Sports Illustrated and TheMaven.

The latest development with underfire Sports Illustrated operator TheMaven has them being sued for over a million dollars in unpaid fees by former SI owner Meredith. Magazine conglomerate Meredith struck a deal to buy Time Inc. back in November 2017 (following a long run-up), but as projected, wasn’t actually all that interested in running SI. Meredith struck a deal to sell SI to Authentic Brands Group in May 2019, and ABG then struck a deal with Maven in June 2019 to operate SI for them, leading to two further deals between Maven and Meredith in October 2019 for an “outsourcing agreement” and a “transition services agreement.” Those deals were signed as Maven started operating the magazine and website (following giant layoffs, which they reportedly had Meredith conduct for them). But, as per Alex Weprin of The Hollywood Reporter, Meredith is now suing Maven for not paying for those transition services:

Weprin posted the entire complaint (filed in U.S. district court in Deleware) to Scribd here, and it’s an interesting read. The suit mentions that the outsourcing agreement (OA) and transition services agreement (TSA) were both signed on Oct. 3, 2019, which also marked that day of SI layoffs. (And those weren’t the last layoffs; Maven laid off a further six percent of SI editorial staff in March, and also announced further salary reductions in June.) The OA was supposed to see Meredith provide Maven with continued “consumer marketing, “print and editorial workflow systems and tools,” and “magazine and premedia support service,” while the TSA was supposed to see them provide IT services, website support, human resources, digital sales support, accounting services (including collections from accounts receivable), and more.

As per the complaint, this arrangement was supposed to see Meredith provide Maven with regular invoices, with Maven filing any dispute with those invoices within 10 days of receiving them. The first payments (for Oct. 3-31, 2019) were due by January 31, 2020, with November payments due by the end of February, December ones due by the end of March, and all following payments due within 30 days of invoice receipt. But, as per point 20 of the complaint, Maven didn’t lodge a dispute with those invoices within the specified timeframes, but also just didn’t pay them: “Notwithstanding the extended schedule afforded to Maven to pay its obligations to Meredith, Maven failed to pay any of the invoices Meredith issued (the “Invoices”) on the due dates established by the Agreements.”

And that now leads to quite the sum in dispute. The complaint says Meredith sent Maven a notice of breach on April 9, 2020, citing a failure to pay for $3.9 million in transition services. Maven then had a 10-day cure period to remedy that, but did not, so Meredith sent Maven a 30-day notice of termination on April 27; Maven responded with a letter disputing the invoices on May 5, which Meredith says was outside the agreement’s timeline for disputes. This has now wound up in court, and although the main amount of the suit is for just under $1.1 million rather than the previously-mentioned $3.9 million, the complaint says that’s from Meredith already recovering some money themselves through the accounts receivable functions they were providing. And the $1.1 million figure is before you get to interest (10 percent per year) and attorney’s fees. Here’s what relief Meredith is asking the court for, from the end of the complaint:

WHEREFORE, Plaintiff prays for relief and judgment against Defendant as follows:

a. A judgment that Defendant is in material breach of the Outsourcing Agreement and the Transition Services Agreement;

b. An award of damages against Defendant in the amount of $1,087,065, along with a late payment interest charge of 10% per annum accruing from the due date of each Invoice until paid in full;

c. An award of pre- and post-judgment interest, attorneys’ fees, and other costs and disbursements associated with this action, as permitted by law; and

d.Such further and other relief as the Court may deem just and proper.”

Obviously, this is just a filing with Meredith’s claims; it’s not a court decision. But it’s certainly significant to see this come up, and it’s interesting reading this in the context of the other information that’s come out on Maven’s finances. In May, in a 10Q filing with the Securities and Exchange Commission, Maven wrote that “the ability of the Company to continue as a going concern is impacted by the uncertainty surrounding COVID-19” and that their company only had sufficient resources to fully fund its business operations through April 30, 2021,” even after receiving a $5.7 million CARES Act loan in April.

This wasn’t the first time going-concern questions had been raised about the company, either. In October 2019, shortly after Maven began operating SI, Fortune story by Scott Nover discussed past financial issues at Maven, including Maven management expressing “substantial doubt about the Company’s ability to continue as a going concern within one year” (in a SEC filing covering the period ending June 30, 2018). Maven obviously made it past that one-year mark, and they raised a lot of money between 2018 and 2019, but this is a company where even the internally-generated filings haven’t been terribly optimistic about the long-term financial picture.

So this complaint from Meredith about more than a million in unpaid fees (and with that only being the part that Meredith wasn’t able to recover themselves) is certainly notable in light of past questions about Maven’s finances. It’s also notable in the light of past disputes with Maven. And those include SI owner ABG “examining The Maven’s rights under the license to operate the Sports Illustrated media business” and telling SI employees “they are legally required to retain and preserve all documents related to Maven, SI, and ABG” (as per an early-July story from Maxwell Tani and Lachlan Cartwright of The Daily Beast).

Interestingly, though, any fight with ABG seems to have died down lately, at least publicly. ABG chief executive officer Jamie Salter told Keith J. Kelly of The New York Post recently (in a piece published last Wednesday) that there is no “civil war” (which Tani used in a Daily Beast headline Monday) at SI. Salter also told Kelly he doesn’t have a financial issue with Maven, saying “They paid me for three years in advance. They don’t owe me any money.”

But that Tani piece from last Monday had a lot of notable dimensions, including discussion of Maven’s controversial employment (and then refusal to publicly part ways with) of Texans’ writer “Patrick D. Starr.” And one part of Tani’s piece on a different subject seems particularly relevant to the Meredith/Maven dispute, especially now that this court filing has come out:

For example, sources said, the magazine has now found itself fighting to uphold the “illustrated” part of Sports Illustrated. In recent weeks, Meredith has deliberately blocked Maven’s access to the magazine’s iconic photo library. In a byzantine arrangement, the ex-owner is slowly transferring the massive digital trove of photos over to SI, but has allowed Maven to access Meredith’s photo hosting service in the meantime. But in recent weeks, Meredith has barred Maven from accessing its photo hosting system, saying that Maven still owes Meredith money. 

And so instead of using photos from its massive archive spanning 65 years, for the moment Sports Illustrated has been forced to primarily use images provided by wire services or shot after the magazine’s sale. This latest Maven-related problem has proven especially embarrassing and depressing for some staffers, who pointed out that Sports Illustrated’s original innovation was to print strikingly colorful sports photographs starting in the 1960s. 

And with Meredith now officially suing, it seems like those photo archives may not wind up with Maven and SI all that soon. This filing is also interesting for illustrating that Meredith is no longer providing any transition services to Maven, and hasn’t been for months. And it says that the transition and outsourcing arrangements ended not by Maven’s choice, but with Meredith terminating them over unpaid fees. So that raises some questions about what Maven has been doing in all of the other areas where Meredith was previously providing SI-related services. And it will be interesting to see what comes of this.

[Alex Weprin on Twitter and Scribd]

About Andrew Bucholtz

Andrew Bucholtz is a staff writer for Awful Announcing and The Comeback. He previously worked at Yahoo! Sports Canada and Black Press.