In the current crop of new-media companies touting their ability
to attract young audiences, perhaps none has generated as much
buzz—or as much interest from traditional media firms—as Vice
Media.
The company, known for its edgy reporting on everything from war
zones to hallucinogens, has drawn investments from or forged
partnerships with media giants including 21st Century Fox, Time
Warner Inc. and A+E Networks, a joint venture of Walt Disney Co.
and Hearst Corp. It is on the verge of getting its own TV channel
in a deal with A+E that could be announced as early as Tuesday,
according to people familiar with the matter.
Last month, Vice Media Chief Executive Shane Smith told CNBC
that the company's revenue was on track to hit nearly $1 billion
this year, and that it was in acquisition talks with "everybody" at
a valuation of $5 billion.
But people familiar with the financial information Vice has been
sharing with potential investors say that the company's revenue
this year is on track to be less than $500 million under generally
accepted accounting principles, or GAAP, up from about half of that
in 2014.
A Vice spokesman said the company's projection of $1 billion in
revenue could include business booked this year but which will
produce revenue at a later date.
"We don't view any discrepancies," said a Vice spokesman. "We're
on pace to book a billion dollars. That level of activity includes
bookings and revenue that get delivered this year, and it would
also include activity this year that results in near-term
commitments going forward."
He added that by traditional accounting methods, the delay of
the planned TV channel, which had been in the works for some time
but hit roadblocks, resulted in less revenue than the company would
have otherwise generated.
Many companies provide metrics about their businesses that don't
hew to GAAP style. They often use terms like "bookings," "managed
revenue," or "gross sales" to refer to the money generated by their
products or services in a given year, even if that includes
payments that won't actually be received until the following year,
or cash they must share with partners.
Public companies are required to report metrics on a GAAP basis,
but that rule doesn't apply to closely held companies like
Vice.
By any measure, Vice's revenue is robust compared with other
new-media companies like BuzzFeed and Huffington Post, which is
part of Verizon Communications Inc.'s AOL unit. The company's
ability to double its revenue in a year and to reach the
hard-to-get young male audiences that are fleeing traditional TV
underscore why it is the object of fascination by media behemoths
that own TV channels.
Interest in the company has been strong: In addition to past
investments by the likes of 21st Century Fox and A+E, Vice is now
in talks to receive an additional investment of roughly $200
million from Disney and transfer another roughly 7% of its equity
to A+E, according to people familiar with the matter. Wall Street
Journal publisher News Corp and 21st Century Fox were part of the
same company until mid-2013.
In August 2014, A+E agreed to buy about 10% of the company for
$250 million, valuing it at $2.5 billion. At the time, the plan was
for Vice to take over a channel in A+E's portfolio, say people
familiar with the matter.
By the spring "upfront" season, when TV channels typically
present their programing for the coming season to advertisers, five
out of the top six pay-TV distributors—who have to sign off
whenever a programmer wants to rebrand a channel—had given their
approval. But DirecTV was a holdout, according to people familiar
with the matter.
That made Vice feel confident enough to pull a bold stunt, even
by the standards of a media company famous for sending Dennis
Rodman to North Korea: it pitched a standing-room-only loft full of
advertisers on a channel that had neither a launch date nor a place
on the TV dial. The shows that were presented were said to be
coming in the fall.
With fall now slipping toward winter, A+E and Vice are on the
cusp of announcing the long-anticipated deal. A+E will turn its H2
channel into the Vice channel by next spring, the people familiar
with the matter say. As part of the deal, Vice will get nearly half
of H2 in exchange for giving A+E an additional Vice stake, bringing
A+E's total ownership to more than 15%, according to the people
said.
The valuations of Vice and the new TV channel in the latest
transaction weren't clear. The average valuation of a stand-alone
cable channel sold over the past two years was $446 million,
according to research firm SNL Kagan. But industry executives say
that H2, a profitable channel with a reach into 70 million
households, is worth considerably more.
In addition to its many major media-company partnerships, Vice
struck a deal with Verizon this summer to make video content for
its coming mobile video service. Other partners include Snapchat,
Live Nation, YouTube and Samsung. In the U.S., Web traffic to
Vice's various online properties hit 61 million unique visits in
September, up from 39 million a year earlier, according to
comScore; globally it was 96 million in August.
In addition to the new U.S. channel, Vice plans to launch
between 10 and 15 international channels next year, according to
one Vice executive. It already operates in more than 30
countries.
Ben Fritz
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(END) Dow Jones Newswires
November 02, 2015 20:45 ET (01:45 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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