Vice Media filed for bankruptcy on Monday, interrupting a year-long descent from a new-media darling to a cautionary tale about the problems facing the digital publishing industry.
The bankruptcy will not interrupt Vice’s day-to-day operations, which include the Virtue advertising agency, the Pulse Films division, and Refinery29, a women-focused site acquired by Vice in 2019.
A group of Vice lenders, including Fortress Investment Group and Soros Fund Management, are in the lead position to take over the company after bankruptcy. The group has submitted a $225 million offer, which would be covered by the company’s existing loans. It would also take over “significant liabilities” from Vice after a deal is made.
This is followed by a sales process. The lenders have secured a $20 million loan to continue operating Vice, and if no better offer comes along, the group will take over Vice with Fortress and Soros.
Yet the dreams Vice executives once had of a stock market debut or a sale at an eye-watering valuation have faded. The company was at one point considered to be worth $5.7 billion.
Investments from media giants like Disney and shrewd financial investors like TPG, who have spent hundreds of millions of dollars, will be rendered worthless by the bankruptcy, cementing Vice’s status as one of the media industry’s most notable bad bets.
Like some of its peers in the digital media industry, including BuzzFeed and Vox Media, Vice and its investors are betting big on the rising power of social media networks like Facebook and Instagram, expecting to bring a tidal wave of young, upward mobile readers that advertisers craved.
Although millions of readers came in, new media companies struggled to squeeze a profit out of it, and the bulk of digital advertising dollars went to the major technology platforms. Last month, BuzzFeed closed its eponymous Pulitzer Prize-winning news division after going public at a fraction of its previous valuation, and Vox Media raised money earlier this year at about half its 2015 valuation.
“There are certainly similarities in the hardships media organizations have faced and Vice is no exception,” said S. Mitra Kalita, the founder and publisher of Epicenter-NYC, a community journalism company based in Queens. “We now know that a brand tied to social media only for its growth and audience is not sustainable.”
The bankruptcy filing will give the company some relief from its heavy debt burden as its backers, including Fortress, try to bail out their investments. Vice Media raised a $250 million loan from Fortress and Soros Fund Management in 2019 as it struggled to turn a profit. It’s been in default on that loan for months.
“It’s the lender who comes in and says, ‘I’m done funding the losses — if I’m going to fund the losses, I’m going to take control of the company,’ said Eric Snyder, president of bankruptcy at the law firm of Wilk. Auslander.”It’s not unusual for the lender to come in and say to the debtor, the borrower, ‘You’re going to bankrupt this, you’re going to file a motion to sell, we’re going to make an initial offer.’ ”
Fortress sees a permanent role at Vice for Shane Smith, the brash co-founder who became synonymous with the company’s gonzo journalism from exotic lands and oversaw a borderline culture rife with allegations of sexual harassment, according to one person who is familiar with the subject. Hozefa Lokhandwala and Bruce Dixon, co-chief executives at Vice, will also stay on.
In a statement, Mr. Dixon and Mr. Lokhandwala that the bankruptcy sale would ultimately “strengthen the company”.
“We look forward to completing the sales process in the next two to three months and charting a healthy and successful next chapter at Vice.”
The bankruptcy is a moment of humility for Vice, which ten years ago seemed destined to sell for eye-watering sums or debut in the public markets. In the 2010s, Vice raised piles of money from traditional media companies, which it had attacked for becoming complacent. The company sold advertisers and investors on its ability to reach young millennials hungry for an alternative to its corporate rivals, delivering you-are-there messages from North Korea and Liberia without the decorum of mainstream news media.
But the harsh reality of digital publishing caught up with Vice and things went wrong. In 2017, the company raised $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 meet aggressive profitability targets, and it ended up becoming an albatross for the company. Later that year, The New York Times and other outlets published investigations into allegations of sexual harassment at the company, sparking a crisis at Vice that shook confidence in management.
Mr. Smith replaced himself as the company’s chief executive and appointed Nancy Dubuc — a longtime TV executive at A&E who spearheaded hits like “Duck Dynasty” — to oversee the sprawling Brooklyn media empire. Investors hoped Ms. Dubuc would sell or float the company, and she made repeated attempts.
The latter took place this winter, a sales process that caught the interest of several would-be suitors. Antenna Group, a Greek media company that previously did business with Vice, expressed interest in acquiring it, but a deal never materialized. Ms. Dubuc left in February, with no buyer in sight and without meeting her long-awaited 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 at Vice World News, the company’s global reporting initiative, after it became clear those efforts were no longer financially viable.
Alex Detrick, a spokesman for Antenna and former vice chief of communications under Mr. Smith declined to comment.
Ms. Kalita of Epicenter-NYC, who also co-founded URL Media – a network of media outlets owned by black and brown people who share content and advertising – said Vice’s bankruptcy reminded founders to start many different types of companies that go beyond advertising alone.
“I think even those of us who now run profitable media startups,” Ms. Kalita said, “think more carefully about growth and making sure we can continuously define our audience and the value we represent to them.”
