Is Fox-Vice the Most Conservative Media Deal of the Year?

Yes, Vice Really Is Worth More Than Instagram or Tumblr

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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."

The consensus subtext seems to be that Old Man Rupert is just doing a variation on what he did back in 2005 when he bought all of MySpace for $580 million: He's attempting to buy relevance, he's staving off the forces of decrepitude and saying "screw you" to actuarial tables (Murdoch turned 82 in March) by overpaying for a slice of naughty youth culture. After all, he telegraphed his fascination with Vice back in October of last year in a tweet:

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. Back in 2010, when Ad Age named Vice to its annual magazine-industry A-List (which honors magazine brands that are much more than just magazines), I made a point, in the award citation, of heading off those who might question our choice:

It'd be easy to dismiss Vice as a cultish niche title -- a street-smart youth-culture magazine with a famously ribald editorial sensibility. But a growing number of major players -- including CNN, which this spring partnered with Vice's online broadcast offshoot, [now rebranded as] -- are recognizing that the ultimate glossy outsider has quietly spawned a global media empire while becoming an unlikely journalistic powerhouse.

Headquartered in New York since 1999 (it was born in Canada as Voice of Montreal in 1994, then rebranded in 1996), Vice is published in 24 editions distributed in 27 countries, with worldwide circulation of 1.1 million. It is the first primarily free magazine to make Ad Age's A-List (paid subs aside, Vice is mostly distributed at boutiques, bookstores and other hot spots in urban areas). That CNN deal, which puts VBS content on, is recognition of Vice's unwavering devotion to global reporting... Vice increasingly also pulls in major marketers like Nike, Diesel, HBO and Levi's. The empire of cool has also spawned record label Vice Music, Vice Films, Vice Books and Virtue Worldwide, a 50-person communications agency.... And this year, Vice launched The Creators Project, a co-branded effort with Intel...

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's documentary show earned it an Emmy nomination).

Yeah, it's easy to be sour about Vice's seemingly "bonkers" valuation -- not to mention Vice itself, and all it stands for. For instance, Gawker's Hamilton Nolan this morning called Vice "an ever-expanding machine for selling counterculture cool to the world's largest and most mainstream corporations" (hilarious coming from a guy who works at Gawker Media) which started out as "a humble magazine about doing heroin and having sex (on heroin)."

Okay, fine, piss on Vice's parade, Gawker et al.

But to everyone else, I say: Do the math! 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.

Vice has all of the upside and none of the downside. And it also makes a shit-ton of money -- unusual for any company involved in a high-profile transaction these days.

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.

Simon Dumenco is the "Media Guy" columnist for Advertising Age. You can follow him on Twitter @simondumenco.

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