A federal lawmaker is urging the U.S. Department of Justice to investigate an agreement between sports streaming service Fubo and the Walt Disney Company to merge their pay television businesses.
On Thursday, Senator Elizabeth Warren of Massachusetts encouraged Acting U.S. Attorney General Omeed Assefi to closely scrutinize the transaction, which is expected to marry Disney’s Hulu with Live TV service with that of Fubo within the next two years.
The pact between Disney and Fubo resolved an antitrust lawsuit filed last year that accused Disney and two peer broadcasters — Warner Bros Discovery (WBD) and Fox Corporation — of antitrust and collusion through it joint venture, Venu Sports.
As described, Venu Sports was set to develop a sports-inclusive streaming service that offered online access to sports-inclusive cable channels like Disney, Fox and WBD, without general entertainment or news channels that lacked sports programming.
Fubo complained the arrangement was illegal because it and other pay TV providers are typically forced by broadcasters to distribute sports channels with entertainment and news networks, which drives up subscription costs. Projected pricing for Venu Sports was expected to undercut Fubo’s base subscription offering by more than 50 percent.
The broadcasters agreed to dissolve the Venu Sports venture after Disney and Fubo announced a merger of their businesses. But Warren said the issue is still not settled, because buying out their legal headache will only give Disney a higher concentration of power in the sports TV business and incentivize it to raise the prices it charges cable and satellite companies for its channels.
Warren said the sports TV landscape already has too few players, with just four entertainment giants holding 90 percent of the TV distribution rights to premium athletic events.
“Disney’s acquisition of Fubo…threatens to eliminate substantial competition between current competitors, which could suggest the merger may substantially lessen competition,” Warren wrote in her letter to Assefi on Thursday.
Fubo and Disney assert this is unlikely to happen, because Fubo and Hulu with Live TV will continue to be available as separate streaming services even after their pay TV businesses come together. In public comments, Fubo CEO David Gandler said he envisioned Hulu with Live TV as being a true cable TV replacement — one with entertainment, news and sports channels — while Fubo carries on as a sports-focused service, suggesting the latter would eventually offer slimmer sports-only bundles.
“Regardless of their specific form, the suggestion of any synergies belies the existence of substantial competition,” Warren said.
Before Fubo’s lawsuit was settled, the DOJ had already weighed in on the antitrust claim, opining that Fubo was likely to prevail in the case because the Venu Sports pact raised concerns about competition and a concentration of power among sports rights holders.
Warren said the DOJ should scrutinize the Fubo-Disney transaction in the same light, noting that the agency had encouraged the Federal Trade Commission to take a close look at mergers and acquisitions between two similarly-situated companies because “merger eliminates competition between the merging firms by bringing them under joint control.”
“[That] is what would occur pursuant to Disney and Fubo’s plan,” Warren wrote.
It is unclear if her letter will be effective. Over the past four weeks, the DOJ has signaled its willingness to align with the political objectives of President Donald Trump.
On one hand, Trump and his political allies have been viewed as favorable to mergers and acquisitions across the corporate landscape, including in the media business. Trump’s pick to lead the Federal Communications Commission (FCC), Brendan Carr, has long opined on the need for media deregulation, which would open the door for large-scale consolidation involving broadcasters and telecommunications firms.
On the other hand, Trump and Carr have targeted a number of broadcast networks and their corporate owners for news reports that painted the president in an unfavorable light.
In December, ABC News agreed to settle a civil lawsuit brought by Trump over comments made by “This Week” host George Stephanopolous that wrongly stated the president had been found liable for rape in a separate legal case. (He was found liable for sexual assault, which, in New York, is legally defined separately from rape.) The network and Disney agreed to donate $15 million toward the foundation of Trump’s future presidential library.
One week after the lawsuit was dismissed, Carr sent a letter to Disney CEO Bob Iger accusing ABC News of influencing public distrust in the media, and saying ABC’s licenses to operate eight local TV stations could be revoked if it does not “operate in the public interest.”
