Showdown At The Apollo - Page 5 of 10

Showdown At The Apollo

declined to name. There wasn’t enough time to properly investigate both companies, “So we decided to enter into a short-term license, a one-year deal, to get the show up for this year and to give us the proper time to access a longer-term license,” says Bernard. “We did not want to rush into a deal that we would be beholden to over the next five years or more.”

Lancey charges that the negotiations were really about the foundation’s quest to gain control of the show. “Basically, their one-year offer was, ‘We want to take over the show, and we want you to pay us money to do it,'” says Lancey. “Then, when we sent our lawyers to New York, they told us [the foundation was] retracting the offer.” Lancey maintains that he and Sutton never discussed a one-year deal with the foundation.

Once the decision to go with a one-year deal was made, however, Bernard says the foundation gave Inner City/Western International another opportunity to broker a deal. “We went back to all the parties, the first being Inner City/Western International, and offered them the one-year deal. They never responded. Time was of the essence, but they apparently were not interested.”

Margolis says his clients were handicapped by a midstream change in the negotiation process, which included unexplained directives they had to agree to. For example, the foundation asked for a role in the production of the show such as “approving the producer, director, host, or any changes.” It also made vague requests to “hold down production costs.” Margolis also maintains that a letter Sutton sent to the foundation July 1, requesting clarification of the new directives and the one-year deal, was never responded to. Without clarification of what the new directives would cost, Inner City/Western International didn’t feel it was given enough information to accurately price their bid for the license. It wound up resubmitting the seven-year, $53 million bid.

After three weeks, Bernard says the foundation fired off a letter to Inner City/Western International warning that the lack of response to the one-year offer would be viewed as a decline. By that time, Mercado-Valdes had already submitted a one-year bid adhering to the terms the foundation asked for and, with time winding down, the foundation made its decision. The Heritage Networks was awarded a one-year, $1.6 million syndication deal in late August. As part of the deal, the company also pays a $900,000 annual fee to rent the Apollo Theater for tapings.

Once Inner City/Western International became aware that the contract had been awarded, Lancey says he and Sutton protested, saying they should have had the right to match or beat any offers. “We did not receive anything in writing that would have allowed us to review, or ultimately match, any offer,” he says. “We were not given an opportunity to respond to anyone’s bid.” Bernard refutes the claim, saying, “Based on the terms in the expired license agreement, [the foundation] was only obligated to present a competing offer to [Inner City/Western

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