Walt Disney is seeing the future, and that future is in digital media.
Bidness Etc. is reporting that Vice Media, known for it edgy digital media and reporting, is selling a 10 percent stake of itself to A&E Networks. A&E, whose parent companies are the Hearst Corporation and Walt Disney Studios, will pay approximately $2.5 billion for the sale. The deal is expected to be announced later this week.
Vice Media Chief Executive Officer Shane Smith said that it is a great deal. "It means we can preserve our independence and it gives us a war chest for another three years of dramatic growth," he said.
This, for Walt Disney, is the latest step to expanding their presence in the digital media market. Earlier this year, Walt Disney acquired Maker Studios, a major partner of YouTube, for $500 million. Maker Studios has 55,000 channels, 380 million subscribers, and monthly views of over 5.5 billion.
Disney's reasoning lies in the changing of customer preferences. Customers are more apt to watch short-form videos than rely on the printed media, with online content much cheaper to create.
Vice Media was previously in talks to sell a 50 percent stake to Time Warner Inc (TWX) in a deal that would have valued the media company at around $2.2 billion, before it was called off yesterday due to a disagreement over valuations. That deal required Time Warner to hand over its HLN news channel segment to Vice Media.
The media company has been a part of another deal that was executed last year, when it sold a 5 percent stake of the company to 20th Century Fox (FOXA) for $70 million, which valued the company around $1.4 billion.
The deal with A&E will require Vice to handle digital and cable programming for A&E's channels. However, it does not allow Vice to take control of any of its channels.
The Orlando Sentinel is reporting Vice has been searching for a cable outlet -- though it currently produces shows for Time Warner's HBO channel -- to distribute its programing and news to a wider audience.
With A&E, Vice will produce programming for the cable network.
Vice Media currently operates across 36 countries. Its network comprises music, news, sports, and technology. Having started as a Canadian magazine, it has evolved itself into a media company with a large fan following, primarily comprising of younger or "millennial" audience.
Another attractive factor for Walt Disney has been the recent surge in Vice Media's popularity, which is attributed to unorthodox style and content of reporting. For instance, it initiated the meeting between the former basketball star Dennis Rodman and Korea's renowned democratic leader Kim Jong Un in North Korea, generating massive viewership.
Moreover, Vice has achieved many accolades on account of producing distinguished news stories across the globe for Time Warner's flagship premium channel, HBO.
Shane Smith, CEO of Vice Group, said that the company aims to go beyond channel programming to owning channels in the future. He added that he wants to see his company associated with big channels like ESPN, MTV, and CNN in the future.