Film studios add to Focus' woes

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Two Hollywood studios-Universal Pictures and Warner Bros. Studios-have begun legal proceedings against troubled Santa Monica, Calif.-based Focus Media.

In his first lengthy interview discussing Focus' legal disputes, Tom Rubin, chairman-CEO of the agency, confirmed Universal sued to protect money that was paid to Focus. Mr. Rubin did not disclose the amount of money, but said Universal wants to make sure funds in Focus' accounts will go to pay Universal invoices still owed to media.

A Universal executive declined comment.

Universal had been a Focus client through last fall, when it shifted its local TV business to DDB Worldwide, New York, which now has the entire Universal media business.


Warner Bros. also filed a lawsuit against Focus Media, Mr. Rubin said. But, again, he would not disclose the amount. Focus bought TV time on Warner Bros. syndicated shows for former clients such as Sears, Roebuck & Co. A Warner Bros. spokesman said he could not comment on pending litigation.

Mr. Rubin blames this latest round of legal filings on Sears, which fired the agency, then filed suit against Focus last month for breach of contract-specifically, for either not paying or being slow to pay the media on Sears' behalf (AA, March 20). Focus countersued for wrongful termination, requesting $100 million in damages.

Sears awarded most of its media buying business to MindShare USA, New York.

"Sears has a campaign against us," Mr. Rubin said. "They sent around press releases all across the U.S. They have written everyone in sight."


Sears charges money was given to Focus to pay for media and that Focus operated as an "agency" for Sears, making it responsible to pay the media.

Mr. Rubin sees it differently. "We hold their funds as an independent contractor, and many times the funds are invested," he said. "All of a sudden, they say I am an agency, and I hold their money in a trust."

Regarding the money, Mr. Rubin said, "It's not theirs, it's ours." This money, he said, represents part of a total pool of funds used by Focus for its costs, its fees and payments to the media for all its clients, not just Sears.

Earlier this month, the Superior Court of California in Los Angeles sided with Sears, which had asked for an injunction freezing funds controlled by Focus Media.

Mr. Rubin admitted payments to the media are overdue, but said this is because Sears stopped making payments as of February. He also alleged Sears would not provide him with a "transition plan" in March, when the retailer and Focus were working on a new contract.

Initially, this new contract meant Focus would lose media buying responsibilities for cable and syndicated TV, while keeping local TV, national and local radio, and Hispanic media buying. Mr. Rubin added, however, that cable and syndication would eventually return to Focus.

Mr. Rubin now estimates moneys owed to be at least $10 million. Other executives, however, believe that from Sears' invoices, that amount would be $20 million.


Because Focus bought time for Sears through September, Mr. Rubin said, his company is owed commissions on that business. Additionally, he added, Focus made media buys for Sears through the year 2002, amounting to $150 million in media time.

According to a declaration made by David Selby, senior VP-retail marketing for Sears, Focus is paid "approximately $500,000 per month" in fees.

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