The virtues of Vice: How this one-time punk magazine was transformed into media giant

It’s a hit with the millennial generation and predicts revenue of $1bn this year, so what can a young company teach its rivals?

In a break from making millions as the world’s richest ad man, Sir Martin Sorrell was asked how best to understand the new media landscape. Visit the headquarters of Vice Media, said the head of WPP. Later he said: “They understand how millennials think, what content millennials want.”

The enthusiasm of 69-year-old Sorrell, whose company owns a 10% stake in Vice, is shared by many of his media mogul friends. That the Murdochs, via 21st Century Fox, Disney’s Bob Iger and the co-founder of MTV Tom Freston all provide cash-backed enthusiasm for Vice suggests they believe that the company, which started life as a “punk magazine” in Montreal in 1994, could understand young people better than News Corp, Disney or any other more traditional media company.

But how? Vice, with its gonzo-style journalism and access-all-areas attitude (typical headline: I Went Undercover in America’s Toughest Prison), is not easy to define. Yet it has somehow come to define a new media age of shareable video content, mostly because of its success – real or perceived – among young people. For these so-called “millennials” – roughly born between 1980 and 2000 – offer a sort of fountain of youth for a media industry faced with ageing readers and viewers, and distribution models still being disrupted by the internet.

Many of the 7.8 million British television viewers who tuned in to the Queen’s Christmas Day message may not have heard of Vice Media, but almost twice that number have viewed the 43-minute Vice documentary about Islamic State (Isis): its rare footage of leader Abu Bakr al-Baghdadi and gory clips of severed body parts had a total of 15.5m views on YouTube when viewed as a whole and in parts.

With 11 digital channels ranging from Vice News to Motherboard (“covering cultural happenings in technology”), Noisey (“a music discovery channel”), a food channel called Munchies, a TV studio and film division, and a record label, as well as the tie-ups with YouTube, HBO and China Daily, Vice has a more diverse business model compared with, say, Channel 4, which offers advertisers slots around specific content at specific times. And that’s before we even start discussing the work produced by the in-house creative services agency, Virtue, which provides advertorial content. Yet a very conspicuous buzz, so hard to quantify, attached itself to Vice in 2014 and it shows no sign of abating in 2015.

Vice, which bills itself as “the coolest magazine in the world”, launched a UK edition in 2002 and now operates in 35 countries, becoming a multimedia company in the early part of the century, Late last year Vice took on James Schwab, a merger and acquisitions lawyer, and Shane Smith, the company’s ebullient founder, talked gleefully of spending a potential $500m snapping up “our competition”.

Another senior hiring is Alyssa Mastromonaco, former deputy chief of staff to Barack Obama in the White House, who starts as chief operations officer this month. “Behind Vice is an eclectic cast of some of the sharpest and most creative minds in media, and I’m thrilled to be joining the ranks, albeit a little less young than most,” said the 38-year-old on her appointment.

Two $250m investments in September led to a new corporate valuation of an estimated $2.5bn. In an interview with the FT in mid-December, Smith, the 45-year-old who launched the magazine with two friends, hyped up a potential stock market listing for the New York-based company this year by talking about potential revenues of $1bn and 30-35% margins, adding: “What media offering has there been like that in the last decade?”

Smith said margins were likely to grow by 10%. “That’s a pretty sexy offering,” he bragged, without giving details of how those margins would be widened. “This is the birth of the next big media brand.”

Vice’s journalism has plenty of critics. David Carr, the New York Times’s media critic, famously once damned it as “putting on a safari hat and looking at some poop”. It was behind the controversial meeting of basketball star Dennis Rodman and Kim Jong-un in North Korea, for instance, in 2013.

Lately that criticism has become more muted as searing reports from Ukraine and Syria, among others, have won plaudits. Its news magazine show on HBO, Vice, won an Emmy last August.

At the same time, criticism of how Vice does business has increased. A “guide to the backlash” on the Digiday website back in October listed doubts over the exact number of millennials who watched Vice content, a key metric, as well as the company’s relationship with corporate sponsors and its treatment of staff. A global company with a surprisingly efficient press department, Vice does not take kindly to criticism. When Nick Denton, founder of the blogging network Gawker Media, questioned Smith’s interest in lucrative sponsored content streams, the Vice founder told the Guardian: “Nick Denton has accused me of fucking Hiroshima.”

So how exactly does this global business operating out of many time zones work? Go to see them, urged Sorrell. “The working conditions are different [from traditional media], the approach is different...They are more modern, much less bureaucratic and much more visceral.”

It is true that the atmosphere in the Shoreditch headquarters of Vice in London owes more to the aesthetic of Silicon Valley than to more traditional TV companies. It is all grey concrete floors and folded-up table tennis tables, and several of the staff are wearing woolly beanie hats while sipping herbal tea at their desks when the Guardian visits. The average age of the still largely white staff working at Vice is just 27.

Kevin Sutcliffe, now in charge of commissioning and editing Vice News content in Europe as head of news programmes, is older than the average, and his appearance wearing a black T-shirt and bright trainers at the Guardian Edinburgh TV festival this summer earned him a ribbing from former colleagues at Channel 4 used to him in more staid clothes. Yet the difference between his old and new jobs is far more than sartorial, he insists. He described the working environment as “leaner and quicker … we’re not subject to particular bureaucratic pressures and the only demand on me is to make extremely good content”. (This is backed up by freelance journalists, who though they may criticise some of the treatment doled out by Vice say the time between pitching ideas and getting a decision is a quantum shorter than when pitching at the BBC for example.)

Before Christmas, at an industry event to discuss the future of the BBC in London, Sutcliffe went further as he eyed the assembled sea of largely grey-haired men and said: “The only reason I’m here is because Vice speaks to young people.”

Launched in March 2014, Vice News is one of the fastest growing news channels on YouTube with more than a million subscribers to date. It’s easy to see the growing appeal of online video, for advertisers at least. Three-quarters of adults watch an average of 115 hours of TV news a year compared with just 27 hours a year among 16- to 24-year-olds, according to the latest Ofcom research .

The comparison – as is so often the case when trying to compare old “watch once” media with new “watched at different times on different platforms” – is not straightforward. Indeed, few of the numbers attached to Vice, a private company with a relatively complicated structure, are easy for established measurement agencies such as Comscore to quantify, including its claim to have a monthly global audience of 181 million people. This has led to excited interest from people looking to make money from the new new thing, and criticism from those distrustful of new measurement techniques.

Vice’s audience figure of 181 million, across all platforms, conflicts with the industry standard measurement gathered by Comscore, which found in June 2014 that Vice.com’s website and its mobile apps reached 4.2 million internet users in the UK, more than doubling year-on-year but still well below many other news brands, including the Guardian. What’s more, these figures included fewer millennials than for much older brands such as the New York Times. A spokesman for Vice said Comscore was “inaccurate” as it only measured one of its sites, Vice.com, rather than all 10, which include Motherboard and Noisey. Dan Miller, the Vice UK spokesman, compared Comscore’s figures to judging the BBC’s audience by television alone and ignoring online and radio.

On the plus side, a report for Ofcomby Enders Analysis found nearly two-thirds of Vice users (even in the smaller Comscore figures) were under 35, compared with just over a third for BBC News. Joe Evans, internet analyst at Enders, said Vice viewers were not just young but tended to be affluent and male, the “new mainstream” in ad-speak. They are also loyal.

Al Brown, one of the longest-serving members of staff in London, who is now head of video content, said the launch of the Vice News channel was prompted by the public’s reaction to serious Vice content when its back catalogue was put on YouTube three years ago.

“The content that outstripped everything else by a huge margin was our most serious hard-hitting documentaries like Vice goes to Liberia. Everyone told us to make bitesized funny clips but we were putting 20-50-minute serious documentaries and they were by far the most popular thing we put up. There was a very well-connected global young hungry audience which wanted to experience big complex global stories in a way that was accessible and no one else was doing it.”

Asked what was different about Vice footage, he said: “It’s made by young people for young people. If our journalists are scared, that makes it into the film. What our journalists are feeling is a huge part of our vernacular.”

Sutcliffe sees this as an essential difference between his films and those of more mainstream media. “The BBC say people turn to it in a crisis for the truth. But people turn to lots and lots of different sources now that the world is a very uncomfortable place … I personally go and find it in 20 different places and make my own mind up. Broadcasters say people trust us but that’s not true. Trust is not the battleground, authenticity is the battleground.”

Such authenticity is potentially harmed by controversies over the relatively close relationship between Vice and Virtue, the company’s agency arm. Last year Capital New York reported allegations from former employee Charles Davis that commercial concerns had killed reports.

Enders said the Vice business model – producing “alternative” content without the huge overheads of the older media companies and using the global, cheap distribution network of the web – had created “enviable financial success”. Yet it raises concerns about the very modern blurring of the distinction between editorial and advertorial content before noting that “traditional media regularly navigates similar hazards”.

Brown has no problem with this, as long as it’s “clearly labelled”. “The best place for us is to make content we want to make and find someone to sponsor it. That’s not going to be an Isis film but if it’s Vice Sports or Munchies, it’s about creating channels or opportunities.”

Besides, his audience are too sophisticated to be taken in for long, Brown insisted. “Young people are real bullshit detectors.”

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