Vice Media is the latest large company headed into bankruptcy, but unlike BuzzFeed, Vice may survive the process. It spells a certain doom for news media outlets that operate on an internet and social-media basis. While likes and shares from Facebook may seem like your company is successfully disseminating its journalism, what we are learning is that it is not.
Why are these bankruptcies happening? Before COVID and even during it, several companies, including Vice, were raking in the dough as Americans relied on journalism to keep them in the loop. Today, more Americans are living check-to-check. Click-driven impulse purchases are on the downswing. It is becoming increasingly difficult for advertising-based businesses to sell advertising space when the costs related to business-to-business clients outweigh the profits. So, we are in a spiral that begins with the consumer and ends with specific businesses. Our economy is changing, and it is creating a lot of collateral damage.
Factors causing bankruptcy
One of the major factors tipping the scales for numerous U.S. companies is the Federal Reserve’s decision to increase interest rates. This has had a cascade effect across the economy but was considered necessary in the wake of COVID-19 and the numerous economic pressures resulting from it. As interest rates rise, capital for businesses applying for loans becomes more and more elusive. Many of these companies struggled to repay loans that had already been taken out, and now, those companies are in bankruptcy, attempting to consolidate their debts, shave off some of the money they owe, and sell off assets that can help repay creditors.
Americans, who mostly live on debt, are likewise feeling the impact of higher interest rates. Mortgages and car loans have both seen increases even as the cost of living has skyrocketed. So, we’re seeing a situation where Americans have less money to spend, businesses are struggling to gain access to capital, and with interest rates spiking, less money coming in for businesses, you have a bit of a death spiral that is taking some businesses with it.
Is AI to blame for this? Not at all. AI added a second pressure to already-existing economic insecurity, and now there is a broadscale panic throughout several industries that is placing pressure on AI companies to scale back their offerings, roll out updates at a slower pace, and ensure that American jobs are not threatened by automated intelligence.
However, the fears may be justified as May heralded the largest number of business bankruptcies in recent memory. It remains unclear if consumer bankruptcies will soon follow, but COVID did not create the spike in bankruptcies many believed it would. Instead, government programs deferred those bankruptcies, and inflation and other factors may be the forces necessary to tip the scales.
Talk to an Indiana Bankruptcy Lawyer Today
Chris Arrington represents the interests of Indiana residents considering bankruptcy. In some cases, bankruptcy will make the most financial sense. Call today to discuss the matter with a bankruptcy attorney.