Fox-Vice Media Deal is Smarter Than You Think
By Simon Dumenco for Ad Age
Media types sure aren’t hiding how they feel about the news that 21st Century Fox is buying 5% of Vice Media in a deal that values the Brooklyn-based multimedia company at $1.4 billion. “21st Century Fox Takes Stake in ‘Gonzo’ Vice,” is how The Financial Times headlined its Friday-night report breaking the news. “Rupert Murdoch Firm Dips into Hipsters’ Bible With $70m Stake in Vice” is how The Guardian put it. “That valuation is kind of bonkers” is what The Atlantic Wire had to say in a post titled “Vice Is Now Worth $1.4 Billion.”
But what if I told you that the Fox-Vice deal is actually kind of a good old-fashioned, logical, non-bonkers deal?
If you’re a regular reader of Ad Age, you already know that Vice is a real, diversified, growing and hugely impressive global media company. In fact, the judges for Ad Age’s Media Vanguard Awards were so impressed with The Creators Project that Vice was one of the few media companies to earn MVAs two years in a row. Ad Age has also reported, over the years, about Vice Media’s high-profile investors — from WPP to former Viacom chief Tom Freston (who helped broker the Fox deal) — as well as newer partnerships with the likes of HBO (where
Vice Media reported revenue of $175 million in 2012. Which, when you think about it, makes a $1.4 billion valuation perfectly reasonable.
Remember, media companies used to be bought and sold on the basis of multiples of revenue. But then Wall Street started hating on certain kinds of media companies — like newspaper publishers, which not only tend to have shrinking revenue but often have scary long-term liabilities (like pension-fund obligations) — while engaging in pipe dreams about flavor-of-the-moment tech companies.
There is absolutely no math to parse in some recent headline-making acquisitions — think Facebook buying Instagram for $1 billion, or Yahoo buying Tumblr for $1.1 billion — because you can’t even begin to do a traditional multiples-of-revenue calculation for low- or no-revenue companies. In those types of deals the buyer is really paying for a dream — a dream of continued relevance, of staving off decrepitude. (Yahoo buying Tumblr was Marissa Mayer saying “screw you” to tech-company actuarial tables.)
Whereas Fox buying a slice of a 19-year-old, money-minting, rapidly growing, highly diversified media conglomerate for a reasonable multiple of revenues?
This may end up being the most conservative media deal of the year, folks.