Billy Penn news site to merge with Denverite, a millennial venture

Spirited Media, the news company that runs the Billy Penn website in Philadelphia and the Incline in Pittsburgh, is merging with the firm that owns Denverite, a similar, all-local millennial venture in Colorado, company officials announced Wednesday.

The executive director of the Lenfest Institute for Journalism, which owns the company that publishes the Inquirer, the Daily News, and Philly.com, was an investor in the Denver company, Avoriaz Inc., and now, consequently, is one in Spirited Media. The Philadelphia Media Network publications compete with Billy Penn for readers and advertising revenue.

Institute director Jim Friedlich said Wednesday that he would recuse himself from any discussions regarding potential institute grants or programming involving that company. He has given up any rights to financial or operational information about Spirited, he said.

His investment constitutes about 4 percent of the new entity, he said, and will be further diluted once the firm brings in new investors. The former Wall Street Journal executive invested in Denverite as it started in May 2016, before being hired in September as director of the institute.

Why not just sell his interest? The merger is a prelude to the company's raising new capital, Friedlich said, and there was no opportunity for current shareholders to cash out.

"I am focusing all of my efforts on the institute's journalism mission, and am no longer an active angel investor in this or other ventures," Friedlich said. "I wish to avoid any potential or perceived conflict of interest."

The institute was designed to find ways that the Inquirer, the Daily News, and Philly.com can not only survive but prosper in a perilous media landscape — and to then share those discoveries with other news companies.

"I see the awkwardness in the situation, but it doesn't seem to rise to the level of a serious ethical problem," said Rick Edmonds, a media business analyst at the Poynter Institute, a journalism training center. "Friedlich doesn't run the Philly Media Network — a separate board does.  And I can't see his financial interest as a reason for the principals not to do a deal that makes sense to them.  So he is disentangling himself by stages, and that makes sense too."

Gene Foreman, former deputy editor of the Inquirer and author of The Ethical Journalist: Making Responsible Decisions in the Digital Age, disagreed.

"There is an appearance of conflict," Foreman said. "He's directing the work of a foundation that owns the Inquirer and Daily News, which compete with Billy Penn. There was absolutely no conflict when he made the investment, but now, as a result of the merger, there is such an appearance. The new circumstances should persuade his fellow investors to allow him to cash out his ownership stake."

In the last decade, the Philadelphia newspapers and website have been battered by cutbacks and layoffs as readers increasingly go to the internet for  news, and it has become crowded with free news sites. Last month, the Knight Foundation and the institute announced they would spend a combined $4.8 million to find ways to speed the online transformation of PMN and other news organizations around the country.

Spirited Media will retain its name, and CEO Jim Brady will continue to be in charge upon the merger with Avoriaz Inc. Denverite describes itself as "a new source of everything that you need and want to know" in a growing city.

Denverite's staff will join Spirited Media, which will now employ 27 people in the three markets.

"We are local companies with national aspirations," Brady said in a statement. "We each respected what the other was doing, so we decided putting the companies together to form the presumptive leader in the space made a ton of sense."

Gordon Crovitz, a former publisher of the Journal and an early investor in Business Insider, was a backer of Denverite, and will now put money into Spirited Media and join its governing board. Kevin Ryan, founder of Business Insider, Gilt, Zola, and other startups, will extend his  investment in Denverite to become an investor and adviser to Spirited Media.

On its website, Spirited describes itself as running news sites that are "produced and designed for mobile, and are aimed at the under-40 audience. We are all local all the time."

In January 2016, philanthropist H.F. "Gerry" Lenfest announced that he had donated Philadelphia Media Network to the Institute for Journalism in New Media, which was placed under the umbrella of the Philadelphia Foundation. The institute was renamed for Lenfest this year.