Since the arrival of the Internet, the evolution of media has been quite a journey. Print newspapers and televised news hours were forced to adapt as was the media publishing world. Books and magazines shifted to e-platforms as blogs and marketing content expanded at lightspeed. Those that adapted well appears to be surviving amidst this highly dynamic landscape. Without question, the journey continues with new digital media challenges surfacing all the time. And the recent collapse of VICE Media showcases these struggles in very real terms. A look back at its rise and fall of this media darling offers many lessons to the digital media world today.
At one point, VICE Media was valued at $5.7 billion at the height of its popularity. But many things have changed since its heyday. In terms of the current situation, the lack of venture capital has affected many tech firms. Likewise, the economic climate has similarly declined since then, negatively affecting media revenues. And in terms of the collapse of VICE Media, some poor internal decisions were also made that further set the company up for failure. Combined with the more common digital media challenges, VICE Media found itself in a downward spiral. Its filing for bankruptcy highlights the fact that navigating today’s digital media world is far from easy.
“There are definitely commonalities in the hardships media organizations have been facing and VICE is no exception. We now know that a brand tethered to social media for its growth and audience alone is not sustainable.” – S. Mitra Kalita, Founder and Publisher of Epicenter-NYC
The Rise and Collapse of VICE Media
VICE Media’s origins date back to 1994. It began as a digital media company out of Montreal, Canada. Known then as “The Voice of Montreal,” cofounder Shane Smith changed its name in 1996 to VICE Media and then relocated to Brooklyn in 1999. Over the next decade, the company grew by leaps and bounds, adding staff and expanding into other digital domains. These not only included VICE’s website platform but also its Motherboard website, ad agencies, and film divisions. Targeting Millennials looking for something different than traditional media, VICE Media embraced a more rebellious persona. And it also linked its success to social media, which ultimately contributed to the collapse of VICE Media.
The first sign that the company was struggling with digital media challenges was in 2019. VICE Media has already released several staff and announced layoffs to come. It also had failed to meet growth projections, which were tied to additional capital investment loans of $400 million. These failures put VICE Media in an undesirable situation, which only worsened as the economy declined and interest rates rose. At the same time, other allegations inside VICE Media such as sexual harassment and a non-inclusive culture were reported. Combined with digital media challenges related to low advertising revenues, the company’s debt increased. Even with an additional VC lifeline of $250 million in 2019, VICE Media simply couldn’t overcome its obstacles.
“It’s not unusual for the lender to come in and tell the debtor, the borrower, ‘You’re putting this into bankruptcy, you’re going to make a motion to sell, we’re going to put in a first bid.’” – Eric Snyder, Chairman of Bankruptcy at Wilk Auslander Law Firm
VICE Media’s Bankruptcy Filing
The terms of the recent bankruptcy filing and collapse of VICE Media were just announced. In essence, VICE Media has 55 days to find a seller for the company. Should that not happen, key investors have committed to purchase the company for $225 million. These investors include Fortress Investment Group and Soros Fund Management. Being in the lead position in the bankruptcy filing, they will be able to swap their secured debt for company assets. In addition, they will also take over some major liabilities. Naturally, VICE Media hopes a sale occurs, since its suggested value now lies between $500,000 and $1 million. But given the digital media challenges that VICE Media has had, this is no guarantee.
In all probability, Fortress and Soros likely forced the bankruptcy decision by VICE Media. They were the venture capitalists that floated VICE Media $250 million in 2019. Seeing rising debts over the past year, these investors probably did not want to wait years for a collapse of VICE Media. Instead, they preferred to either take control through bankruptcy or align with new ownership. For the time being, VICE Media has secured a $20 million loan to get them through the next two months. This should be ample to continue major operations at the company. This is especially likely since VICE Media shut down its news division months ago.
“VICE feels and sounds mostly like a business, delivering to advertisers eyeballs from a niche audience. That is almost never the route to success in publishing. If you don’t begin with editorial vision, and maintain it, you eventually go astray.” – Richard Tofel, Principal of Gallatin Advisory LLC
Key Takeaways for the Collapse of VICE Media
Some of the major factors leading to the collapse of VICE Media are the same affecting many in the tech industry. Slow economic growth, reduced advertising investments, and difficulty getting venture capital represent the most notable. But for VICE Media, digital media challenges also played a major role. VICE Media chose to tie their success to a niche group of the population and to social media as well. But social media alone cannot support a digital media company. Nor can a subset of the population, especially a generational segment likely to be affected by economic trends. In addition, VICE Media sold out by creating branded content for major advertising, undermining its own legitimacy. Things are hard enough for digital media companies without these added missteps.
VICE Media’s peers are also struggling in this regard. BuzzFeed recently shut down its news division, and its pursuing ChatGPT assistance for content creation. VOX has not yet announced such changes, but it too struggles with the digital media challenges of limited outreach and audience. This contrasts with larger digital media and publishing companies that invest in a broader editorial scope and target market. While “buzz” and hyperbole might attract audiences short-term, lasting survival in media requires integrity and a commitment to the truth. Not only was VICE Media’s scope too narrow and limited, but it also failed in these areas as well. This is the most important underlying lesson to be learned from these recent events in digital media.