The Arena Group, publisher of SI, recently failed to pay
$3.75 million to SI's license holder, Authentic, leading Authentic to end their
deal. On Friday, Arena began laying off employees. Staff at Sports Illustrated
were notified of these massive layoffs on Friday, affecting some immediately
and others in a short time.
Authentic, the licensing group that bought Sports
Illustrated for $110 million from Meredith five years ago, terminated its
agreement with The Arena Group to publish SI in print and digital. This
termination followed Arena's failure to make the $3.75 million payment,
breaching the SI licensing deal that started in 2019. Authentic's termination
notice triggered a $45 million fee immediately due to Authentic.
As a consequence, Arena informed SI employees that Authentic
Brands Group (ABG) had officially revoked the license under which Arena
operated the Sports Illustrated brand. This revocation led to the layoffs of
staff working on the SI brand. Severed guild members were given a 90-day
notice, with a chance for resolution during this period, while non-guild
employees were laid off immediately. Despite confusion about the extent of the
layoffs, a 2 p.m. staff call clarified that anyone left in 90 days would be laid
off unless the licensing issue was resolved.
Arena's email to staffers explained that some employees
would be terminated immediately, receiving payment in lieu of the notice period
under the union contract. Others were expected to work through the notice
period, receiving additional information soon.
The move by Authentic to terminate Arena's license and
Arena's resulting layoffs indicate a shift in the company operating SI. This
comes weeks after Manoj Bhargava, founder of 5-Hour Energy, introduced himself
as the new leader to Arena employees, including SI. Authentic has explored
conversations with various parties about taking over Arena's role with SI.
The future is uncertain, with Authentic possibly
establishing a new operator or allowing Arena to renegotiate its current deal.
Regardless, Authentic aims to expedite the process for a swift evolution. SI
has faced financial challenges in the digital age, highlighted by a November
report of AI-generated reviews without disclosure. A perplexing town hall in
December, led by Bhargava, added to the challenges. Authentic acquired SI in
2019, and the recent leadership changes reveal dissatisfaction predating the
missed payment.
In addition to Friday's SI layoffs, Arena fired over 100
employees on Thursday. Bhargava, Arena's interim CEO since Dec. 11, stepped
down on Jan. 5 to avoid conflicts of interest. Layoffs on Thursday were carried
out by Arena executives, its board, and Jason Frankl of FTI Consulting,
appointed as Arena's chief business transformation officer on the same day as
Bhargava's resignation. Frankl looks to design a growth-oriented media company,
ensuring financial stability for cherished brands, with detailed plans
forthcoming.