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Media Meltdowns

Sports Illustrated Owner Sues Former Publisher Over Bungled Leverage Play

NEW YORK, NEW YORK - JULY 21: Michael Jordan signed Sports Illustrated cover is on display during a press preview of The Olympic Collection at Sotheby's on July 21, 2021 in New York City. (Photo by Cindy Ord/Getty Images)
Cindy Ord/Getty Images

Authentic Brands Group, the intellectual property giant that own Sports Illustrated, has filed a lawsuit against The Arena Group, the weird consortium of media brands that stopped paying Authentic Brands Group earlier this year for the license to publish Sports Illustrated, and its owner Manoj Bhargava, the 5-Hour Energy founder, for breach of contract, tortious interference, and copyright violations over The Arena Group's alleged failed attempt to wrest away Sports Illustrated from Authentic Brands Group (ABG) and keep essential data from new Sports Illustrated licensees Minute Media.

The heinously off-putting string of nouns in that sentence alone hints at the level of chaos SI and its staffers have faced since Meredith Corporation sold the magazine to ABG in 2019. That same year ABG sold a 10-year license to publish SI to The Arena Group (TAG), then known as The Maven, in exchange for $45 million. While TAG immediately laid off one-third of the workforce and steadily degraded working conditions throughout its publishing tenure, things worsened sharply this past January, when TAG reportedly failed to pay a quarterly installment of $3.75 million to ABG for the publishing license.

SI employees have faced varying degrees of existential peril since then: Once TAG missed the payment, which Axios reported at the time was a deliberate leverage play, ABG shrugged its shoulders, revoked the license, and told the majority of staffers they'd been laid off or soon would be. It seemed Sports Illustrated would be, for all non-parasitic purposes, dead.

Minute Media stepped into the breach in March and announced it had bought the rights to publish SI. Minute claimed it would hire back many laid-off employees and expand operations globally, both of which are vague promises though infinitely more encouraging than ABG's previous stance, which was, essentially, Not our problem. ABG, per a good Super Bowl–week story from the Washington Post, claims to have already made back the $90 million in cash paid to Meredith when it bought SI in 2019, mostly by using the SI branding on various hotels and at events, like the seven Super Bowl parties the company threw this year. ABG's business is built on buying up intellectual property, from people like Shaquille O'Neal to brands like Reebok, and slapping their logos and names on as much shit as possible. ABG owns 50 percent of Shaq's future earnings!

"In Minute Media we have found a partner that will honor SI’s lauded legacy and exceed fan expectations for the future," said an ABG spokesperson two weeks ago. "As Minute Media shepherds the SI brand across a rapidly evolving media landscape, our priority at Authentic is—and has always been—to protect its journalistic integrity and longevity." That florid statement would seem to contradict ABG's treatment of Sports Illustrated as a brand with a vestigial magazine optionally attached, but again, this is digital media in 2024 so the continued existence of the outlet is really all that matters. While ABG were evil owners, TAG were also reportedly pretty reckless publishers, and the lawsuit details many ways that Bhargava and his underlings tried to weaponize that recklessness in an odd attempt, they say, to take over SI.

Per the suit, the missed payment in January was a bit of brinksmanship engineered by Bhargava shortly after he took over TAG in fall 2023. The suit claims he swept in and replaced SI leadership with his cronies, and immediately tried to muscle ABG into giving him a more favorable publishing deal. Bhargava, according to the suit...

...clearly felt unconstrained by Arena’s contractual promises to ABG and believed that he could simply strong-arm ABG into capitulating to his demands. Bhargava behaved more like a gangster than a trusted business partner and good-faith counterparty, threatening to rip up the Licensing Agreement, and essentially burn everything down and destroy the SI brand, unless ABG entered into a new agreement on completely new terms.

Maybe this would have worked when negotiating with an owner who cared about Sports Illustrated as anything other than a blood-sack to be drained, but that's not ABG, so they told him to fuck off.

ABG's lawyers also made sure to note that U.S. Senator Ron Wyden recently detailed Bhargava's offshore tax dodging via a Swiss bank, an alleged scheme so blatant that Wyden speculated it could lead to "one of the largest [Foreign Bank and Financial Accounts] penalties in US history, if not the largest." Once ABG reached a deal with Minute in March, they told TAG to hand over the keys. It didn't go well.

Once again, however, Defendants opted for lawlessness. Instead of turning over the critical subscriber data that ABG owns, Arena employees instructed third party vendors to either return the data to Arena or to destroy it. Instead of turning over the editorial and media content that ABG owns, Arena posted that content to its own competing websites. And instead of ceasing to use the SI trademarks, Arena flagrantly violated the Licensing Agreement by plastering those marks on its competing websites as well, creating extremely damaging consumer confusion and threatening SI’s search engine optimization (“SEO”) performance.

Lawsuit filing

This is not even the only SI-related lawsuit Bhargava faces, as former executive Ross Levinsohn is also suing him over the circumstances of the latter's firing, which include allegedly unpaid severance.

Caught in the middle of all this inscrutable squabbling between various rich guys is Sports Illustrated itself. Though it's being treated as either an oblique investment vehicle or a name to be slapped onto various party fliers and casinos, there is a magazine here that still publishes great work from some of the best sportswriters in the industry. Many staffers learned this week that they won't get their jobs back. Perhaps they can take solace in the tremendous brand activation achieved at various Authentic Brands Group Super Bowl parties.

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