Nick Denton, founder and CEO of Gawker Media, on Fortune Live.
Fortune

In other words, a billionaire has bankrupted a media entity based on a personal vendetta.

By Mathew Ingram
June 10, 2016

When the Hulk Hogan vs. Gawker Media case first became public, it seemed like little more than a legal tiff between a former wrestler and a media outlet that reported on some of his bad behavior. Nothing out of the ordinary, in other words.

But that was before Hogan won a $140 million judgement from a Florida jury—and before it emerged that billionaire Peter Thiel was financing the case, in an attempt to drive Gawker out of business. And now he appears to have succeeded in doing exactly that.

New York-based Gawker Media—which publishes seven websites including Gawker, Jezebel, Gizmodo and Lifehacker, and has about 6 million unique visitors daily—filed for bankruptcy protection on Friday in an attempt to protect its assets from creditors while it tries to sell or restructure the company.

The main creditor, not surprisingly, is Hulk Hogan, and by extension Peter Thiel. On the bankruptcy filing, Gawker lists its current assets at $50 million to $100 million.

In conjunction with the filing, Gawker Media’s parent company also issued a release saying it has agreed to sell the websites and other assets to Ziff Davis, the publisher of PCMag magazine and owner of websites such as the gaming hub IGN and Ask Men. Although neither Gawker nor Ziff Davis have provided a price for the sale, sources estimate it is between $90 million and $100 million. Last year, before the Hogan lawsuit blew up, Gawker was estimated to be worth as much as $250 million.

Despite the agreement with Ziff Davis, however, there is no guarantee that it will emerge the eventual owner of Gawker Media. Since the assets the company is selling are the subject of a bankruptcy filing, there will be a court-mandated auction, and it is likely that other bidders will appear (Ziff Davis is what’s called a “stalking horse”). It’s even possible that Peter Thiel could acquire the company and shut it down, a scenario some Gawker-watchers have already speculated about.

Any money raised through the sale of assets will be held in an escrow account until Gawker’s appeal of the Hogan decision is finished. If the $140 million judgement is upheld, then the money from the sale will be given to Hogan, and if it is reduced or overturned then the remainder will be given back to Denton and the other Gawker shareholders (Denton and his family own about 65% and a Russian investment fund also owns a stake, although it’s not clear how much).

Regardless of who winds up owning the eventual assets, the bottom line is that Peter Thiel has accomplished his central aim, which was to drive the company out of business. He described his intentions in great detail in an interview with the New York Times, after rumors started to surface that he was behind the Hogan lawsuit. As it turned out, he was not only financing that one but several others as well, and searching for more that he could fund in order to bankrupt the company.

Thiel argued that he was doing this not out of personal spite—since Gawker publicly outed him as being gay in 2007—but because Gawker was a “bully” that reported the details of people’s lives against their will, and did so without any larger journalistic or social justification. When asked about the impact his actions might have on a free and independent press, Thiel argued that what he was doing would actually improve journalism, because it would get rid of a bad actor.

In the pitched battle of wills and egos that followed these pronouncements, most of Silicon Valley lined up behind Thiel, with the exception of eBay co-founder Pierre Omidyar, who owns First Look Media, and Amazon CEO Jeff Bezos, who owns the Washington Post. It’s no coincidence that the only two technology moguls to criticize Thiel’s behavior are media owners, since the threat of billionaires funding vindictive lawsuits is a fundamentally disturbing one for journalists and media owners.

Some of Gawker’s critics—and there are plenty, even within the New York media scene, where schadenfreude runs deep—argue that the site brought doom upon itself by engaging in deliberately risky journalistic behavior, and that there is no reason for concern that billionaires might try to force other media outlets into bankruptcy. But that ignores the very real financial threat that publishers such as Mother Jones have faced from wealthy individuals filing lawsuits, even when the media organization wins.

What if Peter Thiel or some other wealthy individuals decide that they don’t like the reporting that the New York Times has been doing on Syria or gun control or marriage equality? There’s no reason to think this kind of behavior will be restricted to media outlets that we can all agree are reprehensible in some way—the exact same machinery could be used against any media entity, and their only defense would be to have their own billionaire to fight back.

Gawker may have published a handful of articles that were beyond the pale of civilized conduct or pushed the boundaries of what should be allowed by privacy rules (although it’s worth noting that two judges ruled that the Hogan material was newsworthy), but it has also done some ground-breaking and valuable journalism on a range of subjects.

Should all of that have to be destroyed because it published some pieces that upset a billionaire or his friends? If free speech laws don’t protect media outlets that push the boundaries, then who will they protect?

The reality is that Thiel’s vendetta has pushed an entire media organization into bankruptcy, and forced it to auction off its already damaged assets to the highest bidder. That could mean dozens or even hundreds of journalists will lose their jobs. And for what? And while some of the sites it operated may survive under new ownership, something unique will inevitably be lost. And that’s not something we should be celebrating, regardless of what we think of Gawker or Nick Denton.

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