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Vice Devalued: Disney Writes Off $157 Million of Its Stake in Struggling Media Company

UPDATED: Vice Media, after flying high with an eye-popping $5.7 billion valuation, is falling back to Earth.

On Thursday, Disney disclosed a $157 million write-down on its stake in Vice as part of reporting results for the September 2018 quarter.

That represents a decline of around 40% from Disney’s original $400 million investment in Vice three years ago. Disney has a direct 11% ownership stake in Vice (as of Sept. 29, 2018). But the math here gets opaque: Disney’s stake also encompasses A+E Networks’ 20% stake in Vice; Disney owns 50% of A+E in a joint venture with Hearst Corp.

Meanwhile, Vice’s valuation increased from $4 billion at the time of Disney’s direct investment to the $5.7 billion valuation after it received $450 million in new funding in June 2017 from private-equity firm TPG. So that means Disney’s ownership stake in Vice appreciated in value. It’s not clear what Brooklyn-based Vice is valued at now, but Disney’s write-down (based on its estimated 21% total stake in Vice) suggests Vice has lost around $750 million in value since the TPG funding.

A Vice rep declined to comment on Disney’s write-down or its current valuation.

In any case, Disney is set to boost its ownership in Vice: The media conglomerate will obtain 21st Century Fox’s stake in Vice Media under the $71.3 billion asset deal between Disney and 21CF, expected to close in the first half of 2019. Fox had originally invested $70 million in Vice in 2013 for a 5% stake at the time (giving Vice an implied valuation of $1.4 billion five years ago).

Disney’s devaluation of Vice comes as revenue growth at Vice has stalled and the company is struggling to reduce costs under new CEO Nancy Dubuc. The company, whose operations span multiple websites, TV shows, magazines and the Viceland cable network, is trying to avoid layoffs per se and is looking to reduce headcount by instituting a hiring freeze and not hiring replacements for staffers who quit.

The belt-tightening at Vice was first reported by the Wall Street Journal, which said it’s looking to reduce headcount by 10%-15%. A source familiar with Vice said there’s no hard percentage is targeting for the staff reduction. In addition to the hiring freeze, Dubuc is planning to consolidate Vice’s roughly one dozen vertical sites (which the company calls “channels”) by half, the Journal reported.

In July 2017, Vice cut around 2% of its 3,000 employees across multiple departments while expanding internationally and boosting video production.

Dubuc, formerly CEO of A+E Networks, joined Vice as CEO earlier this year in the wake of a sexual-harassment scandal at the company that resulted in the exit or firing of several execs. Co-founder and ex-CEO Shane Smith moved into a new role as executive chairman.

For 2018, the company is expecting revenue of $600 million-$650 million — flat with last year, the Journal reported. Vice is pegging a loss of over $50 million this year, versus a loss of over $100 million last year, per the WSJ.

Last week Dubuc said she expects Vice to become profitable again within the next fiscal year. The CEO noted that Vice was profitable a few years ago, before it invested heavily in the launch of the Viceland cable channel and international expansion.

Vice, which is reliant on digital advertising, is far from the only company hurt by the recent downturn in digital media. This week internet-video producer Defy Media announced that it had ceased operations, with the owner of content brands including Smosh and Clevver blaming “market conditions” for its demise.

Correction: An earlier version of this story said Disney’s write-down suggested that Vice’s valuation had declined by more than $2 billion. However, that estimate did not account for Disney’s ownership position in A+E Networks, which holds an 18% stake in Vice. Factoring that it, the Disney write-down implies Vice’s valuation has dropped more than $800 million since its funding in mid-2017.

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