June 27, 2023

The Vice Saga is Over

It has not been an easy half a decade for Vice. It has been in slow decline, trying to overcome rough investment rounds it raised. It tried to go public via a SPAC, which failed. It tried to sell itself, but that failed. And then it went into bankruptcy. 

It appears, though, just maybe, that the worst might finally be over for Vice.

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Now let’s jump in…


According to The New York Times:

A group of buyers including Fortress Investment Group is set to take over the bankrupt Vice Media company after bidding $350 million to acquire it out of bankruptcy, according to three people familiar with the matter.

Multiple bidders put in offers to acquire Vice Media, but only Fortress’s was deemed “qualified,” meaning the others did not meet the bar Vice had set for buyers, one of the people said. Deals for bankrupt companies require approval by a bankruptcy judge, who deems whether a plan to emerge is sustainable for the business.

This deal is Vice’s lenders taking the business over. In any sort of debt offering, lenders have first crack at assets before equity investors. And since lenders had put more money into the business than they were getting out, equity investors are effectively being wiped out. 

It’s an unfortunate ending to a business that once aggressively bragged about being worth nearly $6 billion. But as I wrote last month:

I find the last quote rather remarkable. Investors don’t give you anything. They buy something from you. In the case of vice, private equity bought equity in the company. But rather than just buy common shares, it wanted some guarantees. It wanted to know that if it put up hundreds of millions of dollars, that its money would take priority over other investors.

The thing about this bankruptcy, though, is that it effectively wipes out everyone on the cap table except for the debt holders. But those debt holders now likely hold common stock in the company versus debt. That means that Vice isn’t under the burden of an ever increasing pile of debt. According to The New York Times:

The $225 million bid, which was led Fortress and Soros Fund Management, would be covered by their existing loans to the company. Taking ownership of Vice out of bankruptcy would allow Fortress to run the business without the weight of its heavy debt load and complex capital structure.

I often wonder whether Vice could have gotten to profitability if it were not burdened by all of its self-induced debt. A lot of Vice’s problems were poor execution, but the strategy was predicated on trying to get bigger to justify the valuation. A clean cap table might be all the brand needs to start growing again; albeit, at a much slower pace and, likely, from a smaller base. 

What a smaller base means is anyone’s guess, but if I were a betting man, I’d expect to hear announcements of Vice assets being sold off piecemeal. Its cost structure was all screwed up because it was trying to operate too many different businesses i.e. the ad agency, the production studios, Refinery29, the main Vice, etc; and many were unprofitable. If Fortress can sell some off of this, Vice will be a smaller and leaner operation. 

None of this takes into consideration whether anyone even cares if Vice exists long term, of course. But if we’re looking at this strictly from a financial perspective, it’s no longer trying to chase some impossibly large number. With a cleaner cap table, it might be in a position to build for the longer-term. 

Or it won’t. And the assets will cease to exist. One thing we do know, though, is that an era is over. Vice isn’t going to take over the media industry. 

Two subscriptions you say?

There is no denying that here in the United States, The New York Times, The Washington Post, and The Wall Street Journal have claimed a disproportionate percentage of the total subscriber base. It is truly a winner takes most climate. 

But according to the recently published Reuters Institute Digital News Report, there are an increasing number of countries where more than 50% of people who have a subscription actually have two or more. 

In most countries, the majority of subscribers only pay for one publication, but in the United States around half (56%) pay for two or more – often a national and local paper combination. Other second subscriptions include political and cultural magazines such as the Atlantic and the New Yorker, partisan digital outlets such as the Epoch Times and passion-based titles such as the Athletic. We also see growing levels of payment for platform-based news subscription products such as Apple News+ (18% of US subscribers). We have started to see more second subscriptions in other markets including Australia, Spain, and France, perhaps due to the greater availability of low-price trial offers.

In last year’s report, only the United States and Australia had reached this threshold of 2+. Now Spain and France have crossed over as well. This makes me optimistic for two reasons. First, it means that more publishers are getting better at promoting their subscription products to audiences. Second, and relatedly, it shows the audience warming up to the fact that they have to pay for content. 

In last year’s report, there was a quote from a 27 year old male who said, “I don’t like when the New York Times asks me to subscribe to read the news. It’s a scam. News is meant to be free.” This year, there was no mention of this. That’s not to say this attitude doesn’t still exist, but perhaps it’s not as prevalent as in previous years. 

This is very positive news for niche publishers. The big three are going to capture a lot of the general interest information subscriptions. And so, if we are going to win, we need to ensure that we are serving a very specific business or passion cohort. The mistake I’ve seen publishers make over the years is assume they can compete with any of the largest brands. Instead, we need to be focusing our efforts on clearly defined publications. 

I’ve long believed that people will ultimately have four subscriptions: national, local, work-related, and passion-related. As time has gone on, I have been unsure if national and local will remain separate or if NYT will simply claim it all. But there is a ton of room to play in the work or passion-related fields. 

I was at The Alliance of Area Business Publishers event in Detroit on Sunday and these publications are able to go deep on specific geographic business communities in ways that the big players simply can’t. Are they all doing amazing? No, of course not. And there’s a ton of work they have to do to transform their businesses digitally. But they are not winning or losing because of WSJ or any of the other big players. They have picked their lanes. 

Seeing that more people are willing to carry multiple subscriptions is a good sign for media operators. If people are more willing to pay, we can invest in creating the content they want. 

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