March 14, 2023

Group Black Will Make a Deal One Way or Another

It’s not a great time to be acquired if you’re an embattled media company, but it does seem that Vice’s days as an independent might be numbered. 

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Now let’s jump in…


According to The Wall Street Journal:

Group Black, a company that aims to invest in and grow Black-owned media firms, has submitted a bid to acquire beleaguered Vice Media for around $400 million, according to people familiar with the situation.

Vice has received other bids for the entire business as well as pieces of its business, people familiar with the matter said. The company hopes to wrap up the bidding process in the next few days, the people said. 

For Vice to only sell for $400 million when it was once valued at $5.7 billion is both shocking from a real dollars perspective, and yet, entirely predictable. If we look at BuzzFeed’s revenue, general interest media companies are selling for less than 1x revenue. Vice is no different. 

In late December, WSJ reported that:

The company [Vice] presented a revenue target of over $700 million at an off-site with senior employees earlier this year, one of the people said. The expected shortfall would leave Vice with around $600 million in revenue for the year, roughly flat compared with 2021, the people said.

So, to get 0.66x 2022 revenue in this economy makes sense even if it’s not what anyone thought the company would be valued at.

But Vice is on the ropes. It is continuing to borrow money from Fortress Investment Group, one of its lead investors. It is not paying vendors. Its CEO has left. Its partners owe it tens of millions of dollars. The reality is, Vice is not in a good place. 

What’s interesting about Group Black buying Vice is how it plans to monetize an asset like this. In a video on its site, the text reads:

2020 was a catalyst for change. Corporate America finally woke up, recognizing vast inequity and inequality and vowing to change. No industry was more complicit than the media industry. Less than 1% of media investment goes to Black-owned media businesses, leaving them underfunded and unable to gain sustainable media opportunities. 

Enter Group Black. A media collective built with one mission. Dramatically transform the face of media ownership. Building, connecting, investing, scaling the largest ecosystem of Black-owned media brands. Our collective represents the most innovative media companies on the planet. Our creators blaze trails of influence. Now a diverse generation can finally find content that reflects them. 

And so, the advertising industry is on notice that they spend too small a percentage of their budgets on minority-owned outlets. According to WSJ, “the company has attracted about $500 million in ad-spending commitments from companies such as Procter & Gamble Co., as well as ad holding companies WPP, Dentsu and Interpublic Group of Cos.”

If Group Black were to acquire Vice, that would turn the company into a Black-owned media company and it could start funneling some of that $500 million in ad-spending commitments to Vice. It’s certainly a smart strategy. The question I have, though, is whether it will result in net new dollars at Vice. 

For example, if P&G, WPP, etc. are committed to spending on Black-owned media businesses, how much of the spend on Vice would be incremental versus reallocating what they already spend into that $500 million. Just as importantly, what’s the long-term commitment for this spend? Acquiring Vice for $400 million with the promise of $500 million is a fine short-term idea, but it doesn’t change the fact that Vice is, inherently, a bad asset for the long-term. 

And if it’s not Vice, then it’s BET, which is also for sale. According to The New York Times:

Now, a third suitor has emerged, according to three people with knowledge of the sale process. Group Black, a media company in Miami run by Black executives, has expressed interest in a bid with CVC Capital Partners, a private-equity firm based in Luxembourg with more than $100 billion under management. To round out its bid, Group Black, led by Travis Montaque, the chief executive, has begun reaching out to prominent Black businesspeople and artists to team up.

Suffice it to say, with $500 million in commitments, Group Black will find a home for the ad money. But what is also clear is that Group Black doesn’t much care which site or business it is. 


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More general interest news content

If there’s one thing that you can always count on, it’s investors giving tens of millions of dollars to entrepreneurs to create large-scale, general interest news publications. According to The New York Times:

In May, he [Jimmy Finkelstein] plans to introduce The Messenger, a news site that will cover politics, business, entertainment and sports. Financed with $50 million in investor money, the site will start with at least 175 journalists stationed in New York, Washington and Los Angeles, executives say. But in a year, Mr. Finkelstein said, he plans to have around 550 journalists, about as many as The Los Angeles Times.

The goal, Mr. Finkelstein said in his first extended interview about the new business, is creating an alternative to a national news media that he says has come under the sway of partisan influences. The site will be free and supported by advertising, with an events business to follow.

Why? In what world is this a good idea? What can The Messenger do that every other general interest publication can’t? I’ll never understand why investors continue to funnel money into these ideas. 

Further in NYT’s piece, “Richard Beckman … said in an interview that the company planned to generate more than $100 million in revenue next year, primarily through advertising and events, with profitability expected that year.”

How? According to the Times:

To build its digital audience, the company has hired Neetzan Zimmerman, who has been a digital traffic maven at The Hill and Gawker Media, and is expecting more than 100 million monthly readers — an ambitious goal that would make it one of the most-read digital publications in the United States.

I’m calling it now. It will not have anywhere near 100 million monthly readers over the next five years. The days of hacking your way to monumental traffic numbers are behind us. The platforms are far stingier with referral traffic than they used to be. 

Let’s compare it to Semafor, which launched in October. According to SimilarWeb, it had 1.6M visits (not visitors) in November, 2.1M in December, and 1.5M in January. For a publication only a few months old, that’s impressive. Axios, which has been around far longer, only had 15.1M visits in January. 

And so, if the path to profitability is 100 million users and 100 million users is impossible, what happens next? Does it just become another slow-dying general interest media company that one day pivots to video? Too harsh?

Media is hard. It takes time to build a deep relationship with readers. Throwing tens of millions of dollars at it doesn’t change that.

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