Vice goes belly-up: How did a hugely valued darling of new media go bankrupt?

Not immediately. Daily operations of Vice’s businesses, including its flagship website, the ad agency Virtue, production and talent management firm Pulse Films, and the women-focused site Refinery29, will not be interrupted, The NYT report said.

The group of lenders to Vice, which includes Fortress Investment Group and Soros Fund Management, has secured a $20 million loan to continue operating the company, the report said.

And what happens after that?

This group of lenders has submitted a bid of $225 million, and if no one else makes a higher bid in the stipulated window, they will acquire Vice. The bid will be covered by the existing loans to the company, and the lenders will also take over Vice’s “significant liabilities”, The NYT report said.

Vice Media was loaned $250 million by Fortress and Soros in 2019, and the company has defaulted on repayments for several months. In its May 1 report, The NYT quoted a source as saying that “Disney [which, along with Fox, had put money into Vice], which has already written down its investments, is not getting a return”.

Will the leadership at Vice change?

Details will emerge over the coming days and weeks, but The NYT report on May 15 said Fortress, the likely new owner, sees a continuing role at Vice for co-founder Shane Smith, and co-chief executives Hozefa Lokhandwala and Bruce Dixon.

In a statement, Dixon and Lokhandwala said the bankruptcy sale would ultimately “strengthen the company”, the report said. “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 statement said.

And what is so special about Vice?

Vice started out in 1994 as a magazine called Voice of Montreal based in Montreal, Canada and, two years later, rechristened itself as Vice. In 1999, Vice moved its operations to New York City and, over the next few years, expanded rapidly into digital media with a distinctive edgy, opinionated style that targeted younger consumers.

Over several years from around 2012, Vice, with its focus on news and current events presented in an aggressive “gonzo” style, raised very large sums of money from traditional media companies that bought into its young pop culture pitch. In 2017, when the private equity company TPG put $400 million into Vice, the company was considered to be worth an eye-popping $5.7 billion.

So what went wrong?

The massive infusion of cash came with financial demands, and Vice was obligated to meet ambitious targets of profitability set by its investors. Like its digital-media peers BuzzFeed and Vox Media, Vice and its investors “bet big on the rising power of social media networks like Facebook and Instagram, anticipating they would deliver a tide of young, upwardly mobile readers that advertisers craved”, The NYT report said.

However, despite their armies of consumers, the new media companies failed to accrue enough profits to be sustainable because much of the advertisement revenue went to the major Internet companies. Its financial troubles became public knowledge in May 2019, when Vice announced it had raised a $250 million debt from George Soros and others.

For several years before that, Vice had faced withering criticism of its workplace culture with multiple complaints of sexual harassment, and its co-founders had conceded the company had failed to “create a safe and inclusive workplace”.

The NYT report described the crisis at Vice as a “cautionary tale of the problems facing the digital publishing industry”. It quoted S Mitra Kalita, founder and publisher of the New York City-based community journalism company Epicenter-NYC, as saying: “There are definitely commonalities in the hardships media organisations 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.”

Vice’s bankruptcy, the report quoted Kalita as saying, was a reminder to founders to develop many different kinds of businesses beyond just advertising.