7:59am PT by Eriq Gardner
Bloomberg Hit With $60M Lawsuit for Ending African TV Deal After Bad Publicity
In a $60 million lawsuit filed on Wednesday in New York federal court, Optima Media Group is attributing a decision by Bloomberg LLP to walk away from an African television partnership to negative publicity.
Optima has produced and broadcast content such as Nigerian Idol, Nigerian X-Factor, the Olympic Games, and the FIFA World Cup. According to the complaint, Bloomberg in 2011 began looking for an African media-company partner for "Bloomberg Television Africa," and after Bloomberg's then CEO Andy Lack negotiated with Optima, the two companies entered into a content sharing and licensing agreement.
But before the full term ended, Bloomberg terminated the agreement shortly after it received an email from a journalist at The Guardian.
The reporter, states the complaint, "asked about the millions of dollars in license fees Optima paid Bloomberg each year; Bloomberg's response to the notion that U.K.-based journalists employed by Bloomberg TV Africa — who were to be paid in British pounds — did not receive their full salaries; and whether Michael Bloomberg would see the 'irony' of this situation in light of his philanthropic work in Africa."
According to Optima, the context is that the African-based company was obligated to pay $16.5 million in license fees during the course of the contract plus millions more in royalties. Optima also says it completed work on a new studio in Lagos.
But then, continues Optima, the Nigerian government imposed limitations on the ability to exchange its currency, so Bloomberg Television Africa "occasionally struggled to access dollars and pounds, and, in those instances, could not make timely payments to their employees and contractors who were to be compensated in foreign currency."
Bloomberg was well aware of the foreign exchange regulations, alleges Optima, which adds that the two sides regularly discussed how to navigate the hurdles. Meanwhile, Bloomberg is said to have continued to accept license payments but sought amendments to the deal for better terms, including greater control over its brand in emerging markets.
"In the renegotiations with Optima, Bloomberg sought to alter its relationship with Optima from the previous franchise-style agreement," states the complaint.
Optima didn't like the proposed realignment, which it believed would make costly technological infrastructure redundant and diminish advertising and sponsorship-related benefits.
In April 2015, Bloomberg's communication staff received an email from The Guardian journalist about what he was hearing about nonpayments to staffers. The inquiry set off coordinated damage control.
Just over a week later, and with the Lagos studio only days from launching, Bloomberg handed over a letter noticing the termination of the agreement.
The contract provided for termination in case of insolvency, which is what Bloomberg is said to have cited as cause, but Optima asserts this was merely pretext.
"As Bloomberg was well-aware, Optima was not, and had never been, insolvent," writes Optima's attorney. "In reality, Bloomberg was shifting its brand-building strategy in emerging markets and the original Agreement clashed with Bloomberg's new approach. Bloomberg also had begun garnering negative media attention for the millions of dollars it made from the license fee arrangement with Optima. Bloomberg changing its mind about the Agreement, however, was not a valid basis for termination."
At a meeting in London, where the termination was discussed, Bloomberg managing director Adam Freeman allegedly said that if he were Optima's chairman, he would "sue Mike [Bloomberg] immediately."
"Bloomberg also knew that terminating the Agreement would leave Optima exposed to its creditors without a source of revenue with which to repay its indebtedness," continues the complaint. "Finally, Bloomberg knew, or should have known, that terminating the Agreement based on Optima's purported insolvency would harm Optima's reputation across sub-Saharan Africa and beyond."
Here's the complaint claiming breach of contract and fair dealing. Optima is represented by Joshua Sohn and Robert Mantel at Watson Farley & Williams.
Bloomberg declined an opportunity to respond.