The rumors that crypto news site CoinDesk is laying off 45% of its editorial staff is a timely reminder that all is not well in the journalism industry.
As traditional media fights in a new fragmented landscape of news sources, and battles for attention against a whole wave of services seeking your time (everything from streaming to social media), gone are the days of a newspaper dropping through your door each morning.
Add to that the departure of advertising revenue as marketing budgets primarily move online and the emergence of artificial intelligence (AI). It is a strange time to be a journalist in 2023.
While CoinDesk cutting back its editorial staff may be a victim of the above factors, its cost-cutting moves may have plenty to say about the state of the cryptocurrency market right now, including the knock-on effects from the crypto scandals of 2022 and a troubled few years for its parent company.
Why Is CoinDesk Cutting Its Editorial Staff?
CoinDesk is getting lean as the company gears for a new chapter. The popular crypto news site is cutting staff as it nears a deal to be sold for a reported $125 million.
Internal emails seen by the press indicate that the layoffs were a “required step” to raise funds for its parent company Digital Currency Group (DCG).
DCG is a crypto conglomerate that owns asset manager Greyscale Investments, bitcoin (BTC) miner Foundry, news agency CoinDesk, and the bankrupt crypto lender Genesis Capital.
DCG has been rocked by the crypto winter. The company had to shut down its wealth management unit HQ and its institutional brokerage TradeBlock in 2023. At the same time, its lending arm Genesis Capital filed for bankruptcy in January 2023 with over $3.5 billion due to its creditors.
What’s putting the pressure on DCG is the Gemini Earn program, a crypto lending crypto that Genesis introduced to crypto exchange Gemini’s customers. According to the bankruptcy filings, about $800 million is owed to the customers of the program by Genesis.
Coindesk Layoffs Explained: How Did DCG Get Here?
Cast your mind back to May 2022, and the implosion of the Terra ecosystem was the first domino that would ultimately lead to the collapse of Genesis Capital.
Soon after, Singapore-based crypto hedge fund Three Arrows Capital (3AC), which had suffered heavy market losses from the Terra collapse, filed for bankruptcy after failing to pay back its creditors.
Genesis was among the top 3AC creditors, lending about $2.36 billion to the hedge fund.
While Genesis managed to recover half the amount through collaterals, the remaining $1.2 billion still remained unpaid. At the time, parent company DCG had stepped in to save Genesis, assuming the 3AC risk and replacing it with a $1.1 billion promissory note to Genesis.
The situation took a turn for the worse when the popular crypto exchange FTX collapsed in late 2022. Fearful Gemini Earn customers – who had lent their crypto to Genesis – began frantically closing their loans, causing a bank run on DCG’s lending unit.
When Genesis could not fulfill the loan repayments, the company filed for bankruptcy in January 2023.
In May 2023, crypto exchange Gemini filed a claim of over $1.1 billion of cryptocurrencies on behalf of Gemini Earn customers. At the center of the claim lies DCG’s promissory note to Genesis.
A new lawsuit filed in July 2023 accused DCG of misrepresenting the solvency of Genesis by writing a “sham” promissory note to Genesis.
5/ It's now clear this was a carefully crafted lie. DCG didn’t absorb any losses or provide real capital. Behind the scenes, DCG wrote Genesis a sham 10yr promissory note w/ a measly 1% interest rate – worth just a fraction of its $1.1b face amount. Genesis was wildly insolvent. pic.twitter.com/RBsf7QmGoZ
— Cameron Winklevoss (@cameron) July 7, 2023
Are the Coindesk Layoffs Solely Due to DCG Troubles?
Although the ongoing issues at parent company DCG may have directly affected CoinDesk’s decision to part way with a large chunk of its editorial staff, we cannot blame the layoffs on DCG’s troubles entirely.
CoinDesk layoffs were not a surprise. Corporate America has seen massive layoffs since 2022 as firms implement cost-cutting measures to protect against a global economic downturn and higher interest rates.
The crypto sector has been hit hard due to a fall in prices and a drop in public interest in cryptocurrencies in the bear market.
Fortune estimated that the crypto industry lost over 2,000 jobs in the first two months of 2023 alone.
Looking at the broader landscape, there have been scores of layoffs carried out in the journalism industry, with reasons given ranging from cost-cutting to declining advertisement revenue:
- 21 January 2023: Tech-focused media company Vox Media lays off 133 people or 7% of its staff due to “temporal macroeconomic forces.”
- 9 February 2023: News Corp, which owns The Wall Street Journal and New York Post, said it would cut 1,250 jobs to shore up its profitability. The company said advertisement revenue, a significant source of income for media firms, was declining due to lower spending from the market.
- 20 April 2023: Buzzfeed closed its news site and laid off 15% of its workforce after facing a slump in advertising revenue.
- 15 May 2023: Vice Media, once valued at over $5 billion, filed for bankruptcy.
- 27 June 2023: National Geographic laid off the last of its 18 staff writers and discontinued its magazine in the US. The company will rely on freelancers to write future issues. The layoffs were a part of parent company Disney’s plans to cut costs.
What About AI in the Journalism Industry?
The use of AI writing tools, of which there are plenty, by corporations is a significant threat to jobs in the media industry. Stirrings from some of the top firms in the industry suggest that AI is here to stay.
The Associated Press (AP) is already using generative AI to automate corporate earnings reports, recap sporting events, and transcribe live events. The publisher took it further by signing a deal with ChatGPT creator OpenAI in July 2023.
The deal will give OpenAI the licenses to use AP’s archive of news stories while allowing AP to “leverage OpenAI’s technology and product expertise.“
Meanwhile, News Corp CEO Robert Thomson said in an investor call that generative AI presented a “remarkable opportunity” for the company to create new revenue streams and reduce costs – the New York Times reported that Google is pitching an AI product that produces news stories to News Corp.
“Quite simply, these tools are not intended to, and cannot, replace the essential role journalists have in reporting, creating and fact-checking their articles,” said Jenn Crider, a Google spokeswoman, in a statement to The New York Times. “Instead, they could provide options for headlines and other writing styles.”
The timing of the global economic slowdown and the emergence of generative AI technology has coincided with portraying a crisis for the media industry.
While some firms have been swallowed by unfavorable market forces, news from publicly-listed firms (obligated to report their financials on a quarterly basis) indicates that advertisement revenues have bounced up from their nadirs, so there is some good news on the horizon.
As for AI, professionals in the media industry have to upskill and be open to using AI tools that can aid them in their work.
Journalists in the newsroom of tomorrow will need to know how to use AI to their advantage while understanding the limitations of their handy helper.