It took A+E Networks and Vice Media more than six months to finish their deal, finally announced yesterday, for Vice to take over A+E's History offshoot, H2. The revamped channel, which will be called Viceland, will debut early next year.
But while the announcement came with a slew of specifics about the revamped network's Vice-produced programming, the most intriguing aspect of the partnership—how the companies will handle advertising on the new channel—has yet to be finalized.
Shane Smith, Vice co-founder and CEO, talked about creating content that "will challenge the accepted norms of current TV viewing," and indicated that Viceland's advertising will do the same. "We will test new and innovative monetization strategies placing Viceland at the pointy tip of the spear of the rapidly changing terrain of TV advertising," he vowed in a statement announcing the new network.
But what exactly does that mean? A+E Networks and Vice declined to make any execs available to elaborate on Viceland's ad strategy. Both company's ad sales teams will be working together, but there are many details yet to be sorted out, including whether Viceland inventory will be available as part of larger ad buys across the A+E portfolio—including History, Lifetime and A&E—or if the channel's ad sales will operate independently.
As they wait for more details, advertisers and buyers are salivating at the possibility of reaching Vice's audience of millennial males. Vice's HBO show "provides us with a way to take a look at what we think the audience might be," said Brian Hughes, svp, audience analytics practice lead, Magna Global. "It works for A+E because H2 is an extension of the History channel, and this will bring something fresh to the mix."
However, Vice's digital success offers no guarantee that its young audience will flock to the network formerly known as H2. "Coming from the digital play that it has, it's already got some awareness, and it may have some traction. And if they can continue, they should have at least some sampling. But again, we've got to be careful, because even when you take a look at digital audience, there's a lot of big numbers out there. But if I were able to put it in a TV metric, they're really low-rated," said Lyle Schwartz, managing partner at GroupM.
And Viceland might not offer enough incentive for millennial cord cutters and cord nevers to change their ways. "I don't know how much of a revenue impact it's going to have, because I think they're going to have a hard time garnering eyeballs to linear TV and a little-known network. The reality is that most consumers these days, especially millennials, aren't really tuning into cable channels anymore. They're accessing over-the-top apps," said Matt Britton, founder and CEO of MRY, a marketing agency specializing in social and millennials.
Even so, Viceland will likely prove irresistible to advertisers with visions of millennials dancing in their heads. "This allows them to go into the upfronts and sell integrated deals with their advertisers. It's going to be a nice sizzle on top of the steak in terms of having really great access to a coveted audience," said Britton. "I think they have a really unique opportunity to reinvent the game in terms of the way that brands can advertise and integrate into TV programming."
No matter how ad sales shake out, A+E expects a lift from H2's 2015 ad revenue, which will be $65.3 million in 2015, according to SNL Kagan. That's just 13 percent of the $498.6 million brought in this year by H2's big brother, History.
For Vice, running its own linear network could cement its status as a top-shelf media organization and set itself up for an even bigger windfall. "Obviously they're looking at an IPO in the future, and for them, they really want to legitimize their brand as an omni-channel media company. They've already proven their ability to connect with consumers online, through online video, and have started to do so through their programming with HBO on another network. But now, with them having their own network, they're really able to offer to investors a community, as well as brand advertisers, a way to reach consumers everywhere that they are," said Britton.
While a wild card like Smith—who boasted on CNBC two weeks ago, before the Viceland deal was set, that Vice would be launching a TV network in the U.S. next year and a dozen in Europe—would seem to be an odd fit with A+E Networks, no one seems concerned about the possible culture clash. An A+E Networks source noted that the company, which acquired a 10 percent stake in Vice Media for $250 million in August 2014, wants Vice (and Smith) to keep its point of view, which has been essential in making it the brand it has become.
And Vice has shown the ability to play nice with corporate partners, including Time Warner's HBO, in the past. "Vice has worked with Bank of America as an advertiser; they've worked with a lot of conservative financial institutions and other legacy corporations that don't necessarily have the edgy corporate culture that Vice does. I'm not really too worried about their ability culturally to partner, because they've shown an ability as an organization to be able to be a chameleon and work with a variety of organizations harmoniously," said Britton.
The tougher task could be attracting viewers to a channel that's hidden in the remote corners of a cable subscriber's set-top box (a problem that also plagued rebranded networks like FXX and OWN in the early going). "I think it's going to be fairly challenging in that regard, but again, they've shown that they know the audience, they've shown that they know how to create compelling content, and they've shown that they understand their consumer. So it's hard to bet against them," said Britton.
Ultimately, Vice is counting on the formula that has made the company's content so attractive to advertisers. "Even when Vice was at its craziest and most zany and salty, we were still 50 percent ads," Smith told Adweek last year. "I think that the skill lies in getting the brand what they want, which is brand lift, while also getting the content that we want out there, rather than the content that [brands] want or that everybody thinks that they want. Our success lies in finding brands that are sophisticated enough to realize that they should sponsor that content."