A+E, Vice Create Cable Network Viceland for Young Viewers

  • Disney and Hearst, A+E's owners, expand investment with accord
  • Ad sales on pay TV could exceed what Vice generate online

A+E Networks, co-owned by Walt Disney Co. and Hearst Corp., formed a new cable network with Vice Media Inc., called Viceland, giving the upstart video company a mainstream TV outlet to air shows about gay culture, marijuana and music.

The channel, previously A+E’s H2, will start in early 2016 and reach 70 million homes, the companies said Tuesday in a statement. Vice, led by co-founder Shane Smith, will supply the programming, while A&E Television Networks LLC oversees technical operations.

Vice is expanding its presence on conventional TV to target advertising sales that could surpass what it gets online. Earlier this year, the company said it would produce a daily news show for Time Warner Inc.’s HBO, in addition to the weekly newsmagazine it already makes. It’s also partnering with Rogers Communications to establish a TV channel in Canada and plans to create networks in European countries as well.

“It makes strategic sense for Disney to continue to expand distribution to new
digital platforms, both inside and outside the multichannel cable bundle,” said Anthony DiClemente, an analyst at Nomura Securities International Inc. who recommends buying the stock. “Disney doesn’t have a cable news network, so although they own ABC News, this expands their genre portfolio.”

Brooklyn-based Vice will own less than 50 percent of Viceland, which will remain controlled by A+E, according to people with knowledge of the matter. As part of the deal, A+E will increase its ownership stake in Vice to between 15 and 20 percent, from 10 percent previously, said the people, who asked not to be identified discussing terms that weren’t announced publicly.

Disney is separately making a $200 million investment in Vice, obtaining a stake that’s distinct from its interest in A+E.

The Burbank, California-based entertainment giant probably has accumulated a 12 percent to 16 percent interest in Vice, including its share of the A+E holdings, according to DiClemente.

Disney and Hearst are bolstering their interests in a new media company that’s successfully reaching younger audiences, viewers who have shunned the traditional pay-TV package in favor of online content or so-called skinny bundles from cable, phone and satellite companies.

The audience at A+E’s namesake cable network has fallen more than 20 percent so far this TV season among viewers between the age of 18 and 49 compared to a year ago, according to Nielsen data. Viewers were also down last year, underscoring the company’s need to broaden its reach to the younger viewers that advertisers want to reach most.

“We want to learn from them,” Nancy Dubuc, chief executive officer of A&E Television Networks, said in February. “They are talking to a generation that we’re struggling to connect to, and I say we as the royal we, as an industry.”

Vice, which has attracted investors like 21st Century Fox Inc. and Disney with its portfolio of Websites and online video channels, has been hunting for a home on TV for more than a year, and had been reported near a deal for H2 since April. Smith unveiled a slate of programming in May that was earmarked for its eventual TV channel, though the company didn’t specify where the programming would air at the time.

Spike Jonze, a filmmaker who has long been involved in Vice’s video business, has shepherded the development and production of those shows, which include “Gaycation,” featuring actress Ellen Page, and “Black Market,” with actor Michael K. Williams.

“Our mission with the channel is not that different from what our mission is as a company,” Jonze said in Tuesday’s statement. “It’s us trying to understand the world we live in by producing pieces about things we’re curious about, or confused about, or that we think are funny.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE