Geographic Cost Arbitrage

Sam Parr shares insights about Vice Media's business model and eventual downfall, emphasizing key lessons about media companies and geographic location decisions.

Key Points:

• Geographic Location Impact:

  • Avoid New York City for creative services businesses
  • High cost of living cities make talent arbitrage difficult
  • Location affects company culture and direction

• Vice's Business Model Structure:

  • Operated like a "mortgage-backed security for media"
  • Combined multiple revenue streams without mastering any single one
  • Partnered with clickbait websites to inflate network numbers
  • Primarily functioned as a creative agency making content for platforms

• Critical Business Lessons:

  • Must nail one revenue stream before diversifying
  • Need something people genuinely love to build lasting media
  • Avoid growing out of your audience (better to have audience grow into you)
  • Example of good targets: Wall Street Journal, New York Times, Economist
  • These publications have audiences that "grow into them" rather than "grow out of them"

• Brand Evolution Risks:

  • Changing core identity (like Vice becoming "woke") can alienate original audience
  • Location (like moving to Williamsburg) can force unwanted brand evolution
  • Hard to maintain relevance when target demographic ages out

• Revenue Reality:

  • Even at bankruptcy, still generating $600M in annual revenue
  • Revenue size doesn't guarantee profitability
  • Multiple revenue streams can mask fundamental business problems