Showdown At The Apollo

Inner City Broadcasting and The Heritage Networks face-off for control of It's Showtime at the Apollo. Who will emerge the victor in this mega-bucks battle?

command in the future. Mercado-Valdes hopes to combine Showtime at the Apollo with his new Weekend Vibe series to create a two-hour block of urban entertainment television, which will enhance his company’s leverage with advertising firms. The referee in the battle, the nonprofit Apollo Theater Foundation, is using negotiations for the rights to Showtime at the Apollo to establish greater control of the Apollo brand. By doing so, the business-savvy board hopes to implement its new mandate to expand and extend the brand, while making the overall theater operations profitable.

A GOOD DEED TURNED BAD
The seeds for the It’s Showtime vs. Showtime fiasco were sown in 1991 when, after a decade of struggling to run the theater and produce the show, Sutton created the Apollo Theater Foundation with help from the Harlem Urban Development Corp. Soon after, Sutton transferred the theater’s title to the foundation, which relieved him of the financial burden of running it alone, but the theater continued to operate as if he still owned it. A deal was worked out whereby Sutton agreed to pay the foundation 25% of the show’s yearly profits to ensure the theater’s future operations. And because Sutton had a supportive board of directors and a favorable reputation, most community and business leaders didn’t criticize the arrangement.

But by handing over the title, Sutton effectively relinquished private ownership of the Apollo Theater and the Apollo brand. Mercado-Valdes, recognizing the value of the Apollo show, made his first serious bid for the rights to produce it in 1998. When his bid was rejected, a foundation board member filed a lawsuit against Inner City, prompting then-New York Attorney General Dennis Vacco to investigate other foundation board members, including Rep. Charles Rangel (D-N.Y.), for mismanaging the theater and failing to collect $4.4 million in profit from Inner City as stipulated in the contract.

As Sutton’s nephew, Inner City President Chuck Sutton, explains it, the lawsuit became a debate over the interpretation of contract language. The $4.4 million cited in the suit was for back payments Inner City allegedly owed the foundation, but the claim was found to have no merit. According to the terms of the contract, Inner City was obligated to pay the foundation 25% of net profits, which it believed represented the actual advertising dollars made when It’s Showtime at the Apollo aired. During audits, however, the foundation’s accountants read the contract differently, counting the seed money to produce the Apollo program as gross revenues as well as part of the net profit of the show. “Under their interpretation, I was supposed to take 25 cents of every dollar I was given to produce the television show and turn it over to the foundation,” says Chuck Sutton, noting that seed money to produce a television show is rarely considered revenue.

Unfortunately, the lawsuit spotlighted the elder Sutton’s biggest dilemma: keeping the Apollo Theater running when the Apollo show wasn’t yet profitable. In 1989, Sutton teamed up with Western International Syndication, a Los Angeles-based television syndication and production

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