Vice Media filed for bankruptcy Monday, marking a year-long decline from a new media darling to a cautionary tale of the problems facing the digital publishing industry.
The bankruptcy will not disrupt the day-to-day operations of Vice’s businesses, which in addition to its main website include Virtue advertising agency, Pulse Films division and refinery29a women-focused site acquired by Vice in 2019.
A group of Vice lenders, including Fortress Investment Group and Soros Fund Management, are in the leading position to acquire the company and emerge from bankruptcy. The group has submitted an offer of $225 million, which would be covered by its existing loans to the company. It would also assume “significant responsibilities” from Vice after any deal is closed.
Next follows a sales process. The lenders secured a $20 million loan to continue operating Vice and then, if no better offer comes along, the group including Fortress and Soros will acquire Vice.
Still, the dreams Vice executives once had of a stock market debut or a sale at a spectacular valuation have been erased. The company was considered to be worth $5.7 billion at one point.
Investments from media titans like Disney and savvy financial investors like TPG, who spent hundreds of millions of dollars, will lose value due to bankruptcy, cementing Vice’s status among the most notorious bad bets in the media industry.
Like some of its peers in the digital media industry, including BuzzFeed and Vox MediaVice and its investors bet big on the growing power of social networks like Facebook and Instagram, anticipating that they would generate the wave of upwardly mobile young readers that advertisers craved.
Though readers poured in by the millions, media startups struggled to profit from them, and most of the digital advertising money went to major technology platforms. Last month, BuzzFeed closed its Pulitzer Prize-winning news division of the same name after going public at a fraction of its previous valuation, and Vox Media earlier this year raised money at about half its 2015 valuation.
“There’s definitely common ground in the difficulties media organizations face, and Vice is no exception,” said S. Mitra Kalita, founder and editor of Epicenter-NYC, a Queens-based community journalism company. “We now know that a brand tied to social media just for its growth and audience is not sustainable.”
Filing for bankruptcy will give the company some relief from its onerous debt burden as its lenders, including Fortress, seek to salvage their investments. Media got a $250 million loan from Fortress and Soros Fund Management in 2019 as it struggled to turn a profit. She has been in default on that loan for months.
“It’s the lender coming in and saying, ‘I’m done financing the losses; if I’m going to finance the losses, I’m going to take control of the company,'” said Eric Snyder, the law’s bankruptcy chair. Wilk Auslander Company. “It’s not unusual for the lender to come and say to the debtor, to the borrower, ‘You’re putting this into bankruptcy, you’re going to make a motion to sell, we’re going to make a first offer.’ ”
Fortress sees a continued role at Vice for Shane Smith, the brash co-founder who became synonymous with the exotic locations company’s gonzo journalism and oversaw a culture that pushed boundaries and was riddled with accusations of sexual harassment, according to a person familiar with the matter. Hozefa Lokhandwala and Bruce Dixon, co-CEOs of Vice, will also remain.
In a statement, Dixon and Lokhandwala said the bankruptcy sale would ultimately “strengthen the company.”
“We look forward to completing the sale process in the next two to three months and charting a healthy and successful next chapter at Vice.”
The bankruptcy is a humbling moment for Vice, which a decade ago seemed destined to sell for a staggering sum or debut on the public markets. In the 2010s, Vice raised loads of money from traditional media companies, which it had criticized for becoming complacent. The company convinced advertisers and investors of its ability to reach millennials craving an alternative to their corporate rivals, delivering dispatches from North Korea and Liberia without the decorum of mainstream media.
But the harsh realities of digital publishing caught up with Vice, and things went awry. In 2017, the company increase $400 million from private equity firm TPG in a deal codenamed “Project Venus” that valued the company at $5.7 billion. But the cash injection saddled Vice with financial obligations if it didn’t hit aggressive profitability targets, ultimately becoming a drag on the company. Later that year, The New York Times and other media published investigations into allegations of sexual harassment at the company, sparking a crisis at Vice that shook confidence in its management.
Smith replaced himself as the company’s chief executive and appointed Nancy Dubuc, a longtime television executive at A&E who directed hits like “Duck Dynasty,” to oversee the growing Brooklyn-based media empire. Investors expected Ms. Dubuc to sell the company or take it public, and she made repeated attempts.
The last one took place this winter, a sale process that aroused the interest of several potential interested parties. Antenna Group, a Greek media company that has done business with Vice before, expressed interest in acquiring him, but the deal never materialized. Ms. Dubuc left in February, with no buyer in sight and failing to achieve her long-stated goal of consistently turning a profit at Vice.
The situation worsened last month. The company laid off employees after Antenna stopped paying Vice for a production deal worth hundreds of millions of dollars. The cuts included employees of Vice World News, the company’s global information initiative, after it became clear those efforts were no longer financially viable.
Alex Detrick, a spokesman for Antenna and a former vice director of communications under Smith, declined to comment.
Ms Kalita of Epicenter-NYC, who also co-founded URL Media, a black and brown-owned media network that shares content and advertising, said Vice’s bankruptcy was a reminder to the founders to build many different types of businesses. beyond just advertising.
“I think even those of us who now have profitable media startups,” Ms. Kalita said, “are thinking more carefully about growth and making sure that we can continually define our audience and the value we represent to them.”