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TheStreet Open House

Vice Media's Shane Smith Is the Future That Time Warner Wants to Own

Stocks in this article: NYTFBTWTRFOXA

NEW YORK (TheStreet) -- Shane Smith, Vice Media's never-bashful co-founder and chief executive, has never waffled about his view of where media and "media consumption," that most popular of industry terms, is headed. And that may be the biggest reason Time Warner (TWX) may be in talks to buy Smith's Vice Media, owner of the provocative young male-focused Vice web site, a prospective deal valued at $2.2 billion deal that was first reported by Sky News.

Last month in New York, as part of a panel immodestly entitled "The Future of Media" and hosted by the Web site IWantMedia, Smith threw one of his emblematic punches, exclaiming that while he respects the New York Times (NYT), and other legacy print publishers, he wouldn't want to trade places with its chairman, the sometimes embattled Arthur Sulzberger Jr.

"Traditional media has owned the Babyboomers, and now Gen-Y has crept up and caught everyone by surprise," Smith said. "The New York Times and the Washington Post are very good at what they do but their demographic is aging. And now we want to go out and eat their lunch. It is a great time to be in this business, because it's opening, and it should."

The future of media, Smith argued, is the convergence of talent and technology, and everybody is trying to find a good combination of the two. Newfangled publishers such as Vox Media -- The Verge, Eater, Curbed -- are acquiring talent (The Washington Post's Ezra Kelin), while truth be told, legacy print publishers are seeking better technology (The Post's Jeff Bezos hiring 35 to 50 new digitally-savvy staffers in 2014).

But while the words talent and technology look nice together, it's not easy to merge them. The Times' Sulzberger can invest in technology but if his newsroom's culture doesn't sufficiently buy into the digital evolution, revenue growth in the Age of Twitter and user-generated content can be elusive. 

The leaked New York Times' report on "Innovation" made clear that the country's foremost news gathering operation had yet to embrace the way media is currently being consumed. While The Times employs many smart journalists and the Sulzbergers have invested in technology that produces first-rate videos, changing a newsroom culture to embrace Twitter (TWTR) and Facebook (FB) and the rest of social media has been far more difficult.

Asked whether the Times or the Post could learn from Vice Media, Smith scoffed.

"Sure, they can learn a lot from us, but you can't retro fit what you don't already have," Smith said. "There's going to be a correction online and a correction among newspaper, and only the strong will survive. A lot of these publications should go down."

Rather than go down, Time Warner CEO Jeff Bewkes may envision Vice Media as one way to continue going up. 

First off, Vice Media is said to be profitable. Secondly, it attracts a coveted demographic: young men, ages 17 to 35. The web site and its popular You Tube channels offer racy news, compelling stories, glossy photos and juicy gossip about all the usual hot-button topics: celebrities, music, fashion, politics, sports and yes, women. Stories are told in a punchy style packaged with all the bells and whistles of the modern Internet.

It's content created and delivered for consumption on mobile devices. Vice also has formidable international appeal, a factor that Bewkes likely appreciates consider that non-US markets represent the company's fasted growth. Vice operates staffs 35 offices around the world.

Of course, Vice Media's business is based largely on advertising rather than on subscriptions, which might be the reason Shane Smith is said to be considering a sale. Vice began as a print magazine in the 1990s, and although that magazine continues to be published, it accounts for only about 5% of revenue, Sky News reported. Vice's real attraction is in video and stories that go viral. 

Ad-based publishing, meanwhile, has become a terribly confounding business, explains Mike Vorhaus, the Los Angeles-based president of the consultancy Magid Associates.

"Vice is a content company, and it certainly offers a demographic that is likely to be attractive to time Warner," Vorhaus said in a phone interview. "But it's business is based in advertising, and right now, all ad-based publishers are struggling. Time Warner likely sees Vice as a hip content company with which it can do more than just sell ads. I wouldn't be surprised if they see a ViceTV if this deal goes through."

Smith may have tipped his hand at the IWantMedia event, admitting that although Vice Media has great popular appeal, it too faces many of the same difficulties as all publishers in "monetizing" digital platforms. So much for the fire-breathing.

Advertising, social media and hip content leads us back to Time Warner. 

Sky News reported Monday that any deal for Vice Media would have to satisfy the company's minority shareholders, which includes 21st Century Fox (FOXA), a Time Warner rival. Fox bought a 5% stake in Vice Media last year in a deal that valued the company at $1.4 billion. Any transaction with Time Warner would also have to satisfy the advertising company WPP, another minority stakeholder.

A lot of moving parts but a transaction that could appeal to both Shane Smith and Jeff Bewkes.

A Time Warner spokesman, in an e-mail, said the company had no comment on the Sky News report. A Vice Media official wasn't immediately available for a comment. Shares of Time Warner were rising 0.2% to $69.11, trimming its 2014 loss to 0.9%.


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-- Leon Lazaroff is TheStreet's deputy managing editor.

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Leon Lazaroff is TheStreet's deputy managing editor.

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