editorial content and partnerships with local media and businesses. After a review concluded that “the deliverables are too vague,” the project was scaled back to a $35,000 six-month pilot project.
But that was just a small part of the cash flowing to IMG from the state authority. Invoices show that IMG billed MHSDA $730,250 between November 2009 and August 2010. In an email, Schutt told Heidel that IMG had delivered “over 7,000 stories/pieces of content” in 2008, 10,000 in 2009, and 12,000 in 2010.
Schutt says that IMG never promised MSHDA any specific content, including any set number of articles. Kennon agrees, saying the authority “did not require IMG to deliver a specific quantitative number of articles and/or advertising placements in its publications per month. However, MSHDA met monthly with IMG to conduct a qualitative review that ensured MSHDA’s objectives were achieved.” In a follow-up email, Kennon explains that the meetings were “to discuss outcomes of content just published and also discuss possible future story ideas related to housing and development issues.”
In August 2010, MSHDA art director Amanda Tuckey complained to a colleague about IMG: “They keep changing their terms [on the number of stories]. I doubt they even understand the extent of our contract … Clearly they tell us one thing and do another.” (Tuckey won’t comment, referring all questions to Kennon.)
Kennon volunteers that at the end of last year “concerns were raised” within MSHDA about IMG’s performance, but says, “we have since resolved those concerns.” At this point, the future of the MSHDA/IMG connection looks bright. Last year, IMG invoiced MSHDA $75,000 for a Pure Michigan Living “Statewide Talent Program” and billed the agency $2,500 apiece for organizing talks in Ann Arbor on such topics as public art and “urban incubators.”
The affordable-housing agency appears committed to ongoing support of Paul Schutt’s media empire. According to Kennon, a “new proposal is currently being reviewed because MSHDA does … believe IMG is … filling an important niche that the traditional news media has not filled … Specifically, MSHDA believes IMG provides young readers with compelling information in a format that they prefer.”
Schutt himself puts it more succinctly: “Michigan’s been very kind to us.”