(01-20-2023 06:51 PM)ArmoredUpKnight Wrote:
I'm trying to understand what happened.
So Fly By Night Cable (FBNC) agrees to purchase content from Pac-12 Networks (P12N). Since P12N consists of 6 regional networks, FBNC is only interested in one or two, etc. If you are in Yuma, Arizona maybe you only want the Arizona and Southern California networks.
FBNC and P12N have a contract that pays $X + $Y/customer each month. P12N wants to make sure FBNC is reporting accurate customer numbers, so they audit FBNC customer counts in 2017.
P12N realized they had been overcharging FBNC, perhaps charging for networks that were not delivered to FBNC. No customers of FBNC complained about not receiving the Washington network, and FBNC did not notice how their bill was being miscalculated.
The CEO and CFO of P12N wanted their books to look good. They might lose their jobs if they report reduced revenue, particularly if P12N has to refund past overcharges. It appears that P12N was mismanaged by locating their production facilities in very expensive San Francisco, rather than an office park in San Ramon where they are moving to.
Last fall FBNC realized they had been overcharged for years. Maybe they were reviewing their contract for the Southern California network. If you don't have media rights to USC and UCLA what are you going to put on that network? Idaho at Washington State field hockey?
Or maybe the Pac-12 is trying to sell P12N and potential buyers were auditing P12N. If you come across an audit from 2017 that revealed P12N knowingly overcharged FBNC, and might be continuing to do so, the lawyers for the buyer are realizing they may be purchasing a $50M lawsuit. And the Pac-12 is legally obligated to report this to the potential buyer, or they could be on the hook for fraud.
Maybe the Pac-12 is trying to get out from under the P12N. They agree to sell it for $1 in return for receiving future revenue. But the potential buyer does not want that $50M liability. They want the Pac-12 to absorb that.