Why does a company with 2 hit reality shows have to file for bankruptcy?
Core Media Group, the production company that owns several reality TV shows, including “American Idol” and “So You Think You Can Dance,” has filed for Chapter 11 bankruptcy protection. The company, which is based in New York, apparently is carrying $398 million in debt. According to The Hollywood Reporter, its creditors include “American Idol” creator Simon Fuller.
Core Media was formed in 2014 as a joint venture between 21st Century Fox and Apollo Global Management, a private equity firm. The portion of the debt to Fuller is$3.4 million and his demand of payment played a key role in Core Media’s decision to file for bankruptcy. Core’s other creditors include Marc Graboff, the former CEO of Core Media who is now the head of the Discovery Communications studio, and a group of investor loans that have now matured.
According to an email received by Fortune from a Core Media spokesperson, the company believes that Chapter 11 will help to restructure the company, allowing for more flexibility and growth in the future. A statement by the company states that: “Core Media Group remains firmly committed to our mission as a global content and management company producing award-winning programming.”
Core Media’s filing for Chapter 11 move comes less than four weeks after the final episode of “American Idol” was aired. The program had a great track record, having been on the air for 15 seasons as part of a surge of reality TV programs. “American Idol’s” top rating was more than 37 million viewers (in 2007, its sixth season), but the show was cancelled when its ratings fell perilously low. In filing for Chapter 11, Core Media submitted a document stating that “Despite its long-running success . . . [Core Media] has recently experienced deterioration in its [the show’s] financial performance.” The document claimed that declining ratings for “American Idol” had created a correlated decline in revenue from Idol-related broadcast fees, international rebroadcast sales, touring fees and merchandise sales.
At times when a business can no longer meet its financial obligations, filing for business bankruptcy may be necessary. Relieving the overwhelming strain that unpaid debt produces can help the firm to restructure and move forward. If your business needs to restructure its debt, and is considering filing for bankruptcy, you should consult with a law firm that specializes in bankruptcy to get the best possible advice and assistance.