Virtue in Vice Media – The “Time Warner of the streets” and its plan to occupy…
From a free Montreal-based “punk” magazine to an international media powerhouse with a $4B valuation.
Business Model:
Vice Media originally started back in 1994 by Shane Smith as an indie, counter-culture magazine that pushed the limits of journalism with its controversial social topics and graphic content. In the past 20 years, Vice has been able to bridge the gap between “old-school” media and young millennials, growing internationally, with 36 offices around the world, 11 digital channels, a record label, an in-house ad agency, and the list goes on. Through its gonzo-style journalism, dubbed “immersionism”, Vice aims to be the largest, global network for millennials. The key to Vice’s current success was its early bets on online content and its commercial monetization strategy.
Vice’s business model focuses on an omni-channel strategy ranging across the spectrum from HBO to its own website to YouTube, which has over 6 million subscribers and over 2 billion views. Content is created both in-house and crowdsourced, which has allowed the company a first mover advantage in the digital arena, even being approached by Snapchat to be one of the first in-app Discover channels to spur more user-generated content. Vice has been able to sustain its growth and increase its margins by subsidizing the costs of productions with the licensing and advertising revenue model it has built up over the past several years.
Licensing fees for content make up a large portion of revenue for Vice, along with partnerships with major brands, native/integrated ads, and traditional advertising. In one single program, there are multiple revenue streams that include brand sponsorship, pre-roll ads, banner ads, etc. A brand can fund a project or series for $1-5M, as seen with Vice’s most famous example of its revenue model, Far Out sponsored by Northface:
http://www.vice.com/video/agafias-taiga-life-full-length
Other companies in project and content partnerships with Vice include Intel for The Creator Project channel, Dell for Motherboard, Vice’s tech site, and Unilever for the new female-targeted channel, Broadly. This multitude of revenue streams has driven a sales projection of $1B for Vice this year.
Operating Model:
To achieve the success across channels as Vice has, it requires lean and agile operations. While traditional media companies, like Disney, have long production cycles and high overhead costs, Vice initially decided to broadcast all its content online, beyond its magazine, given the low cost of digital distribution and the worldwide reach of the internet. CEO Shane Smith early on said, “We just want to shoot stuff that people can see right away. We shoot it, we cut it, it’s up the next day. That was the idea behind VBS.tv.”
This mentality for rapid-decision making and creating stems from the leadership’s appetite for taking risks and lack of fear for getting down and dirty. Quite literally this can be seen most recently with the ISIS documentary (over 15M views on YouTube), and with Dennis Rodman’s recorded visit to North Korea. With international content such as these produced far more rapidly than its traditional competitors, Vice has expanded its global offices not only with the hopes of transforming them into international news bureaus, but also to maintain presence where all their corporate sponsors and partners exist.
Finally, the culture of Vice is not only the core of its business but also its organization. Headquartered in Brooklyn, NY – the location itself speaking to the company’s “alternative” brand – Vice boasts 600 employees (1500 internationally) with average age being 27, that of the company’s target market. Leadership promotes a non-bureaucratic approach, and even weaves Vice’s brand/product into company communications as seen with Smith’s update to employees 3 months ago. It is clear that this is a company that practices what it preaches.
Vice’s Virtuous Future?
As for what’s next for Vice, it looks like Smith and his team will have a lot to celebrate this holiday season. Just on December 8th, Disney doubled its stake to 10% in Vice, valuing the company at $4B with over $500M in funding. Next year, Vice will continue its HBO documentary series, start a news channel for HBO Now, create a Canadian cable-television channel, and partner with A&E for a History channel spin-off in the U.S. Though the question remains as to whether Vice will be able to maintain its grip on advertising and licensing revenue momentum, especially as big players like CNN enter the digital dome, its clear that its steps into the traditional television space may be the best counter-strategy.
Sources:
- Business Insider: http://www.businessinsider.com/how-vice-will-make-500-million-in-2014-2014-6
- Fast Company: http://www.fastcompany.com/3048629/vice-vs-cnn-the-battle-royale-for-the-future-of-the-news
- The Guardian: http://www.theguardian.com/media/2015/jan/01/virtues-of-vice-magazine-transformed-into-global-giant
- The Hollywood Reporter: http://www.hollywoodreporter.com/news/vice-ceo-shane-smith-touts-823552
- International Business Times: http://www.ibtimes.com/disney-doubles-stake-vice-media-which-somehow-worth-4-billion-2216406
- The New Yorker: http://www.newyorker.com/magazine/2013/04/08/the-bad-boy-brand
As a fan of VICE, I’m excited that you’ve written this! How do you think operating and business model will fit into a perceived goal of maintaining a user base that seems to focus on Millennials (18-34-year-olds). As you may, Fox News has an average viewing audience that is aged 65 years of age or older. Do you think VICE will be able to sustain their edginess going forward?
I love VICE news. Thanks for covering this in your write-up. Its my favorite news channel for conflict journalism. In addition to your brilliant analysis, what stands out for me is VICE’s inquisitiveness, honesty, courage and straightforwardness (they are clearly not the most diplomatic of the lot – and I love it!). Also the diversity in their product range makes the channel super interesting – from a documentary on ISIS and Guantanamo Bay, to 2 min daily video news, to short written news pieces.
I find VICE’s documentaries to be really fascinating; they seem to be able to provide a window into parts of the world that traditional media is unwilling or unable to access – to your point I think has a lot to do with their risk appetite. What I’ve always wondered when watching their footage is what sorts of risk mitigation strategies they put in place to protect their journalists, and how much such strategies cost them. Or are they just able to attract really driven and adventurous journalists who are willing to report from dangerous areas, thereby allowing the company to make smaller investments in risk mitigation?
Great post! Great company and an interesting example of the power of digital transformation in media. Great concepts can come to market much more efficiently, which enables innovation and creativity to soar.
Really interesting post… I am totally out of the loop and had no idea about VICE… I will certainly be checking it out. Their penetration across several sectors and markets is really intriguing and it seems like they have some serious untapped potential in multiple areas for growth and innovation!
VICE news is amazing! Other than the greats points you mentioned, for me their informal interviews, mostly unedited film, outspoken and brash journalists, and unbiased opinions are what differentiate them from other media houses. Also by focusing on long form media rather than just short form, VICE is more educational and provides deeper understanding of the stories they cover.
great post. I wonder, as the company grows, how closely they will be able to stick to their edgy strategy that tends to encourage/welcome controversy (for lack of a better term). Have you noticed any editorial changes over time? Have there been any controversies or breaches of trust that Vice has been able to weather (e.g., Brian Williams)?
I enjoy VICE. I’m particularly impressed by how they have managed to stay relevant as they’ve grown into a >$1bn company with backing from the likes of Rupert Murdoch. I guess the young employee base helps here, though I wonder what they do as their core cohorts start to age…do you think they’ll have to “alienate” their early customers in order to win the next generation?
The question of what will happen to serving Millenials as they age is becoming increasingly more relevant. Vice’s mission to be the largest network for the younger generation seems to juxtapose this question. Given Vice is entering the traditional media space with cable channels, I think they are hoping this strategy begins to address this question, potentially even tapping into the older demographic now, especially as seen with their A&E History channel partnership.
Great post! I really enjoy vice news but feel that the quality of the reporting has come down over the last year. Any idea why that might be?
Such an interesting post! How do you think they’ll maintain their quality of content? And what do you think the growth opportunities are going forward?
Thanks Taarini! As Vice scales, they are definitely going to need to implement more quality assurance processes (e.g. more editors, required credentials, etc.), especially if they maintain their freelancers and crowdsourced ideas. Even right now it may take up to 90 days for a someone to get a response, if any, on ideas submitted for content.
With regards to growth opportunities, I think their entrance into traditional cable television is an interesting one to directly compete with the likes of CNN and other news outlets given many millennials are “cord-cutting” and getting rid of their cable services. I think there is a lot of potential in Vice developing specific apps for Apple TV, Roku, etc.
Great article! One of the biggest pitfalls of such media companies is overemphasizing turnover and speed of production at the cost of quality. Vice has indeed managed to balance both by the Emmy nominations/ awards. 3 thoughts on this:
1) Question: What % of its media is crowd-sourced vs. in-house? I see crowd-source as a huge potential (like the Threadless case), but was wondering if it maintains same level of quality/ engagement
2) Given the move into traditional distribution channels to target older generation, I was wondering:
a) Do you see any frictions between the 2 target segments (older vs. younger age groups)? Was reflecting back on the marketing Starbucks case we’ve done and where you see reverse network effects
b) Another pitfall I see here is the increased Fixed costs in maintaining 2 distribution channels. Do you expect this to take a toll on their margins?
Great article!! Loved hearing your take on Vice! What do you think will happen to their media strategy in the context of the media distribution war happening between Netflix, HBO, all the networks, Google, Apple, Amazon, etc? How does vice fit into all of that as a content creator?
Thanks Nate! You bring up an important point on the disruption of media distribution by Over The Top (OTT) content providers. Cable providers and traditional cable networks are feeling this pressure more than anyone else, and I think you can see Vice shifting their media strategy to capitalize on this by partnering with A&E, getting more investment from Disney, and starting their own cable channels. Because they are more focused on content creation and are channel agnostic, they can provide content to many of these players you’ve mentioned above without getting caught up in the distribution war. If anything, they can increase the bidding prices of their content to all these digital channels.
Love Vice!
One thing that is fascinating is the disparity in the quality of their journalistic content on Vice News compared to the very low brow blog posts written on the rest of their channels (go to vice.com and read posts not on the Vice News section and see what I mean).
Glad you wrote about this though, everyone who hasn’t seen the HBO series is in for a treat; in addition to taking advantage of digital media to lower costs they just create fantastic content no one else is delivering (they are also incredibly brave).
Thanks Tulio, great point on the other channels! As more competitors follow the Vice model, I think the company will definitely have to be conscious of the varying quality of their other blog posts and the impact on the overall Vice brand.