ARI SHAPIRO, HOST:
Sports Illustrated was once the pinnacle of sports journalism, and now its future is uncertain. This afternoon, magazine staffers were told to expect massive layoffs. Like most magazines, Sports Illustrated has had a tough time with declining readership and new owners. A.J. Perez has been reporting on this for Front Office Sports. Hi there.
A J PEREZ: Hello. Thanks for having me.
SHAPIRO: So - you're welcome. It's good to have you here. Today's announcement of layoffs comes after a missed payment. Explain what happened.
PEREZ: Yes. So Sports Illustrated is owned by Authentic Brands, which is a licensing company. They own Reebok and a lot of other brands. But back in - right after they bought it in 2019 from - for about $100 million, they sold the licensing rights to a company called Maven. Forty-five million dollars Maven had to pay upfront, along with annual fees going forward, as part of a 10-year contract. Maven morphed into the Arena Group a couple of years ago, and now the Arena Group is basically - well, it's mostly owned by Manoj Bhargava. He's the founder of 5-Hour Energy. And since August, he's been building up more and more equity in the company by purchasing outstanding shares. And also, he acquired a lot of the debt.
Now, during that time - he, you know, during this time, he's not - he was credited at the SEC filings. He's not fully in control, but he was interim CEO for a few weeks back in December through early January. And during that time, he had a very wild introduction to his staff during a town hall of SI and at the other brands of Arena. And the other brands of Arena are, like, TheStreet and Men's Journal...
SHAPIRO: But to the specific missed payment that triggered...
PEREZ: Yes.
SHAPIRO: ...The layoffs - that was the initiating event. And how many...
PEREZ: Yes, it was.
SHAPIRO: ...Staffers is it likely to affect?
PEREZ: It's going to be - now, that led to today. Well, this - it was disclosed today that Authentic has triggered the termination clause in the deal. And as part of that, they can get those rights back. And Arena is on the hook for a $45 million payment on top of that. This is all the while - you know, there are still - there's other - there's people talking to Authentic about acquiring the SI IP, and, really, this could also be the Arena Group's kind of move towards trying to renegotiate the fees before what's left on the contract.
SHAPIRO: Any sense of the number of layoffs we're likely to see?
PEREZ: Well, basically, what we found out today was, within 90 days, it could be everybody.
SHAPIRO: Everybody.
PEREZ: And that's really - that - Authentic has - Authentic is - we had sources saying before this - and they put out a statement that that's not going to happen. They're going to - they're not going to let this brand die. So this is...
SHAPIRO: What's the reaction been from the union?
PEREZ: It was swift and - yeah, they were - they're pushing back. And that's why those employees covered under the union contract have 90 days. They have a 90 - basically 90-day window where this could get cured. This could get fixed - whether that means Authentic coming in and operating it themselves, finding another company or renegotiating with Arena to - at a lower rate.
SHAPIRO: But...
PEREZ: So there's going to be - but there's still going to be many, many layoffs.
SHAPIRO: But even the best-case scenario here seems like such a far cry from the golden age of sports journalism that this magazine was known for.
PEREZ: Yeah, exactly. It was - yeah. It's - when I was a kid, it was - it's like a lot of brands that have changed. They stopped doing - many years ago, they stopped doing the print edition and - outside of the swimsuit edition. So it's just the change in media - old media - and another billionaire savior came in and made a bunch of cuts. That's basically what we have here.
SHAPIRO: A.J. Perez is a senior reporter for Front Office Sports. Thank you.
PEREZ: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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