Fox Invests In Vice, A Media Company That Makes Money Being Terrible And Brilliant; Billion-dollar-plus Vice is the new patron saint of content companies

Fox Invests In Vice, A Media Company That Makes Money Being Terrible And Brilliant

ANTHONY HA

posted yesterday

21st Century Fox has invested $70 million in youth-focused media company Vice Media, giving Fox a 5 percent stake in the company and valuing Vice at $1.4 billion, according to a report in the Financial Times. I emailed a company spokesperson to confirm the funding but they have not responded. Still, the news has been widely reported enough that it seems pretty solid. Although Vice started out as a print publication, most of its recent success has been online, especially in video (which led to a show on HBO). A recent profile in The New Yorker said that in 2012, the company brought in $175 million in revenue, more than 80 percent of it from the web.Vice has also received funding from ad holding company WPP, merchant bank Raine, and former Viacom CEO Tom Freston, but according to the FT, the company’s senior management still controls 75 percent of Vice.

I was a semi-regular hate-reader of the magazine when I was in college, but eventually I got tired on its brand of hipster cynicism. Yet perhaps the most interesting thing about how it recent transformation is not its shift online but the fact that it’s actually investing in reporting, especially international reporting. For example, the top story on the front page right now is a bombing report from Beirut, and TechCrunch’s Colleen Taylor also pointed me to this episode of the HBO show on China’s ghost towns.

Now, Vice approaches a lot of that coverage with its usual sensationalist style — take its high-profile trip bringing Dennis Rodman to North Korea. And yes, Vice is still quite capable of running content that’s genuinely awful. But hey, there’s nothing unusual about digital media companies mixing eyeroll-worthy posts with stuff that’s actually quite good.

 

August 16, 2013 10:00 pm

21st Century Fox takes stake in ‘gonzo’ Vice

By Matthew Garrahan in Los Angeles

Twenty-First Century Fox has taken a 5 per cent stake in Vice Media, the digital media and publishing group that brought basketball player Dennis Rodman to North Korea, in a deal that values the company at $1.4bn.

The $70m deal will be announced on Monday, after being signed before 21st Century Fox was split from News Corp this summer. It comes as Vice, which specialises in youth culture and operates some of YouTube’s most popular channels, has agreed content-distribution partnerships with companies that include Facebook and Twitter.

 

Brooklyn-based Vice started life as a music magazine in Canada but its growth in the past five years has been fuelled by online video, particularly its gonzo-style films from world trouble spots. The company generated revenue of about $175m in 2012.

It is planning an aggressive push in India through 21st Century Fox’s Star, and in Europe, where 21st Century Fox has stakes in Sky channels in the UK, Germany and Italy. Vice will also use 21st Century Fox’s media assets in India, where the company owns the Star platform.

“I want us to be the next MTV, ESPN and CNN rolled into one – and everyone always rolls their eyes,” saidShane Smith, Vice’s co-founder and chief executive.

“The reality is that MTV was bought by Viacom and CNN went to Time Warner. We have set ourselves up to build a global platform but we have maintained control.”

21st Century Fox joins other minority shareholders in Vice, including WPP, the global marketing group; Raine, a merchant bank backed by Hollywood and Silicon Valley investors; and Tom Freston, the former chief executive of Viacom.

Mr Freston advised Vice on the transaction. “The idea was to raise capital to help fund a lot of the initiatives we want to undertake more aggressively outside the US – but also have some strategic alliances with a company that has robust distribution,” he said.

The minority shareholders hold about 25 per cent of Vice; the rest is held by Vice senior management. The founders, led by Mr Smith, will continue to have majority control of the board. The structure of the deal, Mr Smith added, “gives us the freedom to do what we want to do.”

Vice operates online channels dedicated to music, art, technology and mixed martial arts and hit the headlines this year when it took the basketball player Dennis Rodman and three members of the Harlem Globetrotters to North Korea, where they secured a very public meeting with Kim Jong-eun, the country’s president.

Speculation has been rife since last year that 21st Century Fox, or News Corp, would buy Vice, triggered by a tweet from Rupert Murdoch, 21st Century Fox’s chairman and chief executive, declaring Vice a “wild, interesting effort to interest millennials who don’t watch or read established media”.

Vice recently moved into television, producing an HBO series, which was aired and then renewed by the cable channel. It has formed a joint venture with Antenna, the largest media group in Greece, and made a deal with Facebook, whereby it makes customised campaigns for advertisers. It has formed a similar partnership with Twitter to produce a daily news show composed of one-minute clips, and agreed a content production deal with Youku, the largest video site in China.

Vice has managed to maintain an edginess with its viewers while working with some of the biggest brands, such as Intel, which wholly funds Vice’s Creators Project online channel for artists. It has also created branded video series that have been underwritten by sponsors ranging from GE and Toshiba, to Vitamin Water and Converse.

Its connection to a youthful demographic has generated interest from plenty of potential partners. Mr Freston said the challenge was to ensure the company reached new audiences while maintaining its edgy appeal. “Everyone wants to do business with them [but] they have to pick through [the offers] and keep reinventing themselves.”

Billion-dollar-plus Vice is the new patron saint of content companies

BY SARAH LACY 
ON AUGUST 16, 2013

Last spring we held a CEO Supper Club in LA where we featured several loud mouthed would-be media moguls. I always end these dinners by asking what company you’d like to run if you didn’t run your own. Jason Hirschhorn gave an answer after any content CEO’s heart: Vice.

Vice isn’t a new company, but it’s relatively newly sexy given a big push over the last five years to go beyond its magazine roots. When news just broke that it has sold a 5% stake to 21st Century Fox at a deal valuing the company at $1.4 billion, I didn’t see the usual hating that you see when a media entrepreneur gets some cash — at least not in my Twitter stream. I saw a lot of high fives all over the place. Because Vice is the company that’s executing the playbook that so many diverse content companies also want to run. Even companies as diverse as Buzzfeed, NSFWCORP., and us. And since Vice started life as a magazine, it may well too become the patron saint for old media niche publications looking at the best way to embrace the Web.

Vice speaks to a demographic that doesn’t read traditional news. Vice does smart projects to extend its very new media brand into very traditional channels like its HBO show. Most of all Vice invests heavily in editorial. And it doesn’t chase stories everyone else is doing for SEO juice. It does stories that would normally go unreported. It makes us care about a story, rather than pandering to readers by giving them the easy story they think they want. And it makes the bulk of its money from video– something that’s brutally hard to produce and monetize for most Web media companies.

In short: Vice defines its own rules for content, makes existing distribution channels work with it, and leads its audience rather than chasing it. This isn’t always pretty. Sometimes Vice is rightly accused of veering on gonzo-douche. Not everyone thought Dennis Rodman chilling in North Korea was great journalism or even in good taste. Vice has also been criticized for heavy product placement– something a lot of news outlets will have to navigate in this native ad world. After arecent uproar of a photo spread of female literary icon suicides, they even had to apologize.

But these are all thorny areas that nearly everyone in new media is navigating as well. The fact that Vice is finding its way to a monster valuation amid them, if anything makes it more relatable.

It’s the new media success story we’ve been waiting for. Other journalistically-minded organizations who don’t want to take the easy way out or go for a mass audience can now point to a $1 billion+ valuation who didn’t either.

This way the deal was struck is just as important to why we should all admire and root for Vice: As co-founder Shane Smith told the Financial Times, he knows he needs global distribution beyond just YouTube and the Web, but he found a way to get it without selling the company the way MTV and CNN did.

That’s awesome. At some point Web media brands have to stop selling if we’re going to have a next Fortune, MTV, or CNN.

I’ve long argued that new media has failed in large part because while the Web has brutally disrupted the economics of television and publishing, we haven’t replaced any of those 100-year-old brands with new ones. A handful of media companies have crept into the value range of hundreds of millions of dollars– just a few.

The Web has so far decimated more media value than its created, sort of like open source software in the early part of the 2000s. Many of the ones who had the best odds at it have already sold, because it’s a long and incredibly difficult slog to do it well. Web-only, lowest common denominator, page view based models can only get so big. And that’s one reason investment in the sector is comparatively low.

The Vice boost may be the watershed moment content companies need to prove you can still build a $1 billion company doing unexpected, expensive journalism– and the permission investors need to fund those efforts.

I certainly don’t love everything they do but, still: Go, Vice.