A mere few weeks after American Idol left the U.S. airwaves for good, it’s being reported the producer behind the series has filed for bankruptcy.
Hollywood Reporter was the first to break the news that, on Thursday, Core Entertainment filed for Chapter 11 bankruptcy protection. It’s a shocking turn of events for Core, a brand credited with creating hits American Idol and So You Think You Can Dance.
The Hollywood Reporter was able to obtain copies of court documents that demonstrated just how dire things were once American Idol‘s popularity sank.
“Despite its long-running success, however, the Company has recently experienced deterioration in its financial performance, primarily attributable to the decline in ratings for American Idol and the corresponding decline in revenues from Idols-related broadcast fees, international tape sales for rebroadcasts, touring fees, sponsorships and Idols-related merchandise sales.”
There was once a time no one would have dreamed of such an outcome. During its first few seasons, American Idol was a ratings giant. According to CNN Money, the show averaged 20 million viewers through its first two seasons. American Idol reached a ratings high in 2006, peaking at 31 million viewers.
Unfortunately for Core, it was after that high that Idol began its declined. Last month’s “Farewell Finale” drew 13.1 million views, a total not even close to the show’s ratings in its earliest seasons.
— CNNMoney (@CNNMoney) April 29, 2016
It can be said that the beginning of the end for American Idol was itself the beginning of the end for the Core Entertainment, a company based in West Hollywood, California. Citing court documents, the New York Times reported that company’s misfortunes were due to a combination of “decline in overall economics” and the announcement by Fox that the 2017 season of American Idol would be its last.
Bankruptcy documents revealed that, in the first half of 2015 alone, the business lost about $35.6 million. By comparison, it counted losses totaling $15 million for all of 2014. As of the bankruptcy filing, Core Entertainment is $398 million in debt. It owes its various lenders $512 million while reportedly possessing just $73 million in assets.
— Bloomberg (@business) April 28, 2016
Even as the final season of American Idol was winding down, the Wall Street Journal writes that Core was hoping to work out something with its debtors. It was Simon Fuller who is thought to have brought the matter to a head. Fuller was the company’s former chief executive. He left in 2011. Despite his departure, Simon remained a “chief consultant” for the company and was promised a “profit share.”
As of now, Fuller is the largest unsecured creditor associated with Core; the company owes him $3.3 million. Fuller’s demands for payment – and failed talks with other debtors – ultimately forced Core to file for Chapter 11 bankruptcy.
Another reason? The American Idol producer had yet to find a proper replacement in the form of a major, money-making hit. Despite this massive setback, a spokeswoman for Core Entertainment says the company has no intention of selling assets. The organization also claims its confident it will be able “to move through chapter 11 expeditiously.”
— Wall Street Journal (@WSJ) April 28, 2016
It’s possible that Core can bounce back from bankruptcy and the loss of American Idol. Hollywood Reporter wrote the company expressed optimism it would be able to “finalize and document a global deal in the near term.” In the meantime, it’s moving to head off Simon Fuller’s “winding up” proceedings in the United Kingdom. Core hopes that by “freezing” court proceedings across the ocean, it will have ample time to sort things out in the United States.
Both the fall of American Idol and the fallout from its decline should serve as a warning for other producers banking on their current cash cows lasting forever. A downturn in ratings could bring on a downward spiral that ends in bankruptcy.
[Photo by Matt Sayles/Invision/AP]