As previously reported, an amended class action complaint against WWE was filed last week by Firefighters Pension System of the City of Kansas City Missouri Trust. The lawsuit alleges that WWE misled investors about their dealings with Saudi Arabia, in particular with their television deal in the MENA (Middle East & North Africa) region.
WrestleNomics recently released court documents from the suit which claimed that WWE allegedly failed to disclose the early termination of their television deal with Orbit Showtime Network (OSN) in the region and led investors to believe that they were working on renewing a deal.
According to the amended complaint, which also alleges that a former WWE Superstar is a confidential witness in the lawsuit, OSN began to struggle financially, and, as early as 2018, the Middle East pay TV operator began to be "delinquent in the payments of rights fees to the WWE". In September 2018, WWE sent OSN a "Notice Of Material Breach" in regards to said delinquent payments.
In a cost savings measure, OSN decided to shut down its sports channels, and sought the early termination of its distribution deal with WWE. In November 2018, general counsel for OSN informed WWE officials that OSN intended to close up its sports content business and sports coverage by early 2019.
On December 18, 2018, OSN and WWE came to terms on a settlement, which would allow OSN to terminate its deal with WWE early, as of March 31, 2019.
WWE was trying to find a new MENA partner, and tried to negotiate a new deal with the Middle East Broadcasting Center (MBC).
In the lawsuit, an employee of MBC, identified as CW-1, stated that WWE had "wildly unreasonable expectations of the revenue it expected from a potential broadcast partner."
CW-1 claimed that WWE proposed an $80 million annual licensing fee for its projection of over 100 million "OTT" subscribers, which they based on the large number of OSN subscribers who watched WWE. MBC reportedly only projected 6.5 million WWE subscribers at "most" based on their own research and analysis. CW-1 said that WWE rejected this low subscriber figure, so MBC raised their estimate to 10 million subscribers to be cooperative, before finally bumping it up to 15 million "only to please WWE, not because MBC felt the projections were realistic."
CW-1 said that WWE then dropped their asking price for the licensing fee to $50 million. However, MBC felt it could not go above $14.5 million. CW-1 was later informed that negotiations ended there.
WWE has yet to announce a new television deal in the region despite telling investors that they planned to have it completed at the end of 2019.
You can view the excerpt from the lawsuit below (h/t to Heel By Nature for the transcription):
At CW-1's request, due to potential safety and retaliatory concerns expressed by CW-1, Lead Plaintiff has removed some identifying details about CW-1's employment at MBC during the relevant time frame. Lead Plaintiff believes that the details of the responsibilities of CW-1 contained herein are sufficient to satisfy the requirements of the PSLRA. However, Lead Plaintiff can provide additional specificity, including CW-1's exact title, to the Court through an in camera submission.
An employee of the Middle East Broadcasting Center ("MBC")—which is controlled by the Saudi government—confirms that the WWE and MBC could not agree on basic assumptions of a proposed deal. This CW, referred to herein as CW-1,3 explained that he worked on a feasibility study when he joined MBC in Fall 2019, which had begun at some point before his hiring, on the possibility of a broadcast partnership between WWE and MBC. CW-1 recalled that WWE had wildly unreasonable expectations of the revenue it expected from a potential broadcast partner. It proposed an $80 million annual licensing fee for its projection of 100 million-plus "OTT" subscribers, which were based on the large number of OSN subscribers who watched WWE.
CW-1 called this audience estimate "optimistic," and confirmed that, according to his research and analysis, MBC projected only 6.5 million WWE subscribers, at most. According to CW-1, WWE rejected this low subscriber figure, so MBC raised the estimate somewhat—first to 10 million to be cooperative, and then finally to 15 million. But this was only to please WWE, not because MBC felt the projections were realistic. WWE then reduced its licensing fee ask to $50 million. However, MBC felt it could not go above $14.5 million. CW-1 was later informed that MBC and WWE concluded their negotiations due to the difference in "numbers."
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