Thoughts on the Mode Media bankruptcy

mode media bankruptcyIt’s a strange feeling to have a blog post go viral and wish it hadn’t. That was my experience on Friday, when I checked Google Analytics and saw a huge surge in traffic to my post about what to do when a freelance client files for bankruptcy. I subsequently went to Twitter, and found the cause: the Mode Media bankruptcy announcement on September 15. [Note: I am using “bankruptcy” loosely not legally here, as in “they’ve shut down and aren’t paying their creditors.” The company hasn’t yet filed for legal protection, but that would seem a likely path forward according to this article.]

I’ll preface my thoughts with a couple of disclaimers:

  • I genuinely feel awful for the freelancers whose invoices are in jeopardy. Getting stiffed absolutely sucks. (This is a very different situation from the Huffington Post, where bloggers knew full well they were working for free…and only got honked off when Arianna walked off with $315 million and didn’t want to share.)
  • I hope that those people can recover as much money as possible, while recognizing that it’s a long shot.
  • I’ve never done work for Mode Media, so I can’t attest to whether they were good, bad, or otherwise as a client. I also have no idea if they were deceptive about stringing people along.
  • I don’t know all the details, only what I’ve been able to glean from Twitter and blog posts.

It’s that final point where I want to be careful. I see the arguments online splitting into two camps: 1) billionaire jerks took advantage of freelancers, and 2) naive bloggers got what was coming to them.

The truth, I am confident, falls somewhere between those poles. I assume that the owners would have preferred remaining a going concern, and I suspect the bloggers would have behaved differently if they’d known how things were going to play out.

3 Takeaways from the Mode Media Bankruptcy

  • From what I’ve read, many people were owed thousands of dollars, not just hundreds. I saw a figure as high as $40,000. At that point, you’re putting yourself way beyond being taken advantage of. You need to have—as a freelancer friend of mine so eloquently put it—an OH SH*T threshold that you won’t allow to be violated. If a client falls behind on paying you, you need to stop work till they get current. Companies can and do go out of business. Bankruptcy (or any other kind of client loss) is a risk we accept, and must mitigate, as business owners.
  • Mode Media’s exclusivity requirements would be a no-go zone for me; I imagine those who agreed to work with them simply looked at it as a tradeoff. It’s their right as a company, but there are other similar platforms that don’t require being exclusive. Having one big client may have benefits, but it also makes you a dependent contractor rather than an independent contractor.
  • The final red flag was Mode Media’s payment system, which apparently was as high as 120 days for some bloggers. I am not strident about getting paid in 30 days, and have longtime clients that pay in 45 or 60. Once you get out to four months, however, you’re in very risky territory, indeed.

3 Great Posts about Moving Beyond Mode Media

As noted above, I’m on the outside looking in on this particular industry. For an insider’s perspective on the Mode Media bankruptcy, I highly recommend these three blog posts:

Mode Media: What to Do Now and Mode Media Alternatives. Just as you’d guess from the title, Lisa Koivu offers practical ideas on how to handle the current situation and branch out in your freelance business.

What I’ve Learned from the #ModeMedia Shutdown. Kim Thomas offers good suggestions for bloggers looking to work with other brands and ad networks moving forward.

What I Learnt from #ModeMedia Going Bust. Read the whole thing, but I absolutely love the fortitude and positivity of Victoria Jackson’s final lines: “From now on, I make my own money. I negotiate my own terms. I run my own business. Not anyone else. Oh, and another lesson. Money is never yours until it’s in your pocket.”

Were you affected by the Mode Media bankruptcy? Please share your experience in the comments. And if you’re a blogger who’s posted about how to move forward from this situation, make sure to include a link!

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Comments

  1. Elliot Linzer says

    Jake,
    Freelancers getting screwed when a client goes bankrupt is a problem that you only hear about when book packagers for electronic media go under. You don’t hear about this when book publishers fold and only rarely when magazines fold. Guess why. Real publishers usually have real assets. Book publishers usually have a valuable back list of titles that they own. The rights to the backlist can be sold. When book publishers go under, they don’t go bankrupt. They get bought up by other publishers who assume their liabilities. Magazines have valuable subscriber and advertiser lists.
    Book packagers, on the other hand, usually lack real assets and they are prone to folding, and screwing their freelancers in the process.
    The new electronic media also tend to have no real assets. Working for them is always a risk, both for freelancers and for employees.

    • says

      You’ve made an important point, Elliot. As businesspeople, we are responsible for understanding how risky a given client type is–and we can’t let wishful thinking trump reality.

      It’s along the lines of the Warren Buffett principle of stock investing, that you shouldn’t invest in a company if you don’t understand how their business works and how they make money. Thanks for commenting!

  2. says

    Not affected at all that I know of, Jake. I’ve been through one client bankruptcy, though (hopefully, the only one I’ll ever have to deal with).

    I agree with every point you make. If your invoiced amount is growing and there’s no indication you’ll be paid, stop working until they make good on what they owe. Too many times I think freelancers are eager to please clients, even the lousy ones. It puts us in a damn precarious situation when they owe us what could amount to a month’s worth (or more) of our energy.

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