FloSports Sues WWN for $1 Million+, Alleges That They...

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FloSports Sues WWN for $1 Million+, Alleges That They Provided 'Just Plain False' Business Records During Negotiations

DAVID BIXENSPANSEP 21, 20175:45PM EDTShare this Article through Social Media:
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Last Friday, September 15th, FloSports, the parent company of wrestling subscription streaming service FloSlam, sued WWN Inc., the parent company of the World Wrestling Network family of promotions, in Texas’s Travis County District Court. In the complaint, Flo is alleging that last year, when they made a deal with WWN to become the exclusive streaming home of all of their in-house promotions, they were not provided with accurate data about internet pay-per-view buys and video on demand purchases. According to the complaint, FloSports is asking for in excess of $1 million in damages.

“WWN induced FloSports to pay it hundreds of thousands of dollars based on data that was not only inaccurate and unreliable; it was just plain false,” reads the complaint. “When pressed for the data that backed up WWN’s spreadsheet of viewership, WWN originally claimed it had lost or deleted that information. Ultimately, WWN sent records listing many subscribers more than once and including purchasers of DVDs instead of broadcast services. Even with that artificial inflation of viewership, the numbers WWN attempted to account for were far less than those represented in its initial spreadsheet.”

FloSports is suing on grounds of breach of contract and negligent misrepresentation. WWN’s lawyer, who owner Sal Hamaoui has been referring reporters to, has not yet responded to a request for comment as of this writing.

“The lawsuit isn’t to get out of the partnership,” FloSports Senior Vice President and General Counsel Paul Hurdlow told Fightful. “It really is our hope that we’ll get back to talking to WWN and kind of work things out outside of the litigation….Sometimes you have to file a complaint to sort of protect your interest in particular situations. We’re not apologizing that we did it—we chose to do it—but it’s really our preference to have dialogue and work things out with them outside of litigation.”

One Flo source familiar with the numbers told Fightful that during negotiations, WWN told Flo that they were averaging about 5,000 buys per Evolve pay-per-view, which sounds very high based on conversations with indie wrestling sources familiar with the internet pay-per-view landscape. The other WWN in-house promotions, Full Impact Pro, Shine, Style Battle, and ACW, which all draw incredibly small crowds even by indie standards, are believed to have been included in the deal as a value add. A WWN source—Joshua Gavin—who was privy to conversations within the company during negotiations alleged to Fightful that management was openly talking about inflating the numbers, with the idea that Flo had no way of verifying them.

In the end, per the Flo source, FloSlam was up to just under 2,000 paying subscribers before a brief flirtations with a $30/month price point scared some users off. Starting with that move, all of FloSports’ channels are available when you pay the monthly subscription price, whereas before, you only got one sport on the monthly plans (the one that went from $20 to $30 to $20) and had to do a discounted annual subscription to get all of them in one shot.

The new allegations give a great deal of context to the various stories about Flo and WWN that had been floating around as of late, both publicly and privately. For example, in an article about wrestling streaming services that I published Wednesday at Deadspin, I mentioned the story of Josh Wheeler, the promoter of Atlanta Wrestling Entertainment. Wheeler had made a deal early in 2017 to work with WWN on the July 9th Evolve show in Atlanta, the latter’s debut in the market. As part of the deal, the AWE pre-show card before the Evolve main-card would be streamed through FloSlam, the same way that they had with the Tier 1 Wrestling pre-show in New York City and the PWX pre-show in North Carolina. In the deal brokered by WWN, Wheeler says he was initially promised $1,000 as the rights fee, only for it to be cut to $250 just two days out.

Flo filing the lawsuit also comes just four days after the twentieth anniversary of the beginning of federal case filed against Jerry Lawler and business partner Larry Burton stemming from the sale of the United States Wrestling Association to Mark Selker’s XL Sports. XL alleged that Lawler and Selker has cooked the books to make it appear that the dying promotion was worth several multiples of its actual value, with Vince McMahon even giving them a meeting where he told Selker that it was a good investment at the price being asked for. XL won a judgment against Burton only, with the jury believing Lawler, who claimed to have been duped himself by his partner.

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On Monday night, FloSports filed multiple new documents in their lawsuit against WWN, the parent company of Evolve, Shine, and FIP, where they allege that WWN sent them fraudulent business records to secure a deal to get on their FloSlam wrestling streaming service. In the process, FloSports made some notable documents public, including the contract between the two companies and the internet pay-per-view buy data that WWN sent before the deal was struck. Taken together, they all give new insight into the two companies' relationship, which fell apart less than a year after it started.

The IPPV numbers are submitted as an exhibit via an attachment to an email thread back and forth between WWN owner Sal Hamaoui and FloSports’ about their non-disclosure agreement. The email exchange is dated October 11, 2016, just 13 days before the official announcement of the deal and FloSlam service. After Mergler sent Hamaoui the NDA, the WWN promoter sent this reply:

Toby,

These just represent live IPPV and VOD buys for 2015-2016 events. Older titles represent about 15% of our gross sales.

Best regards,

Sal

The spreadsheet sent by Hamahoui gives total buys up to that point for each show in addition to breaking them down by price tier: $9.99-$14.99 (live only), $14.99-19.99 (live plus video on demand), and $24.99-29.99 (live plus video on demand and DVD), with the extra $5 being for customers who ordered on the day of the show. In spite of what FloSports is alleging, these numbers appear to reflect the general consensus on the indie scene of how Evolve was doing before the move to FloSlam. In 2015, the average show drew about 500 to 750 buys, with noticeable increases to a little over 1,000 buys for WrestleMania weekend shows. In 2016, there was a big jump, with the rank and file shows doing about 950 to 1,300 buys, and shows from the weekend of WWE tentpole pay-per-view events doing over 2,000 buys each, peaking at 2,475 buys for Evolve 58 during WrestleMania weekend. The WWN Supershow cards on ‘Mania weekend, which feature talent from Evolve as well as the other WWN groups, did 1,512 buys in 2015 and 1,940 buys in 2016.

For the non-Evolve promotions, Shine, the all-women’s group, appears to have averaged about 500 to 750 buys throughout the two years. The exception is Shine 35 at 948 buys; while there was a WWE PPV that weekend (Money in the Bank), it took place on the other side of the country and was not a “WWE PPV weekend event” the way we normally think of indie shows being like that. It also featured the usual Shine talent roster. FIP shows peaked at 288 buys for Fallout Night 1 and 236 buys for Everything Burns, but other than Fallout Night 2 (188 buys), the rest did under 175 buys. Shimmer, Dave Prazak’s women’s promotion which is DVD-only outside of its WrestleMania weekend shows, is listed at netting 1,708 buys for the 2015 show and 1,508 buys for the 2016 show.

It should be noted that all of these numbers are presented in a PDF printout of a spreadsheet with no provenance indicating how they were gathered.

According to an amended complaint filed by FloSports’ attorneys on Monday, the timeline went something like this: The two sides began talks in August 2016, during which IPPV numbers were given informally over the phone.and by email before Hamaoui sent the aforementioned spreadsheet. Days after that last email, they signed the deal. During the first year, though, “FloSports became suspicious that WWN’s data was inaccurate” and “repeatedly asked WWN to send FloSports more detailed data to support the original spreadsheet” for months. WWN said the data was gone, but eventually found records that they sent on August 18 of this year. As has been previously reported, WWN alleges that the records listed customers more than once (whether this refers to a customer being listed more than once for a single event or is referring to multiple shows is not immediately clear) and included DVD/Blu-Ray purchases. Even then, Flo says that “the records showed viewership numbers far less” than the figures given in the spreadsheet.”

While the complaint says that the contract included WWN asserting that “all data provided by [WWN] regarding past financial performance of events put on by [WWN] was accurate, reliable and truthful,” that page appears to be missing from the copy filed as an exhibit. This appears to be in error, as another new filing, an opposition to WWN’s motion to dismiss the case, cites the exhibit for that line. “When pressed for the data that backed up WWN’s representations, WWN originally claimed the data was lost or deleted,” FloSports attorneys wrote in an amended complaint filed Monday. “Ultimately, WWN sent records listing subscribers more than once and including customers who had not purchased broadcast services. Even accounting for that artificial inflation of its viewership, WWN’s numbers proved far less than originally represented.”

As for the (incomplete) copy of the contract filed with the court, it says that WWN was to get escalating rights fees divided up as follows:

2016: $75,000

2017: $500,000

2018: $550,000

2019: $605,000

2020: $670,000

2021: $740,000

All told, the contract was worth $3.14 million, which is in line with what was rumored. The amount was to be paid in equal monthly installments, with WWN invoicing FloSports. If payment was not made within 45 days, WWN was due a 5% penalty. There was also an incentive package for WWN if FloSlam performed at certain levels. “In addition to the Rights Fee...FloSports will pay an incentive to Events Rights Holder if financial performance exceeds specified levels,” reads the contract. “Events Rights Holder will receive the greater of the Rights Fee...or 30% of total Net Cash attributed to WWN over the course of the year. Example: Net cash in 2017 equals $1,000,000. Events Right Holder receives a total of $500,000. Net cash in 2018 equals $3,000,000. Events Right Holder receives a total of $900,000.” WWN was got credited for subscriptions that were generated in the three days before or three days after an event.

These documents bring into question what Flo was actually expecting out of WWN. With no data indicating how many unique IPPV buyers WWN had in its lifetime, the realistic ceiling of how many subscribers that FloSlam could get with Evolve as the anchor promotion was in the range of 2,000 to 2,500 subscribers. While we don’t know how much of the subscription price was profit, even the most optimistic scenario appears to have had Flo breaking even on the first year of the deal. The prevailing belief on the indie scene is that no indie-centric streaming service has more than about 2,000 subscribers, the now defunct FloSlam service included (it's since become a general wrestling news website). For comparison’s sake, as of the days after Wrestle Kingdom in January, about 25% (15,000) of NJPW World's 60,000 active subscribers were from outside of Japan.

While FloSports had an option to end the relationship, they could not exercise it until January 2018, and the deal would still be good for a year after that. The contract also outlines that the production itself, which became a sticking point for Flo as the relationship went on, was left up to WWN. The standards that they had to live up to were to provide a high definition stream backed by “commentary with similar quality” and shot with two camera angles. Other than some technical details like the streaming protocol and the minimum upload speed for venues, that was about it as far as production details.

On the other hand, when it comes to Flo promoting WWN and FloSlam, a details that WWN has publicly expressed dissatisfaction over, the contract both does and doesn’t clarify the issue. “FloSports will provide $250,000 of advertising value per year on FloSports (i.e. custom digital display, email newsletters, social media, editorial previews/coverage/recaps, etc.),” reads to agreement. On one hand, the contract clearly spells out the type of promotion they’re referring to. On the other hand, your mileage may vary as to if that equals “$250,000 of advertising value.” FloSlam.tv wasn’t built out as a news site under after the two sides split, instead just promoting the streaming service for the most part. The “editorial previews/coverage/recaps” were there, but that was all that was there. Wrestling websites also did not receive press releases from FloSlam promoting WWN events.

WWN was also required to promote FloSlam at its events in fairly simple terms, which it did. There is also a section outlining the license to WWN footage that FloSports was granted, part of it is on a page that was missing from the version filed with the court.

FloSports is also requesting a jury trial, which is a departure from their previously expressed intent of using the lawsuit to renegotiate the contract. Now, the company is committing to the kind of long-term, financially draining process that WWN most likely cannot sustain, especially with little revenue coming in. WWN currently has no shows announced between December and WrestleMania weekend, though they said in a recent email update that there will "definitely" be more Evolve shows in the interim.

Note: The last paragraph of this article has been edited to more accurately reflect that while there are no shows announced for the period between December and WrestleMania weekend, WWN says that there will be Evolve events during that period.