From Tokyo, Japan and New Plymouth, New Zealand – this is Down to Business English. With your hosts Skip Montreux and Samantha Vega.
Happy Holidays Samantha!
Happy Holidays to you too, Skip.
Did you have a nice Christmas?
Yes, pretty low key. The weather was nice for Christmas Day and we went down to the beach for sunset.
Wait a second. You went to the beach?!
I know.
Nice.
How about you? How was your Christmas?
Well you know, here in Tokyo Christmas is a normal working day. So, I actually spent it in the office, writing progress reports for some students I just finished a course with.
Ah, that is right. New Year's Eve is the big holiday in Japan.
Hm. That’s right. Christmas is a very informal event. It’s actually kind of turned into a pseudo Valentine’s day. On Christmas Eve, couples go out for a romantic dinner together and exchange gifts.
Isn’t there something about KFC, Kentucky Fried Chicken, being the traditional Christmas dinner?
Oh yeah, that’s right. KFC is very popular at Christmas time.
What’s behind that?
That is the result of some pretty clever marketing on KFC’s part here in Japan. It dates all the way back to the 1970s.
Really.
Yeah. The manager of the first KFC in Nagoya overheard some foreigners lamenting about missing a turkey dinner for Christmas. So, he did what any self respecting KFC manager would do.
He promoted Kentucky Fried Chicken as an alternative to turkey?
That is exactly what he did. And it was such a success at his store in Nagoya that KFC officially introduced their ‘Kentucky for Christmas’ campaign in 1974, and it caught on.
Hmm. What an interesting blend of smart marketing and cultural adaptation.
Japan is full of examples like that.
Well, speaking of chicken, today’s business story is actually somewhat related.
Really? What are we reporting on today?
Do you remember a couple of years ago I introduced you to that YouTube TV program — Hot Ones?
Hot Ones? Yeah, the interview show where the host interviews high profile celebrities while they eat chicken wings?
That’s the one. The host’s name is Sean Evans and he sits down with movie stars and musicians and interviews them while they eat progressively spicier and spicier chicken wings. Thus the title ‘Hot Ones’.
Yeah. It makes for some pretty funny moments. I love the way Evans introduces each episode. “Welcome to Hot Ones. The show with hot questions with even hotter wings”.
Yes, it is a great twist on an old format.
The last episode I saw, Evan’s was interviewing Ryan Reynolds and Hugh Jackman — just after the latest Deadpool & Wolverine movie came out.
Ah, I must have missed that one.
It … it was hilarious.
I’ll have to check it out.
So why is Hot Ones a business story?
Well, Hot Ones just happens to be one of the most successful and profitable internet TV shows in history. They have 14 million YouTube subscribers, generating $US30 million a year in advertising revenue.
Okay, I’m listening.
And they were just sold by their parent company, BuzzFeed.
BuzzFeed sold Hot Ones?!
Actually, they sold the production company that makes Hot Ones — First we Feast — to a group of investors connected to none other than George Soros.
George Soros?! The legendary hedge fund manager, billionaire, and progressive left-leaning philanthropist?
Yep. That’s the one.
Well, I definitely see the business angle to this story. I do want to hear more.
Then let’s do it. Let’s get D2B … Down to Business with BuzzFeed’s Hot Sale of Hot Ones. To fully understand the reason behind this recent sale of Hot Ones, we need to first take a look at BuzzFeed’s history.
For anyone who doesn't know, BuzzFeed is a digital media company with a focus on news and entertainment.
It was founded in 2006 by Jonah Peretti, and when first launched, it really took the internet by storm.
Yes, I remember those early days well. BuzzFeed seemed to take over the entire internet with their online quizzes, news coverage, and their listicles.
That’s right, they pioneered the listicle format. Instead of writing a normal article, they would put all the information into a list and give it a catchy title.
Those titles were great for SEO and driving internet traffic.
BuzzFeed did have a knack for creating viral content.
The Blue vs. Gold Dress comes to mind.
Oh yes! The photograph of a dress that some people saw as blue with black stripes and others saw as gold and white.
That’s the one. It went viral on the internet like 10 years ago. I saw a white and gold dress. What did you see Samantha?
Really. I saw it as black and blue.
Huh, interesting. Okay, so that was an example of viral content BuzzFeed put out?
Well they posted an article about it that helped make it go viral, but I don’t think the photo itself was their original content.
In any event, BuzzFeed was certainly a hot start up company at one point in time.
They were, and they attracted a lot of attention from investors like SoftBank, the venture capital firm Andreessen Horowitz. Even NBCUniveral invested $200 million at one point.
But that is all private equity investment. Didn’t BuzzFeed IPO not too long ago?
Kind of.
What do you mean, kind of?
Well, over the years, as they faced increased competition in the digital media landscape, it became more and more difficult to make a profit.
Which tends to be the way things go in business.
Obviously, investors were not very happy about that. So, in 2021 BuzzFeed decided to raise money by going public.
So like I said, they IPOed?
Not exactly. They raised money through something called a SPAC. But to be honest, I’m not really sure what a SPAC is, or how it is different from an IPO. Do you know?
I do as a matter of fact.
Oh good. Please enlighten me.
Well you are clear on what an IPO is?
Sure. An IPO, or Initial Public Offering, is when a private company is listed on a stock exchange, and shares in the company are sold to raise money.
That’s exactly right. An IPO raises money by selling shares in a company that has some kind of commercial operation, or existing business. A SPAC, or Special Purpose Acquisition Company on the other hand doesn’t have a commercial operation.
Ah. It isn’t actually a business?
No. It’s simply a newly formed shell company whose only purpose is to raise capital through an IPO and use that money to either acquire or merge with an existing business.
So at a basic level, if you buy shares in an IPO you are buying into an existing company. If you invest in a SPAC, you are giving your money to a shell company that will buy an existing company.
That is the difference.
Why would BuzzFeed opt to go the SPAC route instead of a traditional IPO?
One reason would be there is less paperwork involved in setting up a SPAC, so it's less expensive and is a faster process. Another would be you can purchase companies at the same time you are setting up the SPAC merger and announce predictions about future growth. These are things that you cannot easily do if you IPO.
Well that makes a lot of sense then because in the lead up to the SPAC merger, BuzzFeed did in fact make acquisition moves to strengthen their position in digital media, and to expand their audience to younger consumers — the Gen Z and Millennial crowd.
Two lucrative demographics. If BuzzFeed had a larger access to those audiences, it would make them much more attractive to potential investors.
That must have been their strategy, because in June of 2021 they announced they were acquiring the digital media powerhouse Complex Networks, for $300 million.
$300 million?! Pricey.
Very pricey.
I can honestly say though that I have never heard of Complex Networks.
That doesn’t surprise me because you are not part of their target demographic. Their business model focuses on youth culture.
Youth culture. Yes, definitely I am not their target customer. So, what did BuzzFeed get for that $300 million?
They got a few different media properties. The Complex Network brand itself, an entertainment company focused on pop culture. Pigeon and Planes — a music discovery network. As well as another media brand that focuses on sneaker culture and news.
Sneakers?! As in running shoes?
Yes. It’s called Sole Collector.
Cool name. And I imagine, pretty popular with the younger generation.
But the jewel in Complex Network’s crown was their food entertainment label — First we Feast.
Ah ha. The makers of Hot Ones.
Along with several other food related TV programs.
And you said BuzzFeed announced the acquisition of Complex Networks in June of 2021?
Yes, and the deal was finalized on December 3rd of that year — the same day BuzzFeed completed their SPAC merger with 890 5th Avenue Partners, transitioning from a private to a public company. Three days later, on December 6th, the partners listed BuzzFeed on the Nasdaq.
I’m guessing that this SPAC, what did you say, 890 5th Avenue Partners?
Mm.
They were planning on paying the $300 million price tag for Complex Networks with the capital they raised from going public.
That was the plan, but it didn’t work out. In the end they only managed to raise $16.2 million.
Yikes. Not quite what they were expecting.
Not at all. And it left BuzzFeed in a tight spot. Not only had they just put out $300 million for Complex Networks, they were also facing serious revenue declines.
Making it difficult to turn a profit.
After two years of struggles, they decided to sell off some of their Complex Networks properties in February this year, but at a huge loss.
What did they sell it for?
$108.6 million.
Wow, only around a third of what they originally paid for it.
Yes, but like I said, they only sold some of the properties. The sale did not include First we Feast.
Ah. Probably the most valuable property.
But even hanging on to First we Feast and Hot Ones, the bottom line was BuzzFeed was still carrying a debt burden of $124 million.
Hm. A hefty amount.
It is. So, to alleviate some of that pressure and to reduce their debt they eventually made the decision to sell First we Feast.
It must have been a difficult decision. When did this sale actually go down?
BuzzFeed announced the sale earlier this month, on December 12th.
And the sale price was?
$82.5 million.
Okay. So let’s make sure I’m following all of this. BuzzFeed forked out $300 million for Complex Networks. After a less than spectacular SPAC, they sold off some of the Complex Network properties for $108 million. And then just earlier this month, they sold the crown jewel, First we Feast and Hot Ones for an additional $82.5 million.
Hm. In a nutshell, that’s it.
Tell me more about the buyers. You said it was an investment group connected to George Soros?
Yes. The buyer is a consortium of investors led by an affiliate of Soros Fund Management LLC. The group includes Sean Evans, the host of Hot Ones, along with Chris Schonberger, the founder of First We Feast, as well as other notable investors.
Interesting. What does this mean for the future of Hot Ones and BuzzFeed?
With new ownership, there are plans for growth and expansion. Sean Evans will continue as host and take on a creative leadership role. Their goal is to explore new content formats and possibly expand into live events.
Well it sounds like an exciting time for Hot Ones! And what about BuzzFeed? How will this sale impact them moving forward?
For BuzzFeed, this sale has allowed them to significantly reduce their debt burden from $124 to $30 million. In fact, after the sale BuzzFeed’s cash balance is larger than their outstanding debt.
So the company is under a lot less pressure.
Absolutely. They say they are now in a better position to pivot to high-margin, tech-enabled revenue streams.
What does that mean?
I’m guessing it means they are going to invest in AI-powered services that can sell for a lot of money.
Well, it seems like both BuzzFeed and Hot Ones are entering new chapters in their business journeys.
It does. And I’m especially glad that Hot Ones will continue to be around, because I really do enjoy that program.
Well who doesn’t like watching people torture themselves eating spicy chicken wings.
I guess it’s human nature.
And on that note, I think it is time for us to get D2V … Down to Vocabulary. The first item on our D2V list today is the prefix pseudo.
Like other prefixes it is added to the beginning of a word, like unhappy, impossible, or dishonest. ‘Un’, ‘im’, and ‘dis’ are examples of prefixes. They change the meaning of the root word, in these cases to the opposite meaning of the root.
But the prefix pseudo functions a little differently. It doesn’t create the opposite meaning. Instead, it is used to describe something that is not genuine or is actually fake, but at the same time it appears similar to the real thing.
Like pseudoscience — fake science that appears to be real, but isn't.
Exactly. In the introduction to today’s report, I commented that Christmas in Japan has turned into a “pseudo-Valentine’s Day.” I was saying that in Japan, Christmas is celebrated by couples as a romantic occasion, similar to Valentine’s Day.
So, pseudo means something is like the real thing, but not quite the same.
That’s right. How would you use this in a business context Samantha?
Imagine someone in your workplace who takes on leadership responsibilities but doesn’t have the official title. You might call them a pseudo-manager. For example, “Even though Sarah isn’t the team leader, she’s becoming a pseudo-manager, taking charge of organizing schedules and assigning tasks.”
Perfect. Who’s Sarah? What’s next on our D2V list?
Next on the list is the noun knack. K-N-A-C-K. A knack is a special ability or natural talent for doing something easily or well. In today’s report, I said BuzzFeed had a knack for creating viral content.
In other words, they had a talent, or they were really good at making quizzes, listicles, and news articles that people enjoyed sharing with others on the internet.
Notice the pattern, ‘have a knack for doing something’. You always use ‘knack’ with the preposition ‘for’, followed by some gerund or noun.
Good point. A knack for creating — i-n-g — viral content.
What would be some other examples using ‘knack’.
One of my coworkers has a knack for public speaking. Every time she gives a presentation she is a master at keeping the audience engaged.
What about you, Skip? Do you have a knack for something?
Hmm. I’d like to think I have a knack for explaining tricky business concepts in a simple way.
Yeah, I would agree with that. What’s the final word on our list today?
Our final word on D2V today is the noun demographic. A demographic is a specific group of people that is defined by characteristics such as age, income, or interests.
It is often used in marketing or advertising to clearly define the target audience.
In today’s report, I described Millennials and Gen Z as two lucrative demographics.
In that context, demographic refers to groups of people born in specific time periods. Millennials, born in the 1980s and 1990s. Gen Z, born in the late 1990s and early 2000s.
In business, companies often analyze demographics to target customers effectively. For example, a marketing team might say, “Our target demographic for this product is working professionals aged 25 to 40.”
Another example might be, “Tik Tok is designed for the Gen Z demographic because they value short, visually engaging content.”
A demographic I am certainly not a part of.
Would you like to help D2B reach more people wanting to improve their Business English skills? Be sure to follow D2B on Apple Podcasts, Google Podcasts, Spotify, or any place podcasts are found. While you are there, leave a rating and a review and tell everyone how much you enjoy the show.
And that is a wrap for Down to Business English for 2024. Thank you Samantha, not only for today’s report on BuzzFeed’s sale of Hot One’s, but for all the work you have done on Down to Business English this year.
Ah. My pleasure Skip. It’s been a blast. And I’m looking forward to an all new season in 2025.
Me too. But you and I are not quite done for this year. D2B Members and Apple Podcast Subscribers, the bonus Down to Vocabulary episode for today’s report will drop sometime between now and December 31.
The words and phrases we will be focusing on are: to be high profile, to be catchy, to enlighten, a shell company, and to alleviate.
So if you are a D2B Member, be sure you have copy and pasted your Member-only URL from your D2B Members Account into the podcast app of your choice, so you don’t miss that episode.
And Apple Podcast Subscribers, you don’t have to do anything, the bonus D2V episode will automatically show up in your Apple Podcast app when it is released.
And if you are not a D2B Member or Apple Podcast Subscriber, don’t worry. Public Down to Business English episodes will be back in the 2nd week of January.
We hope everyone has a great New Year!
Thanks for listening everyone. See you next year.
Take care.
Have a comment or question about today’s show? Don’t be shy… visit the D2B website or Facebook page, and post any comments or questions there. Skip, Dez, or Samantha will be sure to leave a reply. Down to Business English... Business News, to improve your Business English.