March Madness

Cumulus Media and the National Collegiate Athletic Association are embroiled in dueling lawsuits over unpaid radio rights fees for the March Madness basketball tournament. The dispute stems from the March 12 decision by the NCAA which, citing mounting concerns over the spread of the coronavirus pandemic, canceled its men’s and women’s college basketball tournaments for which Cumulus subsidiary Westwood One had exclusive audio broadcast rights. It meant the disappearance of one of the most lucrative sports advertising products on the network’s calendar. Cumulus said that was a breach of Westwood One’s long-running play-by-play rights deal and it concluded it did not have to pay the fees for the 2020 season because the tournament was cancelled by the league. When Cumulus didn’t pay up, the NCAA cancelled Westwood One’s contract for non-payment.

According to a regulatory filing, the parties took their dispute to the courtroom on Sept. 28, when each filed competing lawsuits in the Indiana Commercial Court in Indianapolis. The NCAA claims Westwood One breached its contract by failing to pay the rights fees and asked the court to issue a declaratory ruling that its termination of the deal was permissible and that the league is entitled to full payment of the rights fees for the 2019-2020 contract year – despite cancelling the games.

Westwood One, in turn, is seeking a declaratory ruling from the court that says it is not obligated to pay the rights fees since the league cancelled the events that the fees applied to. It also argues that the NCAA was prohibited from ending the agreement for the non-payment.

Westwood One also asked for a preliminary injunction that would prevent the NCAA from terminating the rights deal until the court could make a determination on the issues raised by the lawsuits. It is a move that, if successful, would give the radio network access to any NCAA games that are played while the legal dispute is sorted out. But on Oct. 2 the court denied Westwood One's motion for a preliminary injunction. However, the court didn’t make a decision on the merits for a declaratory ruling. The same day the radio network appealed the denial of the injunction.

Informing analysts and investors of the litigation during its quarterly results call, Cumulus Executive VP/CFO Frank Lopez-Balboa said the company plans to litigate both suits to their conclusion. “While it is always unfortunate for contract disputes to escalate to litigation, and litigation can be unpredictable, we believe in the merits of our position,” he said. “At this stage we are unable to reasonably estimate the impact of the litigation but we will keep you informed as it progresses.”

Even before the suits started flying, Cumulus was already feeling the sting of the March Madness cancellation. When reporting a 14.8% revenue decline for first quarter 2020, the company said that network radio took the biggest hit, mainly due to the March Madness cancellation. Network radio fell 22.1% on a same-station basis in Q1 to $65.7 million.