Disney says its investment of more than $ 400 million in Vice is worth nothing

Just a few years ago, big media companies were betting on Vice Media. Disney has made the biggest gamble, investing more than $ 400 million in the digital swashbuckling publisher.

Now, Disney claims that all the money invested in Vice has been cremated: in the documents filed by investors on Wednesday, Disney said it no longer thought it would ever receive a return on the investment in Vice – a company that at one point it was worth $ 5.7 billion.

Vice is always worth something in the eyes of some investors. Last week, a group of lenders announced a new round of funding of $ 250 million.

But Disney's accounting decision is another – perhaps most striking – example of the trend reversal seen in digital media in recent years. Investors have decided that high-flying publishers who once confidently explained that they have created a new media paradigm are now worth little if not less.

Here is a partial call familiar to some of you:

• Mic, who has raised more than $ 60 million, has sold for less than $ 5 million by the end of last year.

• Mashable, valued at around $ 250 million in 2016, is sold at under $ 50 million in 2017.

• Properties formerly known as Gawker Media, plus Onion and other sites, just sold at a price probably well under $ 50 million; Univision, the television conglomerate that sold them, had paid $ 135 million just for the Gawker sites in 2016.
• We do not know (yet) what is the value of Comcast, which has paid $ 600 million to Vox Media (owner of this site), and BuzzFeed in recent years, now think these two publishers are worth it. But it's a reasonable bet that Comcast thinks they're worth less than he thought in 2015.

All of these companies have different stories and different details. The reality is that a few years ago, all were convinced that they would gain in value, because they knew how to reach a young public by exploiting the big technological platforms, in particular Facebook and Google.

Instead, Facebook and Google have accumulated the bulk of digital ad revenue – the money that new publishers expected to get, once they would have reached a real size. And publishers who expected Facebook and Google to rely on them for content have learned that Facebook and Google do not really need it, after all.

Here are the details of Disney / Vice: Disney told investors on Wednesday that it had eliminated $ 353 million of previously invested funds in Vice. This followed an announcement made last fall Disney reduced the value of its $ 157 million Vice investment.

Disney declined to comment. Wednesday, Disney's quarterly newspaper presents a bit of language: Disney describes the $ 353 million "depreciation" imposed on Vice as a "write-off" – which, from an accounting point of view, means that it does not there is nothing to eliminate afterwards. Everything is gone.

Per Investopedia: "A depreciation becomes a write-off if the entire balance of the asset is eliminated and removed from the accounts."

If you do the math, you'll notice $ 353 million plus $ 157 million, or $ 510 million – far more than the $ 400 million that Disney has invested directly in Vice.

Since Disney will not comment, we will assume that the additional amount includes Vice's investments held by Disney through A & E, the television programmer that Disney holds with Hearst, who also supported Vice; as well as $ 70 million that 21st Century Fox sank in Vice. This stake was transferred to Disney earlier this year when Disney bought a good deal from the Fox Empire.

One last caveat: you can not say that Disney says Vice Media is worthless at all, just that Disney thinks its investment will be worthless. This is a difference with a difference for some Vice Investors, who have entered into agreements allowing them to get their money from the company, in the case of a sale, before other investors.

In any case, Vice is definitely worth a lot less than Disney and many other large, sophisticated media companies have been thinking about just recently. And while Disney may not really feel good about losing money on Vice, it will be rather happy not to have paid billions for all this – an idea that seemed very plausible in 2016.

Vice, meanwhile, is trying to rehabilitate under the direction of Nancy Dubuc, CEO, who succeeded Shane Smith founder a year ago. Dubuc was responsible for cleaning the books of the company, as well as his internal philosophy.

Vice and Smith, who remains chairman of the company's board, were passionate about a pirate character. But now, in the #MeToo era, society has apologized for the damaging "boy's club" culture that has fostered inappropriate behavior that has invaded the entire society. "

Here's a comment on Wednesday's financial news from an assistant spokesperson:

Vice is in full swing and aims to meet, if not exceed, its financial targets for the third consecutive quarter. The strategic plan of our new management team is well underway and with the recent capital increase, we will continue to invest in the long-term growth of our five global businesses – television, studio, digital, news and our advertising agency, Virtue. As the media industry consolidates and fewer players control the information and entertainment consumed by the world, Vice will still be present with a megaphone for more than half of the world's inhabitants under the age of 30 who are looking for independent, world-class content.

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