Splash And Dash Has Certain Appeal

Michael Hedges May 13, 2019 Follow on Twitter

History shows how newcomers are righteously shunned by the old guard. This dates back to the Roman Empire and history shows the peril. Every tradition holds on - or holds out - until its creaking and groaning voice is overwhelmed by a new sound. The newcomers, then, relish in being the loudest noise in the valley.

The Walt Disney Company last week took an impairment charge against its investment in Vice Media. There was an audible groan from the fans of new digital media, Vice Media being something of an icon. Disney wrote-off the US$353 million asset, a 26% stake in Vice Media when the 21st Century Fox and A&E Network stakes are counted. Disney acquired the Vice Media stake once held by 21st Century Fox in that recent transaction. The A&E stake is part of that Disney-Hearst Corporation joint venture. Last November Disney wrote-down its Vice Media investment value by US$157 million.

Founded as a Toronto alternative publisher in 1994, Vice Media may not exactly qualify as a newcomer but certainly a Millennial. It stormed into the digital realm with reckless abandon, taking on new venues and territories. Much of it has been - and still is - brilliant as numerous awards show. Investors streamed in, literally. The reckless part - including the notoriously toxic company culture - has been tempered in the last year or so; co-founder and inescapable spokesman Shane Smith demoted, layoffs followed. Its culture was described by tech/media portal Recode (May 8) as “swashbuckling.”

Disney, 21st Century Fox and Hearst Corporation are as traditional as it gets in the world of big media. Over nearly 100 years Disney has grown from Walt and Roy Disney’s cartoon studio to a major film and television producer, theme park operator and, eventually, media investor. In March, Disney closed on its US$71 billion acquisition of substantially all of 21st Century Fox, the entertainment company principally owned by the Murdoch family and split-off from News Corporation five years earlier. The Hearst Corporation has grown steadily as a newspaper and magazine publisher with significant television and business information services holdings. In the last decade Hearst has been an active venture partner in digital media companies.

Vice Media has moved far from its Toronto publishing roots into a worldwide content production house. In 2015 Fortune magazine referred to it as a “poster child for new media success.” It has won multiple Peabody Awards for its documentaries. “Vice will always be there with a megaphone for the people on this planet under the age of 30 who crave independent world-class content,” said a Vice Media spokesperson, quoted by The Drum (May 10).

All this takes money, buckets of money. In 2017 private equity firm TPG Capital arrived with US$450 million. IPO rumors were everywhere as the company was valued at US$5.7 billion. TPG Capital is a huge leveraged buyout and venture capital specialist. It was a pre-IPO investor in music streaming service Spotify. Days before Disney called its investment in Vice Media a write-off another investor consortium, led by sports and entertainment specialist 23 Capital, bet US$250 million on Vice Media. Talk of an IPO has fallen silent, for now. Vice Media’s biggest (financial) fans are, for now, of that “swashbuckling” variety.

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