Durango, Colo.-based Rail Events claims $3 million in unpaid royalties; Iowa Pacific questions 'unfair practices'

http://trn.trains.com/news/news-wire/2017/02/27-ip-lawsuit

Story is unlocked for all.

The problem I had with the reporting in this story is that the author took the explanation of Iowa Pacific ("IP") at face value, without probing deeper.

If IP feels that there are unfair business practices at stake here, then why did they not file suit first, seeking a declaratory judgment?

Does IP have the $3 million that is allegedly owed on hand? If so, when they withehld the money, did they put it in a special account or escrow until the dispute is resolved?

Have others who operate Polar Express trains complained about similar "unfair" business practices?

Absent that, it's just a weak explanation that Trains gave some credibility by accepting it at face value.

Given all that has happened recently, one possible reality is that IP simply does not have the money to pay its bills. Complaining about "unfair business practices" sounds a lot like "we didn't understand how our contract to run the Hoosier State worked" or "we are returning to our core business activities."

While Mr. Wilkins makes some good points, the far bigger mystery to me is why does anyone continue to pay this outlandish 30% ransom to use the name Polar Express??

We changed the name of our trains years ago to North Pole Express and thus ended the ransom payments.

If I were the RailEvents folks I'd take the $ 3 m they got and be grateful. IMHO the only thing they'll end up getting from this lawsuit is more legal bills. Blood from a stone !!

Sad but true. Ross Rowland

I don't know why IP does what it does, but I'm pretty confident there is more to this story than you realize, David. I say that because I once read that Rail Events, Inc. is part of American Heritage Railways corporate family.

Also, back in August 2012, I read that:
Link: Progressive Railroading - Iowa Pacific Holdings acquires Texas State Railroad (August 14, 2012)

More recently, I read that American Heritage was discussing taking over the Texas State Railroad with the Texas State Railroad Authority, according to the Feb 9, 2017 Palestine Herald-Press article "Railroad authority negotiating with other entities". An excerpt:

If you make a bad contractual agreement, like paying the 30% fees, then you are responsible to live up to your end of the argument.

While I find that interesting, I tend to subscribe to Occam's Razor. The simplest explanation is that IP simply cannot pay its bills, and is now facing significant fallout from that, including the lawsuit. Since the end of last year they've 1) laid off just about all of their employees; 2) Given up the Hoosier State Contract, saying they were loosing money; and 3) now getting sued for not paying money contractually owed a party they are doing business with.

Of course, there could always be more lurking below the surface, but if IP is allegedly a victim of American Heritage, it appears that IP is being made to inflict wounds upon itself.

To me 30% does not seem out-of-line as the DOWT folks charge 30 or 32% of the gate and 10% on sales.

At least with the DOWT gang you get an operating piece of hardware for the ransom payment whereas with the RailEvents ransom all you get is a big bill. When we changed from Polar Express to North Pole Express all we lost was the 30% ransom demand.

Why anyone continues to pay that is a mystery to me.

Ross Rowland

If you don't like the terms then don't sign the contract. No one has a gun to their head. If you sign the contract then you are obliged to live by the terms of the contract.

SixAxleAlco

Since when did this Rail Events Inc. become the rights holder to The Polar Express?
What about Warner Bros? Houghton Mifflin? Chris Van Allsburg?

The Real Polar Express Steamer will always be Pere Marquette 1225.

Enjoy! ^_^

It is my understanding that in years past the Polar Express had done very, very well for IP. This year it did not...and it may very well be their own fault. Given the lax management style for many of their operations I would not be surprised. I think there are some on-line reviews of the IP Polar Express that are so bad they are funny.

As for the defense...they had to say "something" now didn't they? What could they say except the truth (we just don't have the money).

T7

Since when? Most likely from the moment the signed a contract and paid licensing fees. You can license IP (intellectual property, not Iowa Pacific) easily enough. It just involves sone lawyers, signing a contract, and in this case, probably a boxcar load of royalty fees. As you mentioned, there are multiple parties, the author, publisher, movie studio, song writer, and I've most likely overlooked others. Why is the licensing fee so high? They have lots of people to pay. It's all on the level, they're careful to note trademarks etc at the event.

AHR/Rail Events has a contact with Warner Bros. to be the exclusive contractor for the Polar express. Rail Events pays a substantial royalty to Warner Bros,

Hi,

As for Polar Express, that is tied in with the Movie. Research for the movie was heavily based on 1225.

The reason for using well known keywords such as Polar Express and Thomas the Tank Engine, is to gain the advertising leverage.

While Polar Express is a very well known Christmas theme, it is not (in my opinion) very well advertised during say July.

Thomas the Tank Engine is a year round theme.

If your customer base is draws a positive cash flow for one of the events, then it is a win-win situation.

If someone else the next state over does the same thing but looses money, then their customer base is different and you have a loose-loose situation.

IP seems to have been doing good but now is on the ropes. I would suggest that this is the basis of the problems with Iowa Pacific - a traffic downturn.

The idea that Polar Express is bad or crooked because of Iowa Pacific's non-payment is confusing to me.

No one forced Iowa Pacific to sign the contract. No one forced Rail Events to sign the contract. A bad business decision is just that.

Same difference as a US president who has no idea what money costs and just prints more to spend more. Bad business decision.

The fictionalized Polar Express locomotive is heavily based on 1225 but it is not 1225 in my opinion. Feel free to believe what you wish.

Doug vV

Well, if 30% of their ticket revenue is $6 million dollars, that means they had gross revenue of $20 million dollars across their operations. That's not bad, but I don't know what their costs are, etc.

I realize people give BS answers all the time, I just expect reporters to do a better job ferreting out the lame excuses.