Rupert Murdoch buys into alternative media with a $70m slice of Vice

Deal values online youth empire that started as a local magazine at a hefty $1.4bn

Last October, the media proprietor Rupert Murdoch asked his Twitter followers: “Who’s heard of Vice Media? Wild, interesting effort to interest millennials who don’t read or watch established media. Global success.” Another tweeter quickly shot back: “Are you buying them?” “No way!” Murdoch replied, “Last thing they need is corporate sponsorship.”

It now appears that Mr Murdoch was being somewhat disingenuous: not only is Vice’s global success based in part on a series of lucrative sponsorship deals, but tomorrow it will also be announced that Murdoch’s 21st Century Fox has procured a 5 per cent stake in Vice Media for $70m (£45m). The deal values the free underground magazine-turned-global entertainment/news brand at $1.4bn.

Vice was founded as a government-funded community magazine in Montreal in 1994. Until six years ago, its print edition still accounted for around 70 per cent of the business. Today it accounts for less than 5 per cent. The company, which now has its headquarters in Brooklyn, New York, has 35 offices in 18 countries, a record label, an advertising agency, and an HBO television series.

Last year, the Vice.com website grew from two million monthly users to 15 million, and the company generated annual revenue of $175m in 2012. Speaking to The New Yorker for a recent profile of the Vice empire, the chief executive Shane Smith said, “The overall goal is to be the largest network for young people in the world.”

The Vice record label has previously released albums by Bloc Party and the Raveonettes, and in April 2013 put out Snoop Dogg’s reggae-themed LP, Reincarnated, under his new pseudonym, Snoop Lion.

Earlier this year, HBO aired its first series of half-hour Vice documentaries, presented by Mr Smith and featuring serious foreign reporting – or, at least, reporting on serious foreign subjects. The show’s subject matter ranged from child suicide bombers in Afghanistan, to the basketball legend Dennis Rodman’s controversial visit to North Korea, where he and Vice staff were entertained by the country’s leader, Kim Jong-un.

The tone and approach of the HBO series had been perfected by Vice online in the preceding years. One of Vice.com’s first YouTube documentaries, “Heavy metal in Baghdad”, was a 2006 film about an Iraqi band formed against the backdrop of the Iraq War.

The deal between Vice and Mr Murdoch was reportedly signed before the 82-year-old mogul broke his empire in two this summer. Vice joins not News Corp – Murdoch’s suite of “established media” publishing brands such as The Sun, The Wall Street Journal – but its younger broadcasting and entertainment sister, 21st Century Fox: the home of Fox television, Fox News and the film studios.

Mr Murdoch’s newly formed firm also includes Sky and the Asian satellite broadcasting network Star TV, both of which Vice intends to use to push its film and television content internationally. Mr Smith told the Financial Times, “I want us to be the next MTV, ESPN and CNN rolled into one… We have set ourselves up to build a global platform.”

In spite of Mr Murdoch’s investment, and that of several other minority shareholders including the global advertising conglomerate WPP, Vice’s own senior management still controls some 75 per cent of the company. That, Mr Smith added, “gives us the freedom to do what we want to do”.