(Bloomberg) -- Sony Group Corp. approached CBS earlier this year with an offer to buy it out of a long-running agreement to distribute the popular game shows Wheel of Fortune and Jeopardy!, according to a person familiar with the discussions.
The offer was greater than nine figures, according to the person, who asked to not be identified discussing private talks.
On Thursday, Sony’s TV arm switched gears and sued CBS, a division of Paramount Global, saying it breached the terms of their contract and was under-performing in its sales efforts.
Sony, the producer of the programs, claims CBS has made more than $1 billion profit from a distribution agreement going back 35 years, but isn’t working aggressively enough to maximize revenue from licensing the shows to local TV stations and selling advertising in them.
CBS said it will vigorously defend itself in court.
‘Best Efforts’
“Our contract is clear that we hold the distribution rights to these series in perpetuity,” the company said in a statement. “We strongly refute any claims by Sony that we did not use our best efforts in distributing the programs or otherwise failed to abide by our obligations under the agreements.”
For years, CBS projected flat to 2% growth in licensing revenues year-over-year, leading Sony to become “skeptical of and concerned about those projections,” according to the complaint filed in Los Angeles Superior Court. Sony said the first year it got involved in negotiations for some ABC stations, licensing fees grew 17%.
The TV business is going through a transition, with viewers shifting from broadcast and cable channels to streaming services like Netflix. That shift has squeezed profits at legacy media companies like Paramount Global, which have been looking to cut costs.
‘Dismal Performance’
Sony blamed CBS’s “dismal performance” in part on layoffs at Paramount Global. The company has laid off 2,800 employees over the past year, some of whom had worked on fulfilling its distribution agreements, according to the complaint.
Sony also claimed that last year, CBS entered into licensing deals in Australia and New Zealand that ran longer than their two-year limit. CBS then pocketed more than $3.6 million related to the deals and refused to give up its “ill-gotten gains,” according to the suit.
Sony is seeking unspecified damages.
“We attempted to solve this in several different ways to no avail,” a Sony spokesperson said in an email. “Over this year, it’s gotten even worse with their continued breach of contract with Australia and New Zealand, continued layoffs, the proposed outsource of advertising sales, and their failure to reach agreement with Nielsen, in addition to the other points we’ve stated in our complaint.”
The Wall Street Journal reported earlier on the complaint.
The case is Sony Pictures Television Inc. v. CBS Studios Inc., California Superior Court, Los Angeles County.
(Updates with CBS comment starting in fifth paragraph.)
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