There is an incredible amount of uncertainty ahead for Sports Illustrated following Friday’s developments. Those saw publisher The Arena Group announce in an email to staffers that they had lost the SI license and were laying off “staff that work on the SI brand.” That was followed by statements from SI owner Authentic Brands Group and Arena, as well as a number of other comments and posts, suggesting that ABG and Arena are still in negotiations around SI and that ABG is also talking with other publisher candidates.
But while SI may not yet be no more, ceased to be, expired and gone to meet ‘is maker, run down the curtain and joined the bleedin’ choir invisible, it’s certainly in a state of chaos following Friday’s discussions. And many former executives, current staffers, ex–staffers, and fans of the brand have commented on this as if SI is dead rather than pining for the fjords, leading to significant Twitter/X attention for #RIPSI and “Sports Illustrated” Friday.
Whatever happens next, it looks like there will be major changes (at the least) ahead for SI. So it’s worth pondering how we got to this point. And some of the most interesting comments there to date came from a remarkably unfiltered interview ABG CEO Jamie Salter gave to Ben Strauss of The Washington Post Friday about his negotiations with 5-Hour Energy founder Manoj Bhargava, who has acquired some level of controlling stake in Arena.
There’s a lot of uncertainty there, too. Bhargava taking a majority stake in Arena was first announced in August, and this then saw an Arena comment of “signed a definitive agreement to combine with Bridge Media Networks” (a company owned by Bhargava’s Simplify Investments) in November. In December, Bhargava held a wide-ranging call with SI staffers shortly after an AI scandal there, saying “Stop doing dumb stuff” amongst other things.
And Bhargava took over as interim CEO of Arena in December around previous CEO Ross Levinsohn’s exit. But he then gave up that role earlier this month, saying that was “to avoid any conflicts of interest which may arise as part of the pending transactions.” And the wider Arena company announced layoffs of more than 100 people Thursday (although those reportedly were not about SI) ahead of a deal with Bridge, where it was said that “ongoing efforts aim to conclude the transaction in early 2024.”
So there’s at least some level of uncertainty on what Bhargava has paid Arena and what stake he has there. But he was cited as a key factor in the current tensions by ABG CEO Jamie Salter in a remarkably candid interview with Ben Strauss of The Washington Post Friday. Here are some highlights from that:
“If a company doesn’t pay me, I breach,” Jamie Salter, the CEO of ABG, said in an interview with The Post on Friday, adding that Bhargava has sought to lower the licensing fee. “He’s trying to negotiate with me and I told him to f— off. He tried to change the agreement. When you sign a deal with us, you live by the deal.”
Salter added that he could sell the license to other interested parties.
“I mean, it could be good,” he said. “I could end up with a really strong media partner.”
Salter left open the possibility that Arena Group and ABG could continue in business together. He said Arena Group still has five days to make the $3.75 million payment or the licensing agreement is terminated.
“He’s going to [pay] or we’re going to terminate him,” Salter said. “Who’s going to cry first? I ain’t gonna cry.”
Strauss’ piece also includes an incredible walkback of that “five days” comment from another Authentic executive:
“After this story was published, Dan Dienst, executive vice chairman of tactical opportunities for ABG, corrected Salter, saying the period to pay had passed and the license had been terminated. A spokesman for Arena Group did not immediately reply to a request for comment.”
From a contractual perspective, Salter seemingly has a lot going for him here. It’s undisputed that Arena missed a payment, with their own SEC filing Friday saying they “failed to make a quarterly payment due to ABG-SI LLC (“ABG”), pursuant to the Licensing Agreement, dated June 14, 2019, by and between the Company and ABG (as amended to date, the “Licensing Agreement”), of approximately $3,750,000.” And the language there includes a “Upon such termination, a fee of $45 million became immediately due and payable by the Company to ABG pursuant to the terms and conditions of the Licensing Agreement.” So Arena could wind up paying a whole lot to exit this deal.
However, there are questions about what Authentic can do with SI without Arena. It’s unclear if the current staffers’ contracts are only with Arena, or if there’s a possibility of reallocating those to a new publisher if Authentic and Arena can’t come to a deal.
An Authentic spokesperson’s comments to AA Friday of “The layoffs are not an Authentic thing, they’re an Arena thing. This is not something we were privy to” would seem to suggest the current deals are with Arena rather than Authentic. So we’ll see what’s ahead for the brand and their current staffers. But Salter’s remarkably-candid comments to Strauss help illuminate some of what’s going on here and what this dispute is about.
