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Fubo subscriber sues Disney over “monopolistic” practices

(Stock image, Graphic by The Desk)
(Stock image, Graphic by The Desk)

When the Walt Disney Company agreed last week to merge its Hulu with Live TV business with that of sports-centric streamer Fubo, the company probably figured its legal headaches involving its once-former rival were just about finished.

Turns out, that may not be the case.



On Tuesday, Fubo subscriber Cole Unger filed a federal lawsuit in New York accusing Disney of engaging in “monopolistic” practices with respect to the distribution of its flagship sports network, ESPN, on pay television platforms.

Historically, Disney has required cable, satellite and streaming pay TV providers — including Fubo — to include ESPN in its base programming package, and to carry non-sports channels owned by Disney like the Disney Channel, FX and National Geographic.



Disney charges cable, satellite and streaming operators fees to carry its networks, and those fees are typically executed on a per-subscriber basis. ESPN is one of the most-expensive channels for any platform to carry, according to SNL Kagan. Carriage of ESPN and other Disney-owned channels typically drives up the price of pay TV programming for all subscribers, even if they don’t watch or want the channel.

Things seemed to change for sports fans last year when Disney announced its participation in a joint venture called Venu Sports, which involved Fox Corporation and Warner Bros Discovery (WBD). The service was to offer streaming access to sports-inclusive channels like ESPN, Fox Sports 1, TBS, TNT and Tru TV, without entertainment or news networks.



Fubo promptly sued, arguing that the distribution agreement afforded to Venu Sports was anticompetitive because the broadcasters were favoring their own service with a substantially different deal than what they offered other pay TV companies. The lawsuit was settled earlier this month when Fubo and Disney agreed to merge their respective pay TV businesses, and Disney later called off its Venu Sports project.

The agreement paves the way for Fubo to launch a streaming channel package that is similar to that of Venu Sports — and, in fact, DirecTV Stream announced this week it is already rolling out a package that offers sports and some news channels without other networks after renegotiating its distribution agreements with Disney and others.

Unger’s federal lawsuit against Disney appears to restate many of the arguments in Fubo’s original antitrust case before it was settled. The lawsuit affirms comments made by Fubo executives during the antitrust case, through which they admitted dropping channels owned by WBD several years ago in order to carry ESPN and other networks owned by Disney.

“To carry Disney’s sports content on a live-streaming platform, as Fubo has done since August 2020, Fubo is required to pay Disney’s unlawful monopoly rent,” Unger’s complaint said. Without ESPN and other Disney-owned channels, Fubo subscribers are deprived of certain sports programming that is exclusive to the network, including “Monday Night Football” telecasts.

“In contravention to its original business model as a ‘disruptor,’ Fubo readily admits that it had to nearly double the prices it charges to consumers as a result of Defendant’s anticompetitive conduct,” the lawsuit continues. “These higher prices which consumers…pay for streaming platforms, harm both consumers and competition alike. And, as a senior Disney explained point-blank to Fubo’s CEO, Disney did not want Fubo to become ‘the new Netflix.”

That last line was franchised from a conversation between Fubo and Disney executives that was revealed in Fubo’s original antitrust complaint against Disney. The Desk was the first to report on the remark.

The complaint goes on to note Fubo and Disney’s upcoming pay TV marriage, and noted that the pact was widely criticized by industry peers and consumer advocacy groups, including Dish Network, DirecTV and the American Economic Liberties Project. Unger said his complaint is rooted in the Sherman Antitrust Act — the same law that formed the basis of Fubo’s original antitrust complaint against Disney — and he is seeking class action status on behalf of other Fubo subscribers who were charged excessively simply to access ESPN and other sports channels.

Fubo and Disney have not commented on the lawsuit.

The pending consumer class-action case follows affirmations from at least two law firms that are scrutinizing the Fubo transaction with Disney on the basis of whether the deal benefits Fubo’s shareholders. To date, no shareholders are known to be participating in either investigation.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting. Connect with Matthew on LinkedIn by clicking or tapping here.
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