On Friday, Sports Illustrated staff were informed by publisher The Arena Group that Arena’s license to publish the magazine and associated digital sites had been revoked by SI owner Authentic Brands Group. That notice came in an email stating that “we will be laying off staff that work on the SI brand,” and the union responded with a post that “The Arena Group is planning to lay off a significant number, possibly all, of the Guild-represented workers at SI”:
Sports Illustrated staffers received this today. pic.twitter.com/Q0WdVRzuRb
— Richard Deitsch (@richarddeitsch) January 19, 2024
Our statement on today’s mass layoffs at Sports Illustrated pic.twitter.com/tQjJdoHP4p
— Sports Illustrated Union (@si_union) January 19, 2024
Those statements raise a lot of questions about the future of SI. But, just because Arena no longer has rights to publish SI (they never owned the brand, but ran its media operations under license from Authentic) after whatever transition period is laid out in their termination agreement, that doesn’t mean SI is dead as a publication. An Authentic representative told AA Friday they plan to continue editorial operations, including during a transition to a potential new publishing partner.
“This will not go dark,” the representative said. “It’s not an ideal situation any way you can cut it, but Authentic is determined to protect and provide stewardship for the brand. And that includes making sure the editorial arm continues to operate while partners are discussed and negotiations happen.”
It’s not clear what that specifically means for those currently employed at SI. The Authentic representative said they only learned of Arena’s layoff notices when the public did Friday.
“The layoffs are not an Authentic thing, they’re an Arena thing. This is not something we were privy to.”
However, at least some of these efforts to keep the publication from “going dark” were underway before Friday. Authentic threatened to terminate Arena’s SI license in a Jan. 5 SEC filing. And, as A.J. Perez of Front Office Sports wrote Friday, Authentic has been in conversations with other publishers about operating SI:
Authentic’s move to terminate Arena’s license and Arena’s eliminating SI’s staff signals a shift in the company that operates SI, weeks after Manoj Bhargava, the founder of 5-Hour Energy, introduced himself to employees of Arena, including SI, as their new leader. Since then, Authentic has had exploratory conversations with and reached out to multiple parties about the possibility of taking over Arena’s role with SI, industry sources with knowledge of the situation tell FOS.
It’s unclear whether Authentic will indeed pursue the path of establishing a new operator or will now allow Arena to renegotiate its current deal. Sources tell FOS, though, that Authentic’s goal is to move the process along as quickly as possible. One way or another, says one insider, “Authentic will see Sports Illustrated through a necessary evolution.”
Meanwhile, Sara Fischer of Axios got a statement from Bridge Media (subsidiary of 5 Hour Energy founder Manoj Bhargava’s Simplify Investments, in a “definitive agreement” to merge with Arena) that they’re still in talks with Authentic on SI despite the license revocation:
2/2 "Based on this interest, we expect that the great institution of Sports Illustrated will continue, survive and grow. We don’t want to see it collapse and will continue our negations with ABG."
— Sara Fischer (@sarafischer) January 19, 2024
Update: SI’s Pat Forde offered some comment from an Arena executive, and said that “the entire staff has not been laid off”:
The entire staff was not laid off. There still is a website and a magazine. That said: Ugly, brutal day with many layoffs. Nothing quite like hearing colleagues and friends saying they just got termination emails in real time while on a Union zoom call.
— Pat Forde (@ByPatForde) January 19, 2024
Authentic later offered a statement of their own, headlined “Sports Illustrated will continue to deliver its readers and fans a premium experience across verticals,” with a subheadline of “Authentic Brands Group affirms that Sports Illustrated will continue.”
Authentic Brands Group has now put out a statement titled “Sports Illustrated will continue to deliver its readers and fans a premium experience across verticals.” Here’s that statement: pic.twitter.com/qbD8CNWUUG
— Awful Announcing (@awfulannouncing) January 19, 2024
Here’s the body text of that statement:
“Yesterday, The Arena Group’s license to serve as the publisher of Sports Illustrated was terminated as a result of the company’s failure to pay its quarterly license fee despite being given a notice of breach and an opportunity to cure the breach. Authentic is here to ensure that the brand of Sports Illustrated, which includes its editorial arm, continues to thrive as it has for the past nearly 70 years. We are confident that going forward the brand will continue to evolve and grow in a way that serves sports news readers, sports fans, and consumers. We are committed to ensuring that the traditional ad-supported Sports Illustrated media pillar has best in class stewardship to preserve the complete integrity of the brand’s legacy.”
And Arena put out their own statement:
We hope to be the company to take SI forward but if not, we are confident that someone will. If it is another business, we will support with the transition so the legacy of Sports Illustrated doesn’t suffer.
— The Arena Group (@The_Arena_Group) January 19, 2024
Also, in a SEC filing Friday, Arena said that the termination of the license means they now owe Authentic $45 million, and they plan to reduce their workforce by a third:
As previously reported, on January 2, 2024, The Arena Group Holdings, Inc. (the “Company”) 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. On January 18, 2024, ABG notified the Company of its intention to terminate the Licensing Agreement, effective immediately, in accordance with its rights under the Licensing Agreement. 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. In addition, upon termination of the Licensing Agreement, any outstanding and unvested warrants to purchase shares of the Company’s common stock issued to ABG in connection with the Licensing Agreement became immediately vested and exercisable. The Company is engaging in continuing discussions with ABG regarding the Licensing Agreement.
The Licensing Agreement previously provided the Company with the exclusive right and license in the United States, Canada, Mexico, United Kingdom, Republic of Ireland, Australia, and New Zealand to operate the Sports Illustrated media business (in the English and Spanish languages), including to (i) operate the digital and print editions of Sports Illustrated (including all special interest issues and the swimsuit issue) and Sports Illustrated for Kids, (ii) develop new digital media channels under the Sports Illustrated brands, and (iii) operate certain related businesses, including without limitation, certain Sports Illustrated events, special interest publications, video channels, bookazines, and the licensing and/or syndication of certain products and content under the Sports Illustrated brand. The initial term of the Licensing Agreement extended through December 31, 2029, subject to each party’s termination rights. The Company had the option, subject to certain conditions, to renew the term of the Licensing Agreement for nine consecutive renewal terms of 10 years each (collectively, the “Term”), for a total of 100 years.
The Licensing Agreement provided that the Company would pay to ABG annual royalties in respect of each year of the Term based on gross revenues (“Royalties”) with guaranteed minimum annual amounts. ABG agreed to pay to the Company a share of revenues relating to certain Sports Illustrated business lines not licensed to the Company, such as commerce.
Item 2.05. Costs Associated with Exit or Disposal Activities.
On January 18, 2024, the Company announced a plan (the “Plan”) to manage its operating expenses by implementing a reduction of approximately one-third of its current workforce. The Plan is intended to reduce the Company’s operating expenses in response to challenging macroeconomic conditions and the termination of the Licensing Agreement described above. Where required, worker adjustment and retraining notification (“WARN”) shall be given.
In connection with these actions, the Company estimates that it will incur approximately $5 million to $7 million in total restructuring charges, the substantial majority of which are future cash-based expenditures and substantially all of which are related to, employee severance (including WARN notice) and other termination benefits. The Company expects to execute the Plan and recognize substantially all of these charges in the first two quarters of 2024.
It’s far from clear what the future holds for SI, and particularly for those who currently work there. But it is notable that there are plans to continue SI as a publishing brand. We’ll see what develops on that front.
[Image of the 2010 book Sports Illustrated: The Covers from Amazon.]
