Since the June 2019 news of Sports Illustrated owner Authentic Brands Group selling print and digital publishing rights for that brand to Arena Group (then known as TheMaven), there have been countless stories about potential financial issues at TheMaven/Maven/Arena. Some of those issues seemingly went away around the August news of 5 Hour Energy founder Manoj Bhargava purchasing a 65 percent stake in the company. But a Thursday release from Arena Group about 100-plus group-wide layoffs (although, that reportedly is not specific to SI) contains some more uncertainty about Bhargava’s purchase. Here’s that release:
Today, The Arena Group (NYSE American: AREN) has announced a significant reduction in its workforce of over 100 employees. The Company, which has substantial debt and recently missed payments, is completing these cost-cutting measures to initiate a transformative shift towards a streamlined business model.
In parallel, the Company is actively engaged in negotiations with Bridge Media Networks, LLC, (“Bridge Media”) a wholly owned subsidiary of Simplify Inventions, LLC (“Simplify”). The ongoing efforts aim to conclude the transaction in early 2024, including a substantial investment as part of the Bridge Media deal.
Jason Frankl of FTI Consulting, recently appointed as Chief Business Transformation Officer of The Arena Group, commented, “My immediate focus is to collaboratively design a growth-oriented media company, ensuring the financial stability necessary to cultivate and grow the brands we cherish. While this week’s layoffs were regrettably necessary, I look forward to sharing detailed plans soon.”
A.J. Perez of Front Office Sports reported ahead of this announcement Thursday that these layoffs are not expected to impact “SI-specific employees”:
NEWS: The Arena Group has begun a round of layoffs, sources told @FOS. The company operates Sports Illustrated, but SI-specific employees are not impacted. Arena owns The Street, Men's Journal and other outlets. This has been the most brutal January for media cuts I can remember.
— A.J. Perez (@byajperez) January 18, 2024
But there are still notable potential impacts here for SI. One in particular involves the discussion of “recently missed payments.” Earlier this month in a SEC filing, SI owner ABG said Arena had missed a quarterly payment (of around $3.75 million), and they threatened to revoke Arena’s license to publish SI. Nothing there has come to fruition yet, but the acknowledgement of “recently missed payments” in a press release on layoffs and restructuring is certainly significant.
Another aspect of this worth further discussion is the “actively engaged with negotiations” language around Bridge Media and Simplify Inventions. Those are Bhargava’s companies, and the “aim to conclude the transaction in early 2024” language is significantly different than what’s been seen to date.
Initial reports of Bhargava’s deal to take a majority stake in Arena came out last August, and a November Arena release had that deal supposedly with a “definitive agreement to combine with Bridge Media Networks” (one of Bhargava’s companies). That led to the much-discussed December conference call with Bhargava and 350-plus SI staffers, where he told staffers to “Stop doing dumb stuff” as part of a wide-ranging conversation. That came in the wake of the AI scandal at SI, but wasn’t necessarily specifically about that. However, it also happened less than a week before Ross Levinsohn (who had been involved in the SI line since the 2019 deal, and became CEO of the then-Maven in 2020) exited as Arena Group CEO.
But this new release Thursday has Bhargava’s purchase not yet finalized, with language of “The ongoing efforts aim to conclude the transaction in early 2024.” And this also comes after Bhargava took over as interim CEO following Levinsohn’s exit, but then left that role in January “to avoid any conflicts of interest which may arise as part of the pending transactions.” So there are many remaining questions about just how much of Arena he and his companies currently own, as well as what will be involved in “concluding this transaction.” As seen recently with the various Diamond Sports Group RSN issues, even signed agreements to pay for services don’t always lead to actual transfers of money.
Beyond that, that November release from Arena on Q3 financial results has several notable elements around their overall finances and their SI-specific finances. Here’s more from that on the Arena Group-wide front (also including publications such as The Street, Men’s Journal, and Parade, as well as many more):
Revenue increased 11% to $63.4 million compared to $57.3 million in the prior year quarter.
Total digital revenue increased nearly 21% to $45.8 million, representing 72% of total revenue (up from 66% of total revenue in Q3 2022). Digital advertising revenue increased by nearly 29% to $36.7 million due to a 46% rise in revenue-per-pageview which more than offset an 8% overall decline in traffic.
Digital subscription revenue was $3.2 million, down 31% as compared to $4.6 million in the prior year quarter, as the Company continues to focus on free, ad or partner-supported content.
Licensing and syndication revenue was $4.5 million, an increase of 2% as compared to the prior year quarter.Total print revenue decreased 9% to $17.6 million as compared to the prior year quarter, in line with historical print advertising trends.
Gross profit increased by nearly 15% to $28.2 million, representing a gross margin improvement of approximately 1.5% to 44%, reflecting the Company’s tight focus on cost control while growing revenue.
Total operating expenses decreased by $1.4 million or 4% to $35.0 million.
Net loss narrowed by $5.3 million, or 32%, to $11.2 million from $16.5 million in the prior year period.
And here’s more on the SI-specific front:
The Sports vertical, anchored by Sports Illustrated, for the first time reached the #2 spot in the Comscore sports properties rankings this quarter, a milestone achievement for the brand. Athlon Sports and team sites brand FanNation both delivered strong traffic growth, with pageviews increasing by 116% and 48% respectively as compared to the prior year quarter, according to Google Analytics. Sports Illustrated is resonating with audiences on social media as well, with over 600,000 new followers during the quarter.
It’s far from clear exactly where things stand with Arena Group in general, or with their licensing deal with ABG for SI in particular. But reports of issues at Arena Group are certainly worth tracking for potential SI impacts. Even if these particular layoffs don’t hit SI, the ongoing discussions around finances at the parent company that has an agreement to publish the property are definitely notable.
