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Entertainment/Character

Licensors Poised to Lose Millions in Royalties

The Hollywood Reporter reports that top entertainment and music companies like Discovery, CBS, Fox, and NBCUniversal are facing millions in lost royalties if a planned bankruptcy auction of Delivery Agent goes through.

Delivery Agent was founded in 2005; the company runs digital platforms that sell licensed merchandise and has generated more than $800 million in revenue. After an unsuccessful IPO stint, the company filed for Chapter 11 bankruptcy in September.

Now, in Delaware Bankruptcy Court, Hillair Capital Investments is proposing to lead a sale of the company through a bankruptcy auction—and licensors are claiming that they are owed far more than the debtor is claiming.

We’ve crunched the numbers where available:

  • Discovery says it is owed 14% royalties and an annual minimum guaranteed royalty payment of $1 million, but that it hasn’t recieved any payments since Q2 2015. Based on its claims for amount owed, Discovery cleared over $11.4 million in retail sales during the intervening time.
  • HBO claims it is owed $1.2 million in royalties—the licensor might have counted anywhere from $8–11 million in retail sales for the same time period.
  • 20th Century Fox seeks over $157,000 in unpaid royalties for merchandise sold through the CBS and Star Trek stores.
  • Bravado Intl. Group claims it is owed $3 million.
  • Warner Music Group subsidiary Rhino Entertainment doesn’t know how much it is owed, tragically enough.
  • Other companies like CBS and Showtime are balking at a provision that would allow Delivery Agent’s buyer to assume their licensing agreements.
  • Interestingly, NBCUniversal claims that even if Delivery Agent is sold, the things that make up its ecommerce sites such as their design, URLs, and customer data cannot be transferred.
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