Foreign. Up until a few years ago, the media Company Vice seemed to be on top of the world. They had raised over 1 billion dollars of venture capital investment at a peak valuation of almost 6 billion dollars. Their investors included Heavy Hitters including Disney and 20th Century Fox Their Flagship Vice YouTube channel has over 16 million subscribers and its top video has 84 million views.

Their Vice News YouTube channel has more than 8 million subscribers and some of its top videos have tens of millions of views. They've gained critical Acclaim for their reporting of many armed conflicts as well as other controversial topics that the mainstream media refuses to touch. The thinking was that New Media Outlets like Vice would overtake the Legacy Media Giants by appealing to a younger audience and pursuing a digital first content strategy. Despite the hype, Vice has chronically struggled with a lack of profitability, losing hundreds of millions of dollars per year.

This past April the company announced that they were canceling their Flagship Vice News Tonight Show as well as conducting Mass layoffs in May It was reported that Vice is on the brink of filing for bankruptcy. They will sell what little remains of their once vast Empire to their existing creditors for 400 million dollars less than one tenth of their Peak valuation and Vice isn't the only New Age Media company that's struggling. BuzzFeed Went public by merging with a SPAC last year. The stock has since lost 95 percent of its value and the company looks to be on the brink of bankruptcy.

In this video, we'll look at how Vice Media went from a multi-billion dollar disruptor to bankruptcy and what this means for the digital media industry going forward. During earnings season, it's vital to keep track of which companies are reporting earnings when, so you can set yourself up to find opportunities. For example, if a company on your watch list has an earnings miss that could create a buying opportunity and vice versa. To do this, I use the MooMoo Earnings calendar which shows you a day by day list of all upcoming earnings reports.

As soon as a company reports earnings, you can see a one sentence summary of the earnings results in the earnings. Hub If you click into it, you can see the headline earnings numbers and listen to the conference call in app. You can also see the opinions of other members of the MooMoo community in the comments section. In these types of banking failures, it's more important than never to make sure that your money is protected.

You can rest assured that as a member of the Sipc, your assets on MooMoo are protected up to five hundred thousand dollars. We've partnered with MooMoo to offer a limited time promotion where you can get 5 free stocks when you open an account and deposit one hundred dollars or 20 free stocks if you deposit one thousand dollars. This promotion ends on May 31st, so make sure to sign up by clicking the link in the description below. Foreign Vice Media was founded in Montreal Canada in 1994 by Gavin McKinney's Suraj Alvey and Shane Smith who would be the company CEO for most of its existence.

Originally they ran a magazine called Voice of Montreal which covered controversial issues like drugs and alcohol. They eventually changed their name to Vice as they wanted to expand. Beyond Montreal After securing some Venture Capital funding, they moved their headquarters to New York City and started to expand rapidly. In an attempt to bring their original magazine business into the digital age, they launched Vice.com an ad supported News website.

They also started producing video documentaries, usually covering controversial topics. They achieved critical Acclaim for their on-the-ground coverage of the fight against Isis, the conflict in Ukraine and many other War zones, But their most popular content continued to be their series about drugs and sex so the mainstream news wouldn't cover. For example, one of their most popular shows was a series called Hamilton's Pharmacopia, where a Vice news reporter goes around the world trying exotic psychoactive substances. While they succeeded in getting millions of viewers who were primarily young males, it would be a struggle to turn this into a profitable business.

They put much of their content on YouTube for free. This has been incredibly successful with the core Vice YouTube channel raking in more than 1 million views per day. YouTube is a great platform for individual creators to make money and millions of people around the world use YouTube for their primary source of income. but Vice had over 3 000 employees at its peak and rented a huge office in New York.

They also have huge travel expenses, sending their reporters all around the world, often to remote and dangerous areas. This is something that YouTube alone cannot pay for. Their Flagship Vice YouTube channel gets about 10 million views per week or about 500 million views per year. That probably translates to about two and a half million dollars of annual revenue given the massive number of employees they have around the world.

The direct YouTube Revenue represents little more than a drop in the bucket rather than being a primary profit generator, YouTube is leveraged by Vice as a platform to broaden their and enhance their brand visibility. This strategic positioning paves the way for much more lucrative opportunities such as brand Partnerships and television licensing. Traditional television is far more profitable than ad supported programs like YouTube on a per viewer basis. In the US, an average cable television plan costs 83 dollars per month.

On YouTube, the ad revenue is approximately half a cent per video, so even if you watch 10 videos every single day, the total revenue is just one dollar and fifty cent per month. To convince people to pay for a cable TV subscription, you need to have legit TV shows with real actors in cinematography. This is extremely expensive. Many members of the younger Generations prefer to consume content from YouTube and social media for free and can't justify paying 80 a month for cable television.

Because of this, the number of TV subscribers in the US has decreased from a peak of 100 million in 2014 to just 65 million today and it is expected to continue declining. Vice Media went to the cable TV Distributors with a proposition. If they wanted to end the era of cord cutting, they needed to start appealing to young people and with their edgy content. Vice was a partner that could make this happen in 2012 12 by signed a deal with HBO one of the largest pay TV distributors in America.

They initially created a weekly news series which eventually turned into a daily series called Vice News Tonight. On their HBO show, they talked about news and current events very similar to the types of content that they released for free on YouTube and their website with the HBO deal Vice was finally bringing in real revenue and it looked like they were on their way to profitability. In 2015 Vice expanded into the traditional Cable Bundle when they announced a joint venture with a E Networks a Broadcasting Company partially owned by Disney. Together they created a new exclusive television series called Viceland the cable Networks and HBO Pay Vice directly for the right to air.

Viceland. Another Revenue generator was native advertising. Large advertisers pay Vice to create television shows which either directly or indirectly promote their products. For example, they create a show called Beer Land a documentary about craft beer sponsored by Anheuser-Busch With so much apparent success, investors were pumped keeping money in device Handover fist.

They were able to raise 1.7 billion dollars in total from investors, including Disney 20th, Century Fox and George Soros's family office just to name a few. Vice was viewed by many investors and media industry. Executives as a great disrupter at the Forefront of the digital age. Foreign ER and CEO Shane Smith Vice developed something of a frat boy culture with extensive drug use by employees even among senior.

Executives with its counterculture brand Vice attracted Young And Hip employees, many of whom joined the company right after graduating from college and being based in Brooklyn New York It is to be expected that a company would adopt a party in culture, but the partying antics of senior Executives coupled with poor working conditions eventually started to have a negative effect on employee morale. Firstly, Vice's Junior employees were overworked and underpaid. A senior manager advice told New York Magazine that they practiced the 22 rule when hiring. they would hire 22 year olds, pay them twenty two thousand dollars per year, and work them 22 hours a day.

While this might be a little bit of an exaggeration, it wasn't by that much. There are numerous media reports about Vice employees complaining about low pay and the childish antics of Executives in 2014. Gawker Talked to Vice employees who were disheartened when they would see Vice Executives at company-sponsored parties spend more inexpensive alcohol on drugs in one night than they make in an entire month. Shortly after The Gawker article was released Vice Posted this article as a response even while his employees were living in abject poverty.

CEO Shane Smith became a billionaire. While Vice had never turned a profit, Vice's valuation would grow with every funding round, allowing Smith to offload his shares at high prices in 2015. Smith used his Newfound wealth to buy a 23 million dollar mansion in Santa Monica California The lavish excesses of Smith and other members of the senior management team was morale crushing for the company's underpaid workers. The reason they underpaid their employees wasn't because they wanted to.

The fact of the matter was Vice's business model was failing and they were burning money like a fireplace. After signing the licensing deals with HBO and a E, Vice needs to massively increase their content production to fill out their cable TV time schedule. In an effort to cut costs, they shifted away from the type of high production costs and often controversial documentaries which made them popular in the first place. They replaced them with lower quality programming.

For example, one of their Viceland shows is called Action Bronson watches Ancient Aliens featuring the rapper action Ron Sin. This show is basically just a reaction video of him watching Ancient Aliens while consuming recreational substances. Shows like this are a lot cheaper to produce. The problem is very few people are interested in watching an ancient aliens reaction video on cable.

TV Another problem is that in order to appeal to their brand sponsors, Vice changed the tone of their content to be politically woke. For example, in 2018, they published this article titled all Masculinity Is Toxic On Viceland, they created a series called Gaycation where the host travels around the world to explore Lgbtq cultures in various countries. Vice's core audience is young adult males, who on average have more politically conservative beliefs. Vices pivot to Woke content alienated a large portion of their core viewership.

Because of these issues, Vice's viewership started to Tumble. In 2018, Viceland was only pulling in 100 000 viewers per night, making it a massive flop. Also, one of Viceland's major selling points was that it could attract younger viewers to buy cable subscriptions, but this did not play out as the average age of Viceline viewers was 42 years old. This means that the few people who did watch Viceland were older people who already had a cable subscription because of Vice's inability to attract young viewers.

HBO ended their partnership with Vice in 2019, which caused the company a desperately needed Revenue source. To make matters even worse, the New York Times and other media Outlets started reporting about extensive sexual harassment and a generally toxic workplace culture within base. These reports severely damaged Vice's reputation and caused many brand sponsors to drop them. foreign.

TV shows were flopping and their revenue was massively underperforming expectations. They continued to grow, hiring a peak of over 3 000 employees. They created a bunch of new content verticals with Associated YouTube channels including Munchies a Channel about food, noisy, a Channel about music and Vice Asia a channel just about Asia just to name a few. Most of these spin-offs have been complete flops.

For example, despite the noisy Channel having more than 3 million subscribers in high production costs, many of its videos only get a few thousand views. Years of being able to spend a seemingly Limitless amount of Venture Capital Money had made Vice's Senior Management team arrogant and wasteful. This made them willing to invest heavily in new production despite the fact that it was not attracting nearly enough viewer interest to Warrant such expenditure, But the money was about to run out in 2019 as Vice's cash burn continued to grow. Disney recognized a 353 million dollar write down on their 400 million dollar investment representing an almost 90 percent decline in value.

This means that Disney Things Spice has been a failure and is worth almost nothing. In an effort to turn things around, co-founder Shane Smith stepped down and was replaced by Nancy Dubuque who was previously the CEO of a E Entertainment. One of the first things she did was raise 250 million dollars of debt financing and lay off about 10 percent of the company's staff in an effort to reduce cash burn. While the debt financing succeeded in kicking the can down the road, the company was now burdened with tens of millions of annual interest expense at a time when they were already burning cash.

Despite the change of CEO, Vice's same problems with substandard content, quality continued and they underperformed their viewership in Revenue Targets In the summer of 2021, Vice tried to take advantage of the spec boom to go public, but the company's losses were so great that even SPAC investors turned them down. In 2022, the Federal Reserve's interest rate hikes caused the stock market to tank and advertisers to tighten their belts. This decreased Vice's brand sponsorship revenue and made it almost impossible to raise additional Capital As of May 2023, Vice Media ran out of cash and is on the brink of filing for bankruptcy. a Consortium of investors, including billionaire financier George Soros are reportedly planning to buy the company out of bankruptcy for 400 million dollars.

That's less than one-tenth of the company's Peak valuation in 2017.. While Vice will continue to exist in some form, the vast majority of their employees will likely be laid off and the original shareholders will be completely wiped out. Vice Made a lot of mistakes which ultimately led to their divines. but Vice isn't the only digital media company facing serious issues BuzzFeed which went public via US back last year, is similarly losing money and looks to be on the brink of bankruptcy.

The fact of the matter is, it's very difficult to make a profitable digital media company. The reason traditional media companies can make money is because they sell their content to the movie theaters or cable television which have an extremely high monetization preview. This allows them to invest tens or even hundreds of millions of dollars into high quality content, which people are willing to pay money to see. On the other end of the spectrum, you have individual content creators.

They don't have corporate overhead like in accounting departments HR department office space Etc These low operational costs enable them to earn a sustainable income on platforms like YouTube despite its lower earnings per view Vice Sought to carve out a niche in the middle. They bear nearly all the same corporate overheads as traditional media companies, but their content quality isn't compelling enough to hold its own on cable television. To counterbalance this, they made a significant portion of their content freely available on YouTube The underlying strategy was that viewers would be so captivated by Vice's free YouTube videos that they'd be enticed to purchase a cable TV or HBO subscription to access their premium content. However, this strategy backfired.

The majority of viewers were reluctant to pay for a subscription to view Vice videos considering that the free content available on YouTube was nearly as appealing. Digital media companies like Vice and BuzzFeed are competing with millions of YouTubers in social media influencers who are far more Nimble and can produce content for a far cheaper price. Alright guys, that wraps it up for this video. What do you think about Vice Do you think there's any chance they could turn things around under new leadership? Let us know in the comments section below.

As always, thank you so much for watching and we'll see in the next one. Wall Street Millennial Signing out.