By Harry Mottram: Remember the dotcom bubble? When dot-com firms saw their value increase making the owners paper millionaires in the late 1990s only for the inevitable crash to come at the turn of the century. Driven by an economic fashion or “temporary insanity” as Sir John Templeton saw it as lenders and banks began to invest heavily in the emerging online companies as the World Wide Web became commercially viable for entrepreneurs to create new businesses. The insanity was that most of the firms had no business plan and could never make a profit in an untried market. Few succeeded and many lost millions – the more savvy (or cynical) entrepreneurs ensured they sold their shares or companies as soon as they peeked in value and walked away with wads of cash. They left behind them the suppliers who were unpaid, the lenders nursing their losses and the staff with no jobs or pay packets.
With the collapse of Vice and Motherboard it seems we don’t learn from the past. Hailed as the future of new media by none other than Rupert Murdoch Vice made its name with so-called ‘edgy’ programmes merging social media, video, news and film that would appeal to the under 25s. Seen as the Holy Grail by advertisers as the next generation of spenders the idea was free-to-view journalism and entertainment would bring in the advertisers. The problem was that the production costs and high salaries (and even higher lifestyles) of those in charge meant the chances of making a profit were virtually nil. Yes it attracted advertising but not enough – and once again the big economic group of consumer spenders turned out to be the over 50s – not the kids.
It’s a warning to all businesses who would potentially supply a new fashionable sector of industry. Only this year we have seen the collapse of the crypto currency trader FTX leaving an £8 billion pound blackhole and its CEO Sam Bankman-Fried facing jail. It was another semi-Ponzi scheme promising investors that cryptocurrencies were the future – but like all bubbles business basics were forgotten in a frenzy to get rich quick.
Back to Vice and Motherboard – USA firms seeking to supplant traditional media with a heady mix of films, events, music and documentaries. The BBC reported: “The company behind the websites Vice and Motherboard has filed for bankruptcy in the US and is set to be sold to a group of its lenders. Vice Media Group – which was valued at $5.7bn (£4.5bn) in 2017 – could be taken over for $225m. The youth-focused digital publisher said it will continue to operate during the bankruptcy process.”
Don’t hold your breath but administrators have said the companies will emerge in a few months’ time in a healthy financial state after lenders pumped in another few million to keep them going. We’ll have to wait and see on that one – but it is a cautionary tale for lenders, investors and suppliers. The advice from ICSM is as always – only trade with firms that honour your credit terms – however flash new businesses seem or famous the name (remember Debenhams) – credit control is the first rule of business.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk