Vice Media, peddler of provocative magazines, books and video, took a significant outside investment Tuesday from a close-knit, if not incestuous, set of deep pockets.
Advertising and media conglomerate WPP, alongside former Viacom head Tom Freston and The Raine Group, a boutique merchant bank founded by former media investment bankers Joseph Ravitch and Jeffrey Sine, plunked down a reported “high eight figure” sum for a minority stake in the New York-based purveyor of hipster content that now has grand ambitions.
At first blush the deal would appear to be a vanity play for some of the new investors: the Vice brand is edgy, but scattered. The company hasn’t disclosed revenues but claims expected profits of $50 million in “the next couple of years,” which isn’t exactly concrete. (For something concrete, WPP said Vice Media owned $34.3 million in unaudited gross assets in 2010.)
Vice’s tendrils extend into a somewhat confusing array of properties: There’s the namesake magazine and Web site; a TV series on MTV; a separate TV department for the Internet; a film department; a record label; a book publishing arm; a branding agency; and something vague called Digital Verticals, which is associated with The Creators Project, Noisey, and Motherboard.TV. Even today’s press release quotes were high on self-congratulations but low on growth targets. Tom Freston, for example, opens with, “I love Vice.” Sound promising?
Freston appears to be doubling down on his love. In addition to anteing up his own cash for the deal, he’s also an investor in Raine Group’s $300 million fund. And it’s not Freston’s first time working with the multimedia, multiplatform Vice: under Freston’s leadership Viacom provided financial backing for a Vice-run video Web site called VBS.tv as far back as 2007.
Then there’s William Morris Endeavor, which did not invest in the deal directly, but is a backer—and landlord—of Raine Group. As a result, the talent agency will now represent Vice and its content across all media, including TV, film, live events and music. The arrangement has been called a “strategic partnership,” though it’s difficult to imagine WME pimping Vice for free. Unlike the direct investors, WME head Ari Emanuel won’t take a seat on Vice Media’s board.
Freston, speaking to The New York Times, cautioned against “selling out to your sponsors” and “chasing increasingly lowest-common-denominator programming.” But Vice founder Shane Smith seems okay with selling out. “We’ve been accused of selling out since we left Montreal,” he said in an interview with Adweek. “We’re not very concerned with being cool, since that’s by definition small. We’ve been cool because of the content we produce,” he added.
Among the new parties in this round, WPP, a longtime investor in digital media platforms, is almost the outsider, although the deal seems to fit the London-based company’s strategy best of all. WPP’s messaging to shareholders on its media investments is that it will focus on companies serving new media, new markets and consumer insights, all of which would seem to fit Vice’s plans for the future. WPP invests around $100 million a year in media companies; last year it recorded £55.2 million in income from its “associates,” or companies in which it owns between a 20 and 50 percent stake. (Except WPP’s stake in Vice Media is smaller than 20 percent.)
Smith shrugged off the question of a vanity deal. “People might think that with (WPP CEO) Martin Sorrell and Ari Emanuel the money just falls out of their pockets, but they were pretty serious about this deal.” He emphasized that Emanuel, along with the Raine Group founders, have been actively involved, pulling strings and offering advice. Smith also insists that Freston, who assembled the deal, is in it for the long term.