Just when you thought the situation with Sports Illustrated and TheMaven couldn’t get worse, a Thursday story published by Fortune has cast doubt on TheMaven’s financial stability.

A chunk of the Fortune article focuses on what we already know (laying off staff in order to hire cheaper, less experienced independent contractors, then letting those new staffers essentially do whatever the hell they want with minimal editorial oversight), but this chunk about TheMaven’s financial situation is eye-opening.

According to an SEC filing that covers the quarterly period ending June 30, 2018, Maven’s management expressed “substantial doubt about the Company’s ability to continue as a going concern within one year.” Maven’s independent public accounting firm came to the same conclusion based on the company’s financial standing as of the end of 2017. During the first six months of 2018, Maven lost more than $8 million, and in July 2018, the company borrowed $225,000 from chief executive officer James Heckman.

“Notwithstanding these recent financings, the Company does not have sufficient resources to fully fund its business operations through June 30, 2020,” the filing says. After reviewing the finances as of June 2018, the outlook was that the company needed a “significant” amount of additional capital and even that would produce no guarantee the business is self-sustainable. Maven then raised $112 million in debt and preferred stock placements between July 2018 and July 2019. On Tuesday, the company reported to the SEC it had raised an additional $20 million.

I’m not much of a financial guru, but a filing that was submitted two months ago talking about the company potentially not being able to fund its business operations through next summer doesn’t seem great! And while the extra $20 million in funding is great, TheMaven also might have to wait longer to acquire any extra revenue from its purchase of SI from the Authentic Brands Group – the $45 million purchase was against future royalties.

The Licensing Agreement provides that the Company shall pay to ABG annual royalties in respect of each year of the Term based on gross revenues (“Royalties”) with guaranteed minimum annual amounts. The Company has prepaid ABG $45,000,000 against future Royalties. ABG will pay to the Company a share of revenues relating to certain Sports Illustrated business lines not licensed to the Company, such as commerce. The two companies will be partnering in building the brand worldwide.

I think TheMaven is vastly overrating how much SI’s brand can help them going forward. Sure, there are still plenty of talented writers and columnists doing great work for the site, but the Maven-branded team sites are churning out more sloppy, subpar content than you can shake a stick at. Yeah, there’s going to be a natural traffic spike because there’s just *more* content, but when that content doesn’t reflect well on the overall brand, that brand’s reputation suffers and it begins to carry much less cachet among readers.

Hell, it’s the inverse of the Bleacher Report model, which went from page after page of fan-submitted, poorly written content to something more resembling what SI was prior to TheMaven’s purchase of the site (though not on that level, and not with nearly the amount of history behind it).

Jim Heckman, Ross Levinsohn, and the rest of TheMaven really seem to be living in the past when it comes to creating content online. They’re going back to a quantity over quality approach, when more and more outlets (The Athletic…hello) are going the opposite direction to vast approval from readers. If TheMaven thinks they’re going to be able to roll along, accruing debt and banking on future revenue and funding to save them, they might be in for a rude awakening if readers don’t downgrade their reading habits.

[Fortune]

About Joe Lucia

I'm the managing editor of Awful Announcing and the news editor of The Comeback. I also made The Outside Corner a thing for six seasons.