Entercom has issued a statement after receiving word that United States Traffic Network filed a $5 million lawsuit against the company. The company said its reseller agreement with USTN has ended and the lawsuit is baseless, frivolous, and insulting. “Entercom has worked tirelessly and constructively with USTN over the past six months to help USTN work through its significant financial issues. Entercom is owed substantial amounts of money by USTN, and the company intends to defend itself vigorously and assert all of its rights.”
CEO David Field said the end of Entercom’s relationship with USTN is a good thing. “We are relieved to no longer be mired by the difficult USTN situation that was inherited as part of the CBS Radio merger. We will move quickly to augment our strong internal sales organization to ensure that we realize the full value of this inventory. With leading news brands like 1010 WINS in New York, KNX in Los Angeles, and WBBM in Chicago, Entercom has the industry’s most valuable traffic inventory and we are pleased to be in control of our own destiny as we pursue opportunities in this attractive market segment.”
Back in March, Entercom CEO David Field said United States Traffic Network was unable to pay its $4 million bill due to Entercom in Q4 2017. Field went public with the network’s financial problems. He said USTN was having “significant financial issues.” Then in early May, it was announced that Entercom signed a new deal with the traffic network that includes an equity position.
During Entercom’s Q1 earnings call it was announced that United States Traffic Network cost Entercom $12 million in revenue in the first quarter of 2018. On that call, CFO Richard Schmaeling said the previous owners, GTN out of Australia, tried to execute an aggressive business model where they would “pay up” for inventory from broadcasters. Schmaeling said GTN “got out over their skis.”
Entercom said it had taken a “meaningful” stake in the business and Entercom executives were saying other broadcasters were also negotiating with USTN to get equity positions in USTN. In exchange for that equity position Entercom was going to give USTN a pricing break. Entercom said it might lose about $15 million or more in 2018 from its relationship with USTN. At the time, both Field and Schmaeling said USTN was making progress in its restructuring and Entercom was helping them through that. Schmaeling said, “They are quickly righting the ship.”
Sounds to me like USTN ran itself into a nice wall and is suing for a retirement pension. Sometimes the world changes and you lose vendors and/or clients to mergers. Entercom is fully within its rights to take business in-house, considering it is Entercom’s business and USTN’s adherence to whatever deal they had seems a tad flaky.
All points to Entercom on this one.
(Note: I am not an Entercom employee. In our market, we compete with Entercom.)
Entercom is not clean. Nuff said
“Nasty lawsuit?” Who files nice lawsuits? The minute Entercom said they’d take the business in-house I could see what the process was about.