Shane Smith will take your money now

It was the end of the '90s in the teeny Canadian magazine industry.

Vice was sprinting towards disaster and Shift, where I worked as an editor, was going right with it. We were niche publications, one from Montreal, the other from Toronto, with young audiences and novel takes on the Zeitgeist. Our mutual backer was a software mogul named Richard Szalwinski, who brought us together in a hasty plan to break into the United States. Nobody used the term "multi-channel" back then but that's what Szalwinski envisioned: print brands with strong branches in digital, e-commerce, bricks-and-mortar retail and TV.

The problem wasn't just his wild ambition. The timing was horrible, too. Not long into the venture, Szalwinski's funding started drying up. Then the dot-com bubble popped. Vice and Shift were left barely alive, sharing an expensive office in Manhattan. Where could they go from there?

For Shift, the solution was pragmatic—retreat from the U.S., drop the brand-extension plans and regroup back in Toronto with a new investor. For Vice, however, there was no going home. Their style was obstinacy; whatever the crisis of the moment, and this was a major one, they'd push right through it, balls-first.

The magazine was founded in 1994 by self-styled upstarts Suroosh Alvi, a recovering heroin addict; Gavin McInnes, a tree-planter and cartoonist; and Shane Smith, a doughy punk turned gabby marketer. They ran Vice like a boys-only clubhouse, churning out scruffy, unholy content—"The Vice Guide to Giving Head," "The Vice Guide to Shagging Muslims," and so on. The triumvirate were such audacious salesmen that industry observers expected Vice to do okay even as the economy melted. Still, nobody predicted that this scrappy little rag would become one of the most powerful media brands in the world, with a purported valuation in the billions.

Although Vice was started with government money, by 2012 Smith was blasting Canada for creating a risk-averse business culture that discourages creativity, saying, "I came to America from Canada because Canada is stultifyingly boring and incredibly hypocritical."

Two years later, Vice Media and Canada apparently were no longer antithetical concepts. On Oct. 30, 2014, Smith appeared at a press conference with Guy Laurence, his CEO counterpart at Rogers Communications, to announce a three-year, $100-million joint venture. Sitting atop the Canadian media scene with assets that sprawl from cable to sports (the Blue Jays) to mobile to magazines (Maclean's, Chatelaine), you couldn't get much more mainstream than Rogers. Thus the moment called for hipster drag: Laurence, a garrulous Brit, put on a shiny leather jacket over his dress shirt and called Smith "my buddy." Laurence, a 50-something, and Smith, a 40-something, announced they'd decided to make shows for 20-somethings who don't watch television. Their future together was, of all things, in legacy media. Key to the partnership was building a studio in Toronto's Liberty Village to make content for Viceland, a specialty channel that would launch in February, 2016.

"We look at television. We look at online. We look at mobile. Fuck, we'll look at holograms," Smith said. (I've been imagining Rogers executives testing out the Smith style of rhetoric, carefully promising to "fuck shit up.") "I'm platform-agnostic," Smith continued. "I just want my content to get out to as many people as I possibly can, because I believe my content is better than everybody else's."

By hooking up with the media elite, Vice Media has pulled off one anachronistic coup after another. Apart from Rogers, Smith has convinced old-guarders like Rupert Murdoch and Disney to part with hundreds of millions to invest in a supposedly new-fashioned media company that, just like old-fashioned media companies, relies on ad sales and sponsorship deals. The suits seem to adulate Smith as much as they love the dangling carrot of a global millennial audience. But deep inside these organizations, and in the industry at large, Vice has its share of skeptics. Even while Vanity Fair included Shane Smith in its 2015 roundup of "the new media establishment," the editors couldn't help but scratch their heads. "Can someone please explain why Vice is worth all the fuss?" said the write-up. What everyone admires about Vice is a ruthlessly consistent brand, with an amazing hawker in Smith and a cunning sense of timing. Still, why all the fuss?

Smith does 90% of the talking for Vice and poses for 95% of the photos to promote it. To the staff of his company, he's the sun god around which the cult revolves. Vice executive Michael Kronish remembers Smith speaking at the MIPCOM TV trade show in Cannes in 2014. "That was a tough crowd," says Kronish, who heads up Vice's TV and online operations in Toronto. "They were these bitter, disillusioned media people from all around the world who hate their lives, and he just came out there and blew the room away."

In a stage interview during MIPCOM with Alex Carloss of YouTube, Smith explained how Vice, or rather Shane Smith, compared to the founders of the cable revolution. "I'm going to be 10 times ESPN, I'm going to be 10 times MTV, I'm going to be 10 times CNN."

He may talk about Vice in the first-person now, but Smith was actually the third individual to be involved in the magazine that birthed the empire. The origin story starts with Suroosh Alvi co-founding The Voice of Montreal, which was funded by a welfare-to-work program, after studying philosophy at McGill, teaching English in Slovakia and battling substance abuse.

Alvi knew Gavin McInnes, who came on board as cartoon editor. McInnes in turn knew Smith from younger days in Ottawa. Smith, a poli-sci grad from Carleton and member of a couple of punk bands, one of which was called Ultraviolet Booze Catastrophe, started working on The Voice around the third or fourth issue. After separating from the original backers, the trio rebranded as Vice and carried on as one of a clutch of free English-language alternative newspapers in a French-language city. Theoretically, there was no reason for their product to survive.

At some point, Smith says, he lied to a newspaper reporter in Montreal, braying that there was investor interest in Vice from Richard Szalwinski, a man who made his fortune developing special effects and animation software. The story goes that Szalwinski read the resulting article and, in 1998, purchased 25% of Vice for $1 million, a valuation that the Vice guys say they pulled out of a hat. With the infusion of cash, Vice went from newsprint tabloid to glossy pop culture magazine. And then it tried to take New York.

When I think back on Shift, I recall a distant parent company with constantly changing priorities and an elusive leader in Szalwinski. When the dot-com era deflated and the creditors piled up, by all accounts he stopped picking up the phone.

In 2000, the Shift staff nobly bought back the magazine for a nominal sum and took on its debt (by that time, I'd moved to The Globe and Mail). They then sold it to a Canadian media company, which finally gave up the fight and closed the magazine in 2003. The Vice guys also bought back Szalwinski's share of their brand in a similar deal and later moved into a loft in pre-hipster Brooklyn. Being so close to death while at the same time believing you could still make it in the States was a peculiar position to take. But what was there to lose?

Though roles weren't always clearly divided in Vice's early days, Smith was the chief salesman, McInnes the editorial voice and Alvi, according to a journalist who worked with them at the time, "the quiet one in charge." The stuff they published had a horny, thorny point of view—largely that of McInnes, who wrote many of the stories himself, including the "Dos and Don'ts" column of raunchy takedowns of street fashion. Writing under his own name or pseudonyms (often female), this Ottawa boy brought the Brooklyn flavour to the editorial voice.

"They were like the Three Musketeers—very close and protective of each other," says a former Vice columnist. "Nothing could get between them, no woman, no rumour, no bad blood….All three of them had to be on board with an idea or it wasn't going to happen."

In due course, they launched Vice Music, a record label. They started publishing in Europe, Japan and Australia, and added streetwear retail stores in each of SoHo, Los Angeles, Toronto and Montreal. The stores were later shuttered but at the time they helped build brand cred. On all fronts, Vice was clawing its way back from the brink, sporting a Williamsburg cool denoted by cans of Pabst Blue Ribbon, trucker hats and acidic irony. Vice became to publishing what American Apparel—another taste-impaired upstart out of Montreal that was one of its earliest advertisers—was to fashion. In its pages, photographer Terry Richardson took skeevy photos of really young women, and comic Sarah Silverman detailed her bodily functions.

In a set of loose cannons, McInnes was loosest and, ultimately, the liability. Smith and Alvi were keen to go up into the next level, talking to bigger investors. But McInnes, meanwhile, couldn't keep his thoughts to himself. In 2003, The New York Times published the first nail in his coffin at Vice. "I love being white," he was quoted as saying, "and I think it's something to be very proud of. I don't want our culture diluted. We need to close the borders now and let everyone assimilate to a Western, white, English-speaking way of life." There was outrageous, and then there was outrageous: Having an in-house bigot wasn't a good fit with a brand that was about to size up dramatically.

In 2006, Vice signed its first meaningful joint venture, with media colossus Viacom, whose co-president, Tom Freston, took a shine to Smith and company. The fit was obvious. Freston had spun gold with irreverent youth-oriented programming as a co-founder of MTV. It wasn't far from Beavis and Butt-Head to Vice. Freston joined the boys in launching VBS.tv, a pioneering online network for Vice's original videos. Not only was Vice now into real money, it was morphing from a magazine-centric brand to a video-first brand. The digital media operation soon eclipsed all the other limbs of Vice—record label, retail, print and all.

Soon after Freston came aboard, McInnes left the company in what was generously labelled "creative differences." Once a brother to Smith, he was excised from the official history of Vice.

With McInnes gone, the third slot next to Alvi and Smith was filled by fellow Canadian Eddy Moretti, who had joined the company in 2000 and later became the chief creative director. When VBS.tv launched, he led a guerrilla film crew into Iraq to shoot Heavy Metal Baghdad, a feature-length film about the sole metal band in the city. He went on to document gunrunners in Pakistan, environmental abuse in Alberta's oil sands and Hezbollah in Beirut.

For his part, Smith began stepping in front of the camera as a khaki-wearing journalist fearlessly scoping out danger zones like North Korea, Iran, Kashmir and Afghanistan. While the infamous stunt of taking Dennis Rodman to North Korea for some "basketball diplomacy" made Vice look juvenile, the new style was gaining definition.

Calling bullshit on the media business was a specialty of the revered late New York Times reporter David Carr. In Page One, a 2011 documentary about the Times, he sits to interview Smith and crew, who start amping up Vice's "trusted brand" status. Waving his hands, Smith talks about how Vice reports what young people want to see, stuff traditional media like the Times won't touch—for instance, "The Vice Guide to Liberia," in which Smith and crew show a feces-strewn beach and he talks to cannibals about their practice of drinking the blood of children. Carr cuts him off right there. "Before you ever went there, we've had reporters there reporting genocide after genocide," he says. "So just because you put on a fucking safari helmet and look at some poop, that doesn't give you the right to insult what we do." Smith, for once, looks cowed. "So continue," Carr says.

Even so, when he wrote a piece about Vice, Carr praised VBS.tv's docs as "pretty rugged, pretty wonderful television." Indeed, Vice's journalism has been strong for about a decade now, as the brand has moved away from puerile pursuits and broadened its global vision. Those early news videos led to the Vice News web channel (or "vertical"), plus a sophisticated suite of award-winning documentaries Vice produces with HBO, and the fun roster of shows currently airing on the Viceland channel.

As Vice's content got better, Smith's skill as a marketer grew too. He craftily erected verticals exactly where advertisers could reach young people, starting with the music channel Noisey, the arts channel Creators Project and the tech-focused Motherboard. In 2011, Vice Media broke through the $100-million mark in revenue (this figure and those following are in U.S. dollars, except where noted). Last year, Vice reportedly reached over $900 million in revenue. These are the figures that somehow perpetually find their way into the media, yet officially Vice won't confirm them. Whatever the origins, they sound impressive, especially to old-school media executives who see Vice as a beacon in a dark and arid business landscape.

The first media player to invest in Vice was Viacom, in 2006; but in 2010 Vice bought back the stake. A march of longer-term investments began in 2011. The first set included Tom Freston. He'd lost his job at Viacom after a falling-out with chairman Sumner Redstone, but remained an éminence grise at Vice. Joining him was media merchant bank the Raine Group. In 2013, Rupert Murdoch's 21st Century Fox signed on, getting 5% of Vice for $70 million. In 2014, A&E, owned by Disney and Hearst, invested $250 million for a 10% share. Shortly after, A&E gave Viceland the spot previously occupied by H2, a History Channel spinoff. Disney, in its own right, has since put another $400 million into Vice. Also in 2014, Silicon Valley venture capital fund Technology Crossover Ventures took a $250-million slice of Vice.

What does it all add up to? The question was put to Jake Goldman, Vice Media's communications director in New York, and the company was given a week to respond. He would not illuminate Vice's overall ownership structure, nor would he name the members of Vice's board. But most of the 2011 investors appear to have been given seats. Murdoch delegated his son James Murdoch, who had resigned as a News Corp. executive in 2011 after the company pushed edgy journalism too far, resulting in the phone-tapping scandal and the closure of News of the World.

Vice, being privately held, also doesn't make its financials public. But the deals imply total values. A&E paying $250 million for a 10% stake pointed to Vice being worth $2.5 billion. Recent media reports have put the figure at $4 billion. Smith said last year the company was worth "north of $6 to 7 billion." So much cash was "sloshing around" in 2014, in fact, that Smith floated the idea of an initial public offering that, he said, would give Vice a value equalling Twitter ($28.9 billion at the time). "We'd be stupid not to test what the market would bear," said Smith. On the other hand, an IPO would require Vice to provide and prove its numbers.

With all that cash in hand and a full head of steam, Vice Media now has approximately 2,000 employees worldwide, a presence in more than 30 countries and 11 verticals, including the women's channel, Broadly, which has brought Vice's once-67% male audience closer to 50%. (In May, Smith announced that six more verticals will be added this year.) And it now has bigger digs: Vice obtained New York state tax incentives to complete a $15-million expansion of its Brooklyn headquarters, complete with broadcast and production facilities. The workforce there has grown to more than 750.

Vice's newest arm, Viceland, has, since it started piping into 70 million U.S. homes in February, offered far better TV than most nascent channels do. OWN, which Oprah Winfrey launched five years ago, still doesn't have a show as on-brand and entertaining as Viceland's Fuck, That's Delicious, a culinary tour starring rapper Action Bronson, or Gaycation, in which actor Ellen Page and her pal Ian Daniel sample LGBT culture around the world. Having Oscar winner Spike Jonze (Her) as Viceland's creative director seems no small thing.

Ratings, however, are not yet available. Public or private, Vice still has to live with numbers calibrating its stickiness. Vice.com's unique-visitor count is far behind rival Buzzfeed's—50 million compared to 80 million in February—but Vice claims more than double the valuation of Buzzfeed. Even with those higher traffic numbers, Buzzfeed missed its 2015 revenue targets and subsequently slashed its 2016 revenue projections in half, to $250 million. That does not bode well for the new-media market. It also brings into question how much Vice is really pulling in this year.

Variety pointed out this spring that Vice was inflating its audience numbers by rolling in figures from click-bait sites like Dose, OMGFacts and Distractify, for which Vice had sold advertising—sites that have nothing to do with Vice.com. But it's common knowledge that everyone in the business inflates their audience numbers. "If a media buyer isn't a cynic, they haven't been paying attention," says Brian Wieser, a media analyst at New York-based Pivotal Research. Wieser is fascinated by Vice's rocket ride, and says that a key piece is Smith's genius for hype. "Still, you shouldn't conflate this skill with assuming they're going to take over the world," says Wieser. "They're still a media company. There are limits to their growth."

Inside Rogers, a well-circulated narrative has it that the Viceland deal is a lopsided one, and not remotely worth the $50 million Guy Laurence has committed. Things got off on the wrong foot when Laurence and Shane Smith came to a meeting of the minds essentially on their own, over a series of drinks at bars. (Laurence referenced "the pub" in his news conference.) The outline of the deal was set before the public corporation's phalanx of accountants and benchmark-setters came in to figure out the details and deliverables. When I asked for comment from those in charge of the joint venture, Rogers' television and ops executive Colette Watson and Vice Canada president Ryan Archibald denied any trouble aligning goals or targets. Archibald says Vice is as serious about setting and meeting key performance indicators as any company.

Yet Vice, as Wieser says, is still a media company and, just like the TV and radio stations and magazines in Rogers' media division, it's dependent on an unpredictable advertising climate. According to one source, who requested anonymity, Vice's Canadian digital revenue is quite small, below $10 million (Canadian) annually. Both companies declined to comment on the matter.

Culturally, Vice and Rogers (where, by way of disclosure, I once worked as editor of Chatelaine) are like chalk and cheese. Lacking a pierced-and-inked officer to appoint as liaison, Rogers decided that Navaid Mansuri, a long-standing finance and operations executive, would be VP of content partnerships, reporting first to Keith Pelley and then to Rick Brace, the head of media at Rogers. Mansuri was in charge of "operationalizing" the joint venture, alongside David Purdy, a senior Rogers executive on the content side of the business. Neither Rogers nor Vice will comment on the particulars, but by the end of 2015, Mansuri was no longer in his job and Purdy had leapt to the other side, becoming Vice's chief international growth officer. Purdy's move raised more than a few eyebrows inside Rogers, coming at a time when the company was struggling to come to grips with a business plan for Viceland. (Purdy was not available for an interview.)

I spoke to Mansuri in late April. But, given his non-disclosure agreement with Rogers, he couldn't say much. When I asked him why he left Rogers two months before the launch of Viceland, which he was overseeing on his company's behalf, he would only say, "[There] was a discussion between myself and my manager, Rick, that it was time to look at different options."

There are other chafing points that extend beyond the TV and mobile plays. The feeling at Rogers is that a $100-million partnership between two "buddies" should extend to courtesy in other divisions of the company. For instance, Maclean's was without a dedicated correspondent on the ground in Paris after the terrorist bombings swept the city last November. Rogers requested permission to post a story from Vice, which did have a reporter there, but Vice declined.

There's no sign of anything but relaxed bonhomie at Viceland Canada headquarters in the converted warehouse neighbourhood of Liberty Village, where at 9:30 a.m. the staff is just trickling in, coffees in hand. There's an old-timey wooden bar stocked with liquor, and a gallery of stills from Vice's war-zone docs. Most of the 150 staff based here work at a bullpen-style expanse of long tables with iMacs on them. A glass-enclosed lounge set to the side, with its tufted leather sofas and raw wood tables, completes the hipster cliché.

Here I meet with Michael Kronish, executive vice-president of TV and online at the Toronto operation, and Vice Canada president Ryan Archibald, who is a Vice veteran. Archibald is wearing a piece that fans of the brand covet: a Vice logo turned into a gold ring.

The two avow that Vice will not ossify as it grows, but continue to stay on the cutting edge. "If we're successful, the content we're making will constantly evolve," says Kronish. "No one on the creative side has any intentions of just doing more of the same. Our job is to look for new ideas and new ways of exploring the old ideas."

While also fending off the haters, of course. "We've always had a bigger target on our back," Kronish says. "It's the nature of not understanding how these little street kids came up and made it so big. It's about fear and jealousy. People want us to fail. We've been too successful consecutively over too many years."

He brings up the analogy of a punk band, which is not far off from what Alvi, McInnes and Smith were back in the day. The punk band comes out with their first record and everybody loves it. They make a second record. It's more musical and it broadens their reach, which pisses off the original fans. Now it's time for the third record to come out, and suddenly there's a mob licking its chops, just waiting to say: "See? They sold out."

"We're a 20-year overnight success, and everybody is ready to point the finger and say we're lame," says Kronish. "But we're not."

Yet for all its founding diffidence and its perpetually erect middle finger, Vice has the mannerisms of a middle-aged company. It handles its own messaging and is very controlling about inquiries from other media. Neither Smith nor Alvi was available for an interview for this story, and various attempts I made through back channels to talk to Vice staff, former and present, were ignored or refused. In a tiny industry, which media still is in Canada, people fear upsetting the mighty Vice. When I was given time with Kronish and Archibald, a public-relations person sat in on the interview, a practice that is as corporate as corporate gets.

Another sign of the aging is how Vice gets assailed as if it were owned by the 1%. (Which it is. But still.) If Vice is so rich, why does it still pay peanuts for an online post? (Because that's the industry standard.) Why doesn't more of that wealth trickle down to the grunts who churn out all the content to keep the 24/7 news cycle alive? ("Rarely anyone makes $45,000," according to a source quoted in rival Gawker's vehement attacks on Vice in 2014. Vice Media staffers in the U.S. recently unionized to improve their pay rates and benefits, and their Canadian counterparts seem not far behind.)

And why did Vice fire Los Angeles-based editor Charles Davis in 2014? For pissing off brand partners, it is alleged. Here we get to the soft underbelly of the entire media business as it pursues a new revenue model, variously called native advertising, branded content and custom content, where material is produced explicitly to meet advertiser needs. Legacy media, including newspapers like The Globe and Mail, typically have custom-content arms. At Vice, custom content is not an arm; it's the core of its being. Like Buzzfeed, it's unimpaired by old-school ideas about maintaining an impermeable wall between advertising and editorial and, like Buzzfeed, it has an audience that doesn't care about where content comes from, as long as it's content they like.

There's a little-noticed third aspect of Vice's pivot from punk to player. It not only switched emphasis from print to video and took on big partners—it also went heavily into the advertising business. That's not advertising in the sense of selling space or airtime, as conventional media companies do, but in creating content—in the form of video, Facebook takeovers, festivals and events—so that corporations can "connect with" the millennial audience globally. There's lots of this "white label" stuff out there—for all intents and purposes, it's emanating from a company itself, when in fact it's the work of an ad agency. In 2006, Vice set up its creative arm, Virtue Worldwide (as in Vice and…). The point is not to run it as a separate business. Quite the opposite. As the LinkedIn profile for Vice and Virtue puts it, "With the entire Vice ecosystem at its disposal, Virtue is unlike any other creative agency." At Vice's Toronto office, Virtue staff sit amid the editorial types.

An inaugural Virtue project for MTV was followed by jobs for major companies like Intel, Coca-Cola, Dell and AT&T. Vice has also leveraged its verticals to produce lucrative custom programs. To promote Samsung phones to 18- to 34-year-olds, Vice created Up Next, a content stream for electronic dance music fans that included videos, daily posts on Vice.com and Vice's Thump vertical, and a live-streamed launch event at Pier 84 in New York featuring famous deejays.

Vice dove deeper into the advertising mosh pit in 2011. When Raine Group and Tom Freston came on board as part-owners, so did WPP, the world's largest advertising and public relations company. It invested a "high eight-figure sum" (i.e., more than $50 million) and took a seat on Vice's board. WPP is home to Ogilvy & Mather Worldwide, Young & Rubicam Group, and PR giants Burson-Marsteller and Hill & Knowlton. These are the sort of media managers that the world's most powerful companies hire when, to use Vice parlance, they need to polish up a turd. WPP's announcement of the deal said "WPP will work with Vice to facilitate relationships with the world's leading brands."

At the same time, Vice forged a strategic partnership with William Morris Endeavor, one of the world's top talent agencies, which also co-founded another Vice funder, the Raine Group. WME is in the advertising business itself as part-owner of hot New York agency Droga5. The announcement quoted above went on to say that "WME and its CEO, Ari Emanuel, will represent Vice and its content across all media, including TV, film, live events, and music."

In 2013, Vice purchased Brooklyn ad agency Carrot Creative for a reported $20 million. Asked how many ad agencies Vice owns in whole or part, communications head Jake Goldman did not respond.

That Vice has erased the traditional line between the media and advertising industries not only illustrates the trend in media to provide full-service communications to corporations—"storytelling," as it's called—it also explains a lot of the company's success. But how far can it go down this road without sacrificing its supposed street cred? In March, Vice was pilloried for producing content for Philip Morris's Marlboro brand through the U.K.-based Vice ad agency Edition Worldwide. "The Philip Morris thing definitely got overblown," Archibald tells me. "That's somebody just trying to throw darts at Vice. It's true that Vice does partly own the agency, but it's a fully airtight agency. There was no marketing happening through Vice. Vice wasn't activated in any way."

It still seems too close for comfort: The only publicly available information about Edition Worldwide is that its two listed officers are both senior European Vice executives.

Selling cigarettes for corporate America—that's edgy, all right.