A now-familiar story: Investors say they overvalued a high-flying digital publisher.
Just a few years ago, big media companies were falling over themselves to bet on Vice Media. Disney made the biggest bet, by putting more than $400 million into the swashbuckling digital publisher.
Now, Disney says all of the money it put into Vice has been incinerated: In investor filings Wednesday, Disney said it no longer thinks it will ever get any return on the investment it made in Vice — a company that at one point was supposedly worth $5.7 billion.
Vice is still worth something, in some investors’ eyes. Last week, a group of lenders said they put a fresh round of $250 million into the company.
But Disney’s accounting decision is yet another example — perhaps the most stunning one — of the turnabout we’ve seen in digital media over the past few years. Investors have decided that high-flying publishers that once confidently explained that they’d created a new media paradigm are now worth very little … or even less.
Here’s a partial roll call familiar to some of you:
- Mic, which raised more than $60 million, sold for less than $5 million late last year.
- Mashable, which was valued at about $250 million in 2016, sold for less than $50 million in 2017.
- The properties formerly known as Gawker Media, plus the Onion and other sites, just sold for a price that’s likely well below $50 million; Univision, the TV conglomerate which sold them off, had paid $135 million for the Gawker sites alone in 2016.
- We don’t (yet) know the value that Comcast, which put a collective $600 million into Vox Media (which owns this site), and BuzzFeed over the past few years, now thinks those two publishers are worth. But it’s a reasonable bet that Comcast thinks they are worth less than it thought in 2015.
All of those companies have different stories and different particulars. The through-line is that a few years ago, all of them were confident that they were going to shoot up in value, because they knew how to reach young audiences by exploiting the big tech platforms — in particular, Facebook and Google.
Instead, Facebook and Google have hoovered up the majority of digital ad revenue — the money the new publishers expected to get, once they reached scale. And publishers that had expected Facebook and Google to rely on them for content have learned that Facebook and Google don’t really need them, after all.
Here are the Disney/Vice particulars: Disney told investors Wednesday that it had wiped out $353 million of the money it had previously put into Vice. That followed an announcement last fall that Disney had knocked down the value of its Vice investment by $157 million.
Disney declined to comment. But one bit of language in Disney’s quarterly filing Wednesday is telling: Disney describes the $353 million “impairment charge” it took on Vice as a “write-off” — which in accounting-speak means there’s nothing left to get rid of after this. It’s all gone.
If you’ve been doing the math, you’ll note that $353 million plus $157 million is $510 million — well more than the $400 million Disney invested directly in Vice.
Since Disney won’t comment, we will assume that the additional sum includes Vice investments that Disney owned through A&E, the TV programmer that Disney owns along with Hearst, which also backed Vice; as well as $70 million that 21 Century Fox sunk into Vice. That ownership stake transferred to Disney earlier this year when Disney bought a good chunk of the Fox empire.
One last caveat: You can’t say that Disney is saying Vice Media isn’t worth anything at all — just that Disney thinks its investment isn’t going to be worth anything. That’s a distinction with a difference for some Vice investors, who have deals that allow them to get their money from the company, in the case of a sale, before other investors.
In any case, Vice is certainly worth much less than Disney and many other big, sophisticated media companies thought quite recently. And while Disney can’t feel great about losing money on Vice, it will be quite happy that it didn’t pay billions for all of it — an idea that seemed very plausible as recently as 2016.
Vice, meanwhile, is trying to overhaul itself under the leadership of CEO Nancy Dubuc, who took over for founder Shane Smith a year ago. Dubuc has been tasked with cleaning up the company’s books, as well as its in-house ethos.
Vice and Smith, who remains the company’s executive chair, used to revel in a pirate persona. But now, in the #MeToo era, the company has apologized for a “detrimental ‘boy’s club’ culture that fostered inappropriate behavior that permeated throughout the company.”
Here’s a comment on Wednesday’s financial news from a Vice spokesperson:
Vice is firing on all cylinders and on target to meet, if not exceed, its financial targets for the third straight quarter. Our new executive team’s strategic plan is well underway and with the recent capital raise, we will continue investing in the long-term growth of our five global businesses — television, studio, digital, news and our advertising agency, Virtue. As the media industry consolidates and fewer players control the information and entertainment that the world consumes, Vice will always be there with a megaphone for the more than half of the people on this planet under the age of 30 who crave independent world-class content.
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Author: Peter Kafka