Vice Media to Sell Itself as It Files for Bankruptcy
- Soros fund, Fortress among lender group that bid roughly $225 million for former digital-media darling
Vice Media said it has received a rescue offer and filed for bankruptcy protection, a striking turn for a digital-news darling once promised to upend mainstream media.
The bankruptcy filing marks the latest downfall of media upstarts that years ago commanded sky-high valuations, only to struggle to compete with the likes of Meta Platforms’ Facebook and Alphabet’s Google for ad dollars. Last month, BuzzFeed said it was closing BuzzFeed News after it continued to lose money.
In its heyday, the hip, irreverent media company co-founded by Shane Smith attracted a bevy of investors, including 21st Century Fox and private-equity firms. In 2017, it secured a $450 million investment from TPG, leading to a $5.7 billion valuation that made Vice the most valuable new-media company in the U.S.
But the company, which owns a production studio, a creative agency and digital publisher Refinery29, struggled to mature into a media force and didn’t manage to live up to its valuation. It started looking for a buyer willing to pay just a fraction of its earlier valuation, and struggled to cover basic costs, falling behind on bills from its vendors. It recently cut staff and shut down its Vice News Tonight broadcast.
On Monday, the company filed for chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York, and said a group of its creditors had agreed to buy Vice for about $225 million and take on significant liabilities. The agreement is subject to higher bids from other parties, it said.
The Wall Street Journal previously reported that Vice was working on a deal that would have senior lenders including Fortress Investment Group and Soros Fund Management acquire the company out of bankruptcy.
In a declaration to the bankruptcy court, Vice Chief Restructuring Officer Frank Pometti said that the company struggled with hefty financing costs. Court papers show that Vice is entering bankruptcy with $834 million in funded debt and $350 million in assets, indicating that creditors and shareholders are likely to take significant losses.
Backers include TPG, Sixth Street Partners and James Murdoch’s investment firm. The Murdoch family is a major shareholder in Journal parent News Corp.
Vice said its media brands would continue to produce content. “This accelerated court-supervised sale process will strengthen the company and position Vice for long-term growth,” Bruce Dixon and Hozefa Lokhandwala, Vice’s co-chief executives, said in a written statement.
The company said it had received funding from the bidders to maintain operations. Vice said it expects the financing and cash generated from continuing operations to fund its business during the sale process, which it anticipates to close in the next two to three months.
Vice gained popularity through its ability to capture the zeitgeist, said Michael Kassan, CEO of media consulting firm MediaLink, which has advised Vice and some of its investors over the years. Eventually, he said, Vice lost ground to digital platforms such as YouTube, TikTok and Meta.
“That thing that was the attraction to Vice, you can find that in a lot of other places now,” he said.
Vice was started in the mid-90s as a Montreal-based punk magazine, and ultimately set up shop in hipster Brooklyn. The company built a popular digital video and television business, targeting young consumers with its edgy content and gonzo-style reporting that often went viral. It was also known for stunts such as sending Dennis Rodman to North Korea to meet the country’s leader, Kim Jong Un.
About a decade ago, Vice became part of an elite circle of digital-media companies that challenged established publishers. Mr. Smith, who ran the company as CEO for many years, more than once lobbed threats aimed at larger competitors, saying Vice would “eat their lunch” and was the only media company that truly understood millennials. At the time, Mr. Smith told the U.K.’s Observer newspaper he wanted to be the next CNN and ESPN.
Today, Vice touts shows such as “Weediquette,” exploring marijuana culture, and “Most Expensivist,” a show hosted by rapper 2 Chainz about how the rich spend their money.
Vice’s business has faced challenges for years. The company missed its 2017 revenue goal of $805 million by more than $100 million, The Wall Street Journal reported at the time. When Vice fell short of its revenue goals, investors, including private-equity firms TPG and TCV, Walt Disney Co., Hearst and 21st Century Fox, began more aggressively pushing for the company to turn a profit.
Vice’s digital business, once the main draw for eight-figure advertising deals, found it harder to pitch itself in that central role as traffic has dropped.
U.S. digital traffic in March—20 million monthly unique visitors—was half of what it was in March 2019, according to digital-media measurement company Comscore.
“The stickiness of the eyeballs wasn’t as strong as we thought, and audiences move on,” said Mr. Kassan.
Among the other digital companies that promised to disrupt the traditional publishing industry in the early aughts are BuzzFeed, which went public through a special-purpose acquisition company a year and half ago and said last month that it would end its news operation. Its stock has lost more than 90% of its value since the company went public.
Mashable, another digital-media darling, sold itself to Ziff Davis in 2017 for about $50 million, or just one-fifth of the company’s $250 million valuation at the time.
Vice’s bankruptcy filing comes as a new digital-news outlet is being launched: This week, publishing veteran Jimmy Finkelstein introduced the Messenger, with $50 million in funding and 175 reporters. A representative for the publisher said its ambition is to have 500 journalists by the end of next year.
The Messenger’s debut comes less than a year after the creation of Semafor, launched by former Bloomberg Media executive Justin Smith and former New York Times media columnist and BuzzFeed News founding editor Ben Smith.
Some digital-news upstarts have sold themselves to larger media companies in recent years, including Politico to German news company Axel Springer for more than $1 billion in 2021 and Axios to Cox Enterprises last year, a deal that valued Axios at $525 million.
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Business NewsNewsVice Media to Sell Itself as It Files for Bankruptcy
First Published:16 May 2023, 01:28 AM IST
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