$100 Million Lawsuit? This Is Looking Worse Than I Thought…

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That was Austin’s side of the story. Now we’re about to see LiveXLive’s side of the story in their complaint against Austin. This complaint is really entertaining to read, and I think it’s going to be one of the biggest stories involving a social media influencer this year. To everyone’s surprise, the fight didn’t sell as many pay-per-views as initially expected. The fans of most of these creators are young enough to not yet have a job, a good amount probably don’t have discretionary income to spend on a boxing match, and they know their way around streaming. Add it up and you have an audience that was about as likely to pay for this fight as they are when they visit the hub.

The complaint states that Austin and SGP represented to LiveXLive that they expected 2.2 million pay-per-view buys. It seems that a lot of the problems start here. For their efforts, LiveXLive was gonna receive a 15% fee added to any ticket or bundle. Sounds fair to me. LiveXLive is a publicly traded media and event productions company that was hired to put on the Social Gloves event. They are suing Austin McBroom, Austin’s dad Allen, and Austin’s company Simply Greatness Productions claiming $100 million in damages. Now that we’re hearing their side of the story, I want to see if you guys think that $100 million in damages is justified.

Defendants represented that they would dedicate the resources and implement a marketing strategy in order to meet the audience projections represented in the Deck. Defendants promised to collaborate with LiveXLive and utilize LiveXLive’s extensive experience and the collective knowledge of its marketing team to develop a tactical strategy in order to ensure that the event performed as planned in the Deck. LiveXLive knows how to put on live events. Austin does not. Austin hires this company to leverage their experience and knowledge of marketing for a live event in order to reach the two plus million desired buys. Let’s see if everything goes according to plan. SGP’s production of the event was in chaos and at risk of not airing. SGP’s deal with MGM the planned venue for the event dissipated. With less than three months to the event, SGP was scrambling for an alternative venue but it did not have the resources to successfully cement a new venue deal.

As you’ll see in a minute, Austin was saved by LiveXLive numerous times throughout the planning of this event. With the event at risk, defendants faced a financial catastrophe. The financial compensation promised to some of the fighters was senseless. LiveXLive is not privy to all agreements with the fighters, but it is informed and believes that had the event not transpired, defendants would have had a financial liability of $7 million to two of the fighters and an additional $2 million to one of its investors. It sounds like Austin made a lot of big promises to the prospective fighters in order to get them to agree to participate.

You’ll see in a couple of minutes that Austin wrote a few contracts off to the side that LiveXLive was not aware of, which complicated the situation. To salvage the event, defendants asked plaintiff, in the final hours, to secure a venue for the event. Plaintiff leveraged its relationships and secured a deal, on SGP’s behalf, with the Hard Rock Stadium in Miami.

Plaintiffs are informed and believe that SGP’s agreement with the MGM provided for SGP’s payment of $750,000 for use of the venue. It sounds like Austin would have been better off just outsourcing the entire production of the event from the start. The entire complaint lays out someone who thought that just showing up would generate 2.2 million pay-per-view buys. $750,000 seems really low for the use of an entire arena, doesn’t it? That must not include all of the services contracted to third parties: cleaning crew, security, parking attendants, food services, stadium operations just to name a few. However, LiveXLive was able to secure the Hard Rock Stadium under a sponsorship deal wherein Hard Rock committed to a confidential guaranteed payment.

At least one player in this game got paid. I wish I could see the terms for the payment because wouldn’t you wanna know what it costs to rent a stadium for a day. This sounds funny, but you know some huge football fan that made a lot of money in crypto is going to have his wedding in a football stadium one day. In a subsequent agreement with LXL, SGP committed to designating the confidential guaranteed payment to finance a portion of the budget for the event.

But for LiveXLive’s engagement, a sizeable portion of the budget would not have been underwritten and, again, the success of the event would have been in jeopardy. LiveXLive finds a stadium to host an event on short notice, brokers the deal, is able to receive money for using the stadium, and then Austin just says, “okay, yea put that revenue source towards “my tab for funding the event.” For a guy that was going to teach us on how to become millionaires on social media, and as someone who owns an eight figure house, Austin doesn’t exactly strike me as someone with money. Defendants had initially planned on partnering with Live Nation to, among other things, secure talent for the event. Prophetically, Live Nation chose not to contract with SGP. I love how many shots this attorney takes at Austin in the complaint.

If you read this entire complaint, you’ll see many references to his incompetence and inability to follow orders.

Prophetically is such an emotionally charged word as it indicates they avoided a disaster by collaborating with Austin. Defendants requested plaintiff’s assistance in securing musical talent, talent and hosts for the event. Plaintiffs leveraged their relationships and facilitated introductions to Talent who ultimately contracted with SGP to perform at the event. A major theme of this complaint is Austin relying on LiveXLive’s experience and industry connections to facilitate the production of this event. I read these paragraphs and thought of a compliance ladder. It’s where you get someone to say yes to something small, which psychologically makes it easier to say yes to something slightly bigger, and then you say yes to something slightly bigger. The first yes is just a little help finding the venue.

Next is, “Oh hey can you give us a hand “with signing musical artists to perform.” And then, “Oh it looks like we need some help “with the marketing, “can you help us just for a couple days?” And before you know it, LiveXLive is doing all of the work. Of course, the next paragraph states that the McBroom’s wanted LiveXLive to increase their role and to now produce, present, and broadcast the event. On good faith, LiveXLive dedicated millions of dollars in LiveXLive’s human capital to produce the Event and ensure its production success. Defendants represented that the Event would generate in excess of 2.2 million pay-per-view sales based upon their social media presence. This is a fallacy that many large social media influencers fall into that think follower numbers on a screen equate to sales. Just to give you an idea of what 2.2 million pay-per-view buys looks like, check out this list.

This is Business Insider’s list of the top 55 best-selling pay-per-view events. Number eight is the Conor McGregor – Nate Diaz second fight, which was a huge event here in Las Vegas selling 1.65 million pay-per-views. In a much anticipated fight, Mayweather and Alvarez were able to land 2.2 million pay-per-view buys. This is the comparison for the amount of purchases Social Gloves was anticipating. Fight fans are willing to pay for legends boxing, social media influencers not so much. Once LiveXLive’s marketing team became engaged, it became very apparent that the McBrooms and SGP were completely out of their element and the event was destined to dramatically underachieve. My guess is LiveXLive was the professional in the room with a game plan, while Austin was expecting to just show up and sell 2.2 million. Despite SGP and the McBrooms’ promise to collaborate with LiveXLive on the marketing, Austin McBroom rejected LiveXLive’s overtures.

For example, on one occasion, Austin McBroom would boast that, “We don’t need to do marketing. “We have 6 million impressions.” When you’re an influencer, people just buy your products without any marketing apparently. It’s easy to get a big head when you reach Austin’s level on social media. You feel much more important than you really are. People who enjoy watching someone’s YouTube videos does not mean they’ll automatically buy your $50 product. Jackie Stone, LiveXLive’s Chief Marketing Officer educated at University of Miami and NYU and with 30 years’ marketing experience told Austin McBroom that if SGP continues with its laissez faire approach, “You are not selling one million tickets” let alone 2.

2 million. Austin McBroom said, “You are wrong.” LiveXLive’s CMO said, “I’m going on record to tell you that.” This complaint tells a completely different story than the one Austin has been sharing publicly.

I’m starting to think that this is more of the truth than Austin’s lawsuit against LiveXLive. Everything LiveXLive states appears to be in contract and on the record. And they’re the ones with experience running events, Austin does not. Austin McBroom’s arrogance was astounding as he failed to honor minimal marketing tasks which SGP was contractually obligated to perform. Simple tasks such as ensuring that the fighters deliver social media posts with links to purchase tickets went unfulfilled. There’s a lot of strong wording in this complaint detailing how the event’s subpar sales numbers were on him.

For the amount of followers that all of these influencers have, 136,000 pay-per-view sales was pretty underwhelming.

There’s probably 50 million people who follow at least one of the fighters who participated in the event. 136,000 sales is as small a number as my chances of dating Scarlett Johanson. “LiveXLive’s marketing strategy was validated on a limited basis when it dedicated $300,000 to marketing in accord with the programs detailed in its report to defendants. This marketing generated $1.6M in ticket sales, a 400% return on investment.

Had defendants fully implemented LiveXLive’s strategy, a strategy which defendants had represented, at time of contracting, that they would, the event would have been financially successful with adequate returns to pay the fighters even at their inflated contracts, the talent, the hosts, the investors and return a profit to SGP. They should be able to sell 2.2 million pay-per-views. They could have made this event be the biggest of the year with the correct marketing, price points, and promotion. This was a unique event so generating attention was pretty easy. I think it would have generated a larger net profit if the price point was $20 and they didn’t include all of the artists. Immediately following the event, defendants received notice that the actual sales numbers were approximately 136,000. Austin went on a smear campaign saying that LiveXLive was lying about the sales numbers.

According to this complaint, it appears that 136,000 was the correct number of pay-per-view buys and Austin is having some cognitive dissonance or is wanting to save face. In light of the robust contracts defendants negotiated with the fighters, the talent and the hosts, these sales would be substantially inadequate for SGP to fulfill its contractual obligations. By this measure, the event would be deemed a failure despite acclaim for its production. Austin made a bunch of payout promises, underestimated the expenses to put on the event, and now can’t pay the contractually obligated payout due to lower revenue than expected.

I’m so fascinated with business behind the scenes. An event can appear like a success, but there can be so much drama behind the scenes that’s entertaining to a guy like me who has no dog in this fight. I said in the first video my guess was that events like this cost significantly more than you’d think. I wish I had numbers for you, but my guess was $10 million on the low end. Austin claimed a couple million from tickets at the gate, but that was probably just a dent in the budget.

When making the first video, I completely forgot about marketing budgets, which as mentioned previously was at least $300,000, but probably a lot more. These paragraphs mention that defendants developed an untruthful narrative saying publicly that the sales numbers were false and that LiveXLive was cheating defendants. This is why you always need to hear both sides of the story. In my last video, I shared Austin’s press conference about this which made it seem like LiveXLive was the guilty party in this fiasco. I’m starting to think that Austin is trying to save face as best he can right now. I think he’s in major debt, doesn’t generate nearly enough income to comfortably support his lifestyle and expenses, and needs to pay the fighters. Here’s Allen McBroom, Austin’s dad, showing pictures of the family flying private from Los Angeles to Miami just for the fight. If I were LiveXLive, I’d have a field day during discovery analyzing Austin’s expenses for the fight.

A private jet of that size flying round trip cross country is not cheap. Defendants hired an auditing company, FTI, to do a full audit of the financials of the event. Based on the complaint, LiveXLive fully complied and the defendants did not want the results to be public. As a proximate cause of defendants’ defamatory statement, the value of LXL’s shares had drastically fallen by more than 20% causing nearly $100 million in damages. LiveXLive is a publicly traded company so they can argue that this event’s impact on their financial statement will drop the price of their shares.

At a large enough volume, you can argue a drop in stock could lead to tens of millions of dollars in damages. I’m not familiar enough with the legal system and any precedents that come before a complaint like this, but there seems to be some merit with this complaint. There’s around 77.55 million shares for LiveXLive. Even a drop of 20 cents per share based on lower revenue numbers could lead to tens of millions of dollars in damages.

The PSA provided that “In consideration of LXL’s “Production Services, SGP shall pay LXL “all sums arising out of, related to, “or incurred in connection with production of event.” Plaintiffs incurred a substantial amount of costs prior to the event, and they continue to incur expenses related to the event through the date of filing. I wish we could see exact numbers from this event, but my guess is LiveXLive is owed a lot of money and is not distributing the money until all of the numbers are final. Even if there were funds available for distribution to SGP after payment of Plaintiffs’ costs and damages arising from the SGP’s breach and defendants’ tortious conduct, funds which LiveXLive alleges do not exist, the process of distribution was complicated by defendants’ incompetence and concealment, and by the professional negligence and malpractice of its counsel.

You’ll see in a minute that the funds are sitting in a trust, which is why Austin is saying he hasn’t gotten paid. He hasn’t. But it appears that LiveXLive is doing that so that the funds are at least somewhere and not accidentally spent on private jets and mortgage payments.

My interpretation is that LiveXLive is waiting to have all numbers finalized before distributing any of the revenue. And this reads like the funds sitting in the trust do not even cover the expenses, meaning LiveXLive will still be owed money from the event. Remember in the first video, I said that Austin wanting to produce a second Social Gloves sounds like a ponzi scheme where he could use the new funds to pay off what he owes from the first Social Gloves event. This complaint sounds like my theory was correct. For example, SGP entered into an agreement with Brycehallbiz, LLC for the services of Bryce Hall as a fighter at the event. SGP and Brycehallbiz represented to LiveXLive that Brycehallbiz had priority for payment subordinate only to the financier of the event, James Harden. Unbeknownst to LiveXLive and Brycehallbiz, two weeks before it entered into its agreement with Brycehallbiz, SGP entered into a similar agreement with Tayler Holder LLC for the services of Tayler Holder as a fighter.

That agreement, likewise, granted priority to Tayler Holder on terms which appear equivalent to the rights granted to Brycehallbiz. This story has so many angles to it. Where did James Harden come from? If you’re new to the channel, I make videos on why pro athletes go broke. Unfortunately, many invest their money into events or business deals that don’t make any sense. James Harden isn’t going broke or anything, but no one knew that Harden invested in this event until these complaints went public. No one knows how much he invested, but if I told you $2 million, would you be surprised? There was mention of an investor paying $2 million earlier in this video so that’s my best guess. Austin was basically writing checks hoping that the event would sell enough to be able to cash those checks. When the event didn’t sell, he was stuck.

I’m guessing Bryce and Tayler Holder were the biggest draws he could land so he did some shady maneuvering to get them to sign. “LiveXLive is facing conflicting claims for payments and has been threatened with liability from multiple parties should it not acquiesce to these threats.

This risk of liability was created by SGP’s incompetence at best or its deceptive behavior at worst. This complaint really makes Austin’s behavior look pretty questionable. LiveXLive sounds like the adult in the room following strict business protocols and contractual law, while Austin was signing deals and checks he couldn’t cash. This has merit as LiveXLive has contracts that it can’t deliver on based on SGP’s shady decisions. Because of defendants’ failure to honor its contractual obligations and their pre-contract representations to appropriately market the event, Social Gloves dramatically underperformed. Thus, even if LiveXLive went uncompensated for the substantial investment it made to ensure the creative success of the event, there would be insufficient funds to pay the talent and hosts.

LiveXLive is making it clear that there are not enough funds to pay everyone. After reading this complaint, I think they’re in the worst position out of everyone because they had upfront expenses, publicly traded company so significant losses were possible, and ruined reputation. And they’re going to have to figure out the best way to allocate the funds. However, because of the underperformance and SGP’s promises of priority payments to James Harden, Brycehallbiz and Holder and perhaps others who have yet to be revealed, the talent/hosts will not be compensated unless dramatic restructuring occurs.

I interpreted this as there needing to be alterations to the original contracts for how much the fighters are getting paid. Bryce Hall and Austin making $5 million plus a percentage of pay-per-view was a pipe dream. I imagine some of the other fighters were expecting to get paid seven figures or close to it. This impasse has severely damaged LiveXLive’s economic relationship with the talent and hosts.

As a result, the certain management of talent and the hosts have suspended business projects with plaintiffs. Collateral damage from a business deal gone south happens all the time and sucks. I hate being owed money and missing out on opportunity costs because you aren’t getting paid. In this example, LiveXLive has future projects that could help them make money, but management of the talent is reconsidering.

That sucks. Defendants continue the revenues be turned over to them for distribution. However, as SGP has continuously threatened bankruptcy, some fighters and other creditors have urged plaintiffs to hold the funds, in trust, out of a concern that if the funds were given to defendants, they would abscond and leave the creditors empty-handed. No trust for Austin at all. Based on the complaint, it sounds like he’s been difficult to work with the entire time and left LiveXLive doing all of the work. We know the money is in a trust waiting to be disbursed, but LiveXLive is holding it knowing that it’s better sitting there than in an influencer’s wallet.

Imagine the potential drama if Austin had access to the money. The way I interpret this complaint and situation is that the revenue generated was much less than expected and not enough to fully cover all expenses. Because of that, behind closed doors, both parties are probably disagreeing on where the money should go. I imagine LiveXLive wants all of its expenses covered and money to pay off their investors, such as James Harden, in order to maintain their reputation in the industry.

They also wanna show higher revenue numbers for their upcoming earnings call so their stock price doesn’t plummet more than it has in 2021 already. And Austin is on the other side of the table seeing that money is sitting in a trust and wants it for himself and to make sure the fighters get paid so he can save face publicly. This whole thing is a fiasco.

My interpretation was that LiveXLive was acting like an established business and Austin was acting like an entitled influencer who thought just hosting the event would bring in 2.2 million pay-per-view buys. The McBroom’s are facing a lot of lawsuits right now for being YouTubers who focus on family entertainment. You would think they were business tycoons who had to step on a lot of throats to reach the top with the amount of business drama thrown their way. There’s three sides to every story. Side A, side B and the truth. Now that we’ve heard from both sides, hopefully the truth will prevail.

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