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The once-hot media company is being sold for scrap, but its co-founder made himself one of the riche͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
 
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March 20, 2023
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Ben Smith
Ben Smith

Welcome to Semafor Media, where we break the news behind the news.

Saturday morning brought an old familiar feeling to editors and political journalists around the country: A STATEMENT FROM DONALD TRUMP to send us careening around, trying to figure out how to cover a story of massive public interest whose protagonist has already tried to write your headline.

We’ve got some ideas about how to do better this time, and in Semafor’s Principals newsletter we’ll do our best to keep our eye on the powerful forces at play in Washington, as well as the former president’s campaign. Still, good luck to us all!

Max’s big story today is on another great hype man of the 2010s: Shane Smith, the Vice media co-founder who for a time seemed to embody a new generation of media, and who has quietly vanished. Max offers a new accounting at how much money he took with him.

ALSO: Texts with CNN chief Chris Licht, WME moving in on Washington, and AI can now do fingers.

Want political news with just the right amount of Donald Trump? Sign up for our daily Principals newsletter. 

Box Score

New York: Former president Donald Trump called for mass protests in the event that he is arrested this week. He’s still getting his message out almost exclusively through his little-used Truth Social.

Washington: TikTok is lobbying US lawmakers against banning or forcing the sale of the company by dispatching some of the platform’s influencers and creators to the nation’s capital this week. — The Information

Silicon Valley: ChatGPT4 could emerge as a “copilot for the mind,” writes Dan Shipper, in a practical-minded look at what the new chatbots could do for the writing professions. — Every

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Max Tani

Shane Smith made more than $100 million from Vice

Brad Barket/Getty Images

THE NEWS

After Vice raised $500 million in 2014, its CEO and co-founder Shane Smith remarked to a friend that he’d become “post-economic.”

Brash, decadent, and charming, Smith was the burly, bearded face of Vice Media through its decade of apparent prosperity, from the late aughts until the late 2010s. Vice’s image as a new kind of culture business intertwined with his own image as a big new media mogul: He drove a vintage Rolls Royce, bought a mountain in Costa Rica, and reportedly dropped over $300,000 on a single Las Vegas dinner. He handed out bonuses in the form of fistfuls of (company) cash at a holiday party. He bought the $23 million Santa Monica mansion made famous by the movie Beverly Hills Cop.

But as investors sell off what’s left of Vice, it’s increasingly clear that the lavish spending helped create an illusion of prosperity.

And close watchers of the company continue to wonder: Where has Smith, who remains Vice’s executive chairman, gone? And, more to the point, how much cash did he extract from Vice?

The company remains tight-lipped on Smith’s role and his personal gains. Smith himself, once ubiquitous, has spent the last few years on a disciplined campaign to lower his own profile, and also declined to comment.

But a person with direct knowledge of the transaction revealed one remarkable detail: Smith sold more than $100 million of his own shares — about a quarter of Vice’s current value — when A&E and Crossover Ventures invested a collective $500 million in Vice in the 2014 deal that made him “post-economic.” He also drew a salary of $1.6 million (plus bonus), a number unheard of among startup investors, according to a divorce filing reported by Business Insider.

Vice’s change of fortune was on display last week at the South by Southwest media festival in Austin. In previous years, Vice threw wild parties featuring baby goats, pop-up roller rinks, and wild concerts with A-List rappers. This year, the company was nowhere to be found. But Smith himself was nearby: One person there told Semafor that they’d seen him in Austin, playing cards at the SoHo House.

MAX’S VIEW

It’s understandable why Smith continues to lay low. The Vice co-founder predicted that the company would be worth $50 billion sometime in this decade, and acted accordingly, turning down the opportunity in 2015 to sell it for $3 billion to Disney. As media valuations began to turn in 2017, Vice raised another $450 million from the private equity firm TPG at a paper valuation of $5.7 billion, and didn’t reveal how much equity, if any, Smith sold.

Even when scrutiny of the dark parts of the company’s hard-partying culture and increasing pressure from investors forced Smith to relinquish his CEO title in 2018, he described himself and incoming CEO Nancy Dubuc as a “modern day Bonnie and Clyde” who were “going to take all your money.”

That prediction did not bear out. And now, the investors who believed his vision are picking up the pieces. Vice’s years-long struggle to find a buyer have pushed a company that once valued itself at nearly $6 billion to the edge of potential bankruptcy. As Semafor first reported last year, Vice has struggled to pay its bills, a situation that forced vendors to dispatch collection agencies to force the millennial-focused media company to pay up. Earlier this month, Dubuc resigned, as did global president of news & entertainment Jesse Angelo.

The core problem is that Vice was presenting what were, at best, a set of decent businesses — producing content for HBO, running an ad agency, a website, and a studio — as something novel and hazily scalable. Now Fortress Investment Group, Vice’s controlling investor, continues to field different offers for the business and its parts with the help of advisors PJT Partners and investment group Liontree.

Earlier this month, Group Black, the company aimed at increasing Black-owned-and-operated media firms, submitted a bid for Vice for $400 million, a far cry from the astronomical valuations of the past. And in recent months, Vice’s investors have canvassed potential buyers for different assets such as the women’s culture and lifestyle site Refinery29. In an interview this week with Variety, the company’s new CEOs said they were “in a process of looking at a number of options and will reflect on what we receive.”

It’s now virtually impossible that Smith, or any early Vice investors, will receive anything in exchange for their shares in the company, as Fortress’s investment will be paid back first. But equity aside, his compensation was wildly out of sync with other media founders of his generation. (Don’t shed a tear: They make the big money when their companies sell or go public). Public filings from BuzzFeed, whose valuation has also sunk since the mid 2010s, show CEO Jonah Peretti making a salary of $325,000.

KNOW MORE

Even after Smith began to lower his public profile and installed Dubuc at Vice, he retained a large and previously unreported role in the company. In the months before the pandemic, Smith still maintained an office in Vice’s Venice bureau. Two staffers told Semafor that a driver would often chauffeur him to the office in an SUV with blacked-out windows.

He also still had plenty of potential ideas for content. He was no longer the company’s swashbuckling chief correspondent, but after Anthony Bourdain died, he told staff he was interested in hosting a travel/food show in the style of Bourdain. And when Covid hit, he hosted a Vice TV pandemic interview show from his home office.

Crucially, he helped “broker” Vice’s last great deal, the rescue of Vice World News by the Saudi-backed Greek company Antenna, a person familiar with the talks said.

I spoke to nearly two dozen people who at one point interacted closely with Smith, or occupied senior levels at his company. Few had any idea how he how he now spends his days: When asked about some of our reporting this week, the company’s former spokesman Alex Detrick cautioned me against reporting several tidbits I’d heard from former Vice higher-ups, saying that Smith keeps in touch with just a handful of current and former executives at the company, and they likely weren’t the ones who’d talk to me.

But while he’s vanished from the day-to-day aspects of the business, he remains visible in one place: His name continues to pop up on Emmy awards submissions for Vice News productions.

ROOM FOR DISAGREEMENT

“Trust in traditional media has eroded, there are more ways than ever for our audiences to consume our content and revenue models are evolving faster than ever,” the company’s new co-CEOs wrote in a recent memo obtained by the New York Times.

NOTABLE

  • The New York Times’s Emily Steel reported in December of 2017 on sexual harassment at Vice. Smith expressed “extreme regret,” but the story diminished his ability to serve as the face of the company.
  • Vice Media was “built on a bluff,” Reeves Wiedeman wrote in June of 2018 in New York Magazine, noting that the tough terms of the TPG investment could turn it for Smith into “the worst deal he ever landed.”
  • The company is now living on a loan from Fortress Investment Partners, the Wall Street Journal reported last month.
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One Good Text

Chris Licht is the chairman and CEO of CNN.

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Intel
Scot Pansing/Midjourney

This is not a real photograph!

AI image generators have finally cracked the ultimate challenge in creating fake photos: five-fingered hands.

Talent agency WME is in talks to buy the Ross Yoon Agency, a D.C.-based literary talent agency that has represented political figures James Clapper, Neal Katyal, and Peter Strzok and journalists Jonathan Chait and Karen Tumulty.

The Wall Street Journal’s Alexandra Bruell is inside the New York Times union’s slack, as management fights the union and the union fights itself.

The buzzy podcast startup Kaleidoscope, launched by ex-iHeartMedia and Mental Floss executive Mangesh Hattikudur and ‘Sleepwalkers’ host Oz Woloshyn, is ramping up production on several new shows, including a series about cricket hosted by ex-Das Racist rapper Heems.

New York Magazine editor David Haskell has a cameo in World of Interiors, which describes his apartment as a “punchy potpourri.”

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Reading

Getting It Right

John Walcott, who led the Knight Ridder bureau that refused to dance to the Bush Administration’s tune before the Iraq invasion, reflects on that era and this one in a new Foreign Affairs piece that’s well worth your time.

“The failed wars in Afghanistan and Iraq show what happens when top officials ignore their subordinates or assemble their own teams of analysts to confirm their biases —and when journalists become stenographers for them,” he writes in a piece that feels intensely relevant at a moment when a great deal of global comes to Americans through intensely polarized Washington lenses. Walcott commends reporters to “experts and scientists inside and outside the Beltway and more junior staffers and military officers much closer to the relevant intelligence.”

“If you want to know the local crime situation, ask the residents and the cops on the beat, not the police chief or the mayor,” he concludes.

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— Ben

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