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Sports Illustrated staff received a notice on Friday about significant job cuts, with some happening immediately and others in the near future.
Authentic Brands Group, the licensing group that acquired Sports Illustrated for $110 million five years ago, has terminated its agreement with The Arena Group for publishing SI in print and digital. This decision comes after Arena missed a $3.75 million payment, breaching their licensing deal that began in 2019. Authentic's termination triggered a $45 million fee, according to an SEC filing on Friday.
In response, Arena informed SI employees via email that Authentic Brands Group officially revoked the license under which Arena operates the Sports Illustrated brand, leading to staff layoffs. Guild members will receive a 90-day notice, during which the licensing issue might be resolved, while non-guild employees will be let go immediately. The extent of the layoffs was unclear initially, but a staff call clarified that anyone remaining after 90 days would be laid off unless the licensing issue was resolved.
"Some employees will be terminated immediately and paid instead of the notice period under the union contract," stated Arena's email to staffers. The Sports Illustrated Guild expressed determination on social media, pledging to continue their fight for fair treatment.
The move by Authentic to terminate Arena's license and Arena's subsequent layoffs mark a shift in the company, following the introduction of Manoj Bhargava, the founder of 5-Hour Energy, as their new leader. Authentic has engaged in talks with various parties to explore the possibility of taking over Arena's role with SI.
The article suggests that Authentic's goal is to expedite the process, either by establishing a new operator or allowing Arena to renegotiate its current deal. Regardless, insiders believe Authentic will guide Sports Illustrated through a necessary evolution.
Sports Illustrated has faced financial challenges in the digital age, with a November report revealing AI-generated reviews on its website without disclosure. Bhargava's leadership was marked by a controversial town hall in December, where he downplayed the importance of individuals. Despite Simplify Inventions' $50 million deal to acquire a majority of Arena in August, Arena faced layoffs even before Authentic's recent termination.
Authentic's discontent with Arena predates the missed payment, stemming from multiple layoffs, the departure of top talent like Grant Wahl, and frequent leadership changes at SI. Apart from the SI layoffs on Friday, Arena fired over 100 employees on Thursday throughout its organization.
Bhargava, who initially served as Arena's interim CEO, stepped down on Jan. 5 to avoid conflicts of interest, as his company, Bridge Media Networks, is in talks to make a substantial investment in Arena. The Thursday layoffs were carried out by Arena executives and board members, along with Jason Frankl of FTI Consulting, who was appointed Arena's chief business transformation officer.
Frankl expressed the immediate focus on designing a growth-oriented media company and ensuring financial stability while regretting the necessity of the recent layoffs. Detailed plans for the company's future are expected to be shared soon.