5-Hour Energy founder buys news channel because TV commercials got too pricey

Like many businesses these days, Manoj Bhargava has had to deal with soaring inflation, which for the owner of 5-Hour Energy, translated to surging advertising costs. So billionaire Bhargava, whose businesses are largely privately held, decided to seize the means of delivery. Regulatory filings show that earlier this year, Bhargava—through a subsidiary—became the majority owner of NewsNet, a 24-hour news channel available through traditional broadcasting networks and on streaming services like Roku, where the channel is currently available. Terms of the acquisition were not disclosed. Sign up here for upcoming events and awards Ad Age In-Depth: TV Pivot Ad Age 40 under 40 Ad Age Small Agency Conference & Awards Bhargava, a serial entrepreneur who owns an office and industrial park in Farmington Hills where NewsNet, 5-Hour Energy's parent company and various other affiliated companies of his are headquartered, is now in the midst of what he says is a $50 million investment in the infrastructure needed to boost the news channel founded in 2019: building out a 30,000-square-foot television studio and beefing up the staff. Much of that construction is underway and is slated to be complete later this year, according to network executives. In doing so, Bhargava said he seeks to deliver a credible, headlines-focused national news channel, free of political opinions. Still, he concedes the main goal is to find a less costly avenue for advertising his consumer products. "For me, it's more of a media company than a news company," Bhargava told Crain's in an interview this week. Bhargava's 5-Hour Energy drinks account for about $1 billion in annual revenue, and the executive said the company spends anywhere from $30 million to $80 million annually on advertising. In recent months, his media-buying costs had been skyrocketing by 50 percent or more, he said, although he was unable to pinpoint why those costs were going up. The majority of that advertising is on television, he said. "So we're going to end up with a television system and our plan is to cover at least half of the United States," Bhargava said. "And then we have a way to not only advertise our product, but maybe to barter some of the advertising with some of the other outfits. … And this (NewsNet) kind of pays for most everything, which I kind of like." Ad spends in general are on the rise. U.S. media spending is forecast to hit $320 billion this year, a 12.2 percent increase, according to a Magna forecast. David DeMuth, the chair and CEO of Southfield-based advertising firm Doner Co., said it's difficult to say whether Bhargava's strategy will work. That's especially true as advertising has become more fragmented, he said. "I think for advertisers, you really have to understand your audience and follow them and find them more efficient placement now, and those opportunities are out there," DeMuth told Crain's. "But media has become a much more data-driven endeavor than ever before. For (Bhargava) to buy a media platform and advertise 5-Hour Energy on it, like, I don't know if that's gonna get return on investment on that or not. It depends who's watching that media." From a content perspective, Bhargava said they've chosen a simple motto to follow for the network: "News … like it used to be." The style of the programming is based on Headline News, now called HLN, a CNN-owned news network that primarily focuses on delivering straightforward news programming on a variety of topics. For example, news segments this week focused on various health care issues, primary elections in Pennsylvania and national weather forecasts. "There's so much of the opinionated media out there, left and right," said Phil Hendrix, NewsNet's news director. "We're really just committed to trying to do journalism the way it used to be done." Sign up for Ad Age’s Media newsletter. NewsNet has been beefing up its staff with the hiring of veteran news anchors including Glenn Ray and Jill Washburn, and headcount currently stands at about 20, a number that could double over time, said the company's CEO, Vince Bodiford, a Bhargava lieutenant. While acknowledging that the deal is largely an advertising play for some of his products, Bhargava said consumers shouldn't expect to see 5-Hour Energy ads plastered on the newscast, which he said will have the appearance of a traditional newscast focused on the news of the day, human interest topics, weather and other staples of broadcast news. Other advertising will also be typical of what is seen on traditional newscasts, he said. Still, over time, Bhargava said the plan is to transition much of 5-Hour Energy's advertising to the network. Bhargava stands as far from the only wealthy businessperson to purchase media companies in recent years. Tesla founder and wealthiest man in the world Elon Musk late last month entered into an agreement to acquire social media company Twitter for about $44 billion, a deal he has since tried to walk back or halt. In another high-profile example, Amazon billionaire Jeff Bezos owns the Washington Post. To be sure, the scale and reach of NewsNet is vastly smaller than those properties. It launched in Cadillac in Wexford County in 2019, and Bhargava said the company has largely lacked capacity to know its specific viewership levels, something it is working to implement. NewsNet's founder, Eric Wotila, retained a 10 percent stake following the acquisition by Bhargava, and holds the title of president under the new ownership structure. The investment in NewsNet is not Bhargava's only play in the television space. Through a subsidiary, the businessman owns about 5.2 percent of Gray Television Inc. (NYSE: GTN), an Atlanta-based broadcasting company operating in nearly 100 American markets, including Michigan affiliates WILX in Lansing and WNEM in Flint. Bhargava's stake in the company is worth about $92 million based on the $20 stock price for Gray Television on Thursday. Bodiford said that investment stands separate from the ownership of NewsNet. Bhargava's other business interests are varied, as Crain's has reported, and include family office consulting, a water purification venture, as well as venture capital investing in health-focused startups. While it's unclear just what kind of dividends the NewsNet venture may pay, Bhargava said the investment is something for the long term. "I expect this whole thing will take a couple of years," he said of the plans with the news channel. "This is long-term for me. Two years is really long."

5-Hour Energy founder buys news channel because TV commercials got too pricey

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