Chicken Soup for the Soul, Fuel TV form JV for action sports streaming

Financially troubled Chicken Soup for the Soul Entertainment (CSSE) is teaming up with Fuel TV to form a joint venture for SVOD and free ad-supported streaming TV (FAST) action-sports content.

The companies are combining library assets for Fuel TV-branded channels, including CSSE SVOD content from SurfnowTV will become Fuel TV Surf, while existing ski video channel LiftTicket will become Fuel TV Snow. The partners plan to launch new channels Fuel TV Skate and Fuel TV Bike, which are expected to roll out in the coming months.  

Headquartered in Lisbon, Portugal, Fuel TV has a 5,000-hour library and is available in more than 130 countries across more than 500 million devices, including through pay TV, FAST and SVOD offers. It counts 80 different partnerships with broadcasting and streaming platforms, and its action-sports catalog includes 250 hours of live events and 350 hours of exclusive content.

“We are delighted to join this venture, uniting two of the biggest action sports libraries, and both companies’ prowess in the media industry will allow us to consolidate the leadership in the action sports space,” said Fernando Figueiredo, CEO of Fuel TV, in a statement. “Moreover, it will give Surf, Skate, Snow, and Bike a standalone home for those core viewers that binge their sport for hours. For 20 years, Fuel TV action sports channel has gathered all these sports and will keep doing it by being the home of hundreds of hours of LIVE Events from across the globe.”

Under the JV deal, Fuel TV will run and operate the channels while CSSE’s Screen Media Ventures will contribute 1091’s library of action sports titles and its Crackle Connex unit will sell ad inventory.

“Fuel TV is the gold standard for action-sports content, and they are the perfect counterparty for us to work with on this joint venture,” said Elana Sofko, chief strategy officer of Chicken Soup for the Soul Entertainment, in a statement. “Their expertise, combined with our robust content and advertising teams, will make this a powerful offering.”

CSSE in the announcement said it plans to expand joint venture efforts in 2024, contending the new business deals will drive added revenue for existing assets it owns while leveraging third-party expertise.

CSSE financial woes

Chicken Soup for the Soul Entertainment, which counts three flagship AVOD services including Redbox, Crackle and Chicken Soup for the Soul, as well as the Redbox Free Live TV FAST service and TVOD and DVD rental business, has been dealing with financial struggles.

For the nine months ended September 30, 2023, the company had negative operational cash flows of $21.4 million and a deficit of $783.4 million.

In August 2022 the company acquired Redbox, which along with approximately 29,000 DVD rental kiosks in the U.S., brought with it the assumption of nearly $360 million in debt.

In a form 10-Q filed with the SEC on December 22, 2023, CSSE detailed “substantial doubt” about its ability to continue operating as a going concern, noting it had expected to be able to service the Redbox debt based a partial rebound in the number and cadence of movie releases that were available for its DVD rental network, along with cost synergies. However, the company cited, in part, its failure to secure a loan facility, which hurt its ability to pay for and secure new content, as well as pay content providers.

CSSE said in the filing that it wasn’t able to pay for all the movies that its content providers offered, leading Redbox kiosk rentals to fall short of management’s expectations, “resulting in insufficient cash flows and a significant working capital deficit” that impacted its ability to effectively run the business.

As a result, it launched initiatives including optimizing its kiosk network, implementing job cuts across the supply chain and corporate teams and trying to maximize cost synergies across the combined business.  However, taken together, CSSE said the factors resulted in “asserted defaults” or contract terminations “with critical content and service providers” – meaning it couldn’t procure and monetize content efficiently across its distribution platforms.

“Due to the on-going impact of the above factors on our current and future results of operations, cash flows and finical condition, there is substantial doubt as to the ability of the Company to continue as a going concern,” wrote CSSE in the December SEC filing.

To address issues, the company said it was evaluating a variety of strategic initiatives, including hiring an investment bank to help sell assets and asses strategic alternatives, provided three additional non-binding term sheets from third-party lenders including two for $50 million each and one for $140 million, and was in active discussions to modify underlying terms of an existing loan agreement to either close additional financing, extend the loan terms, or convert the debt and interest into a minority non-controlling interest in CSSE.

This month in early January, the company filed an 8-K disclosing it received a notification from the Nasdaq Stock Market that it wasn’t in compliance with continued listing standards of the market because it had less than $10 million in stockholder equity. Under the rules, CSSE has 45 days to submit a plan to regain compliance, which if accepted by Nasdaq would grant an exception of up to 180 calendar days – giving CSSE until July 3, 2024, to regain compliance.  Previously, in September Nasdaq told CSSE it wasn’t in compliance because for the prior 30 consecutive business days the closing bid price for CSSE stock was below the required per share minimum price of $1.

On January 5, 2023, the company’s board decided to temporarily suspend payment of monthly cash dividends starting with a payment scheduled for on or around January 15, 2024, which it said would defer approximately $1.2 million in cash dividend payments each month.