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Disney doesn’t want Fubo to become “next Netflix,” complaint alleges

Fubo says it was forced to drop sports-inclusive channels offered by Warner Bros Discovery in order to take ESPN and other Disney-owned channels.

Fubo says it was forced to drop sports-inclusive channels offered by Warner Bros Discovery in order to take ESPN and other Disney-owned channels.

(Image courtesy the Walt Disney Company, Graphic by The Desk)

A senior executive with the Walt Disney Company expressed concern over the viability of Fubo as a sports-inclusive streaming service, saying the company didn’t want Fubo to be as successful as Netflix, according to a new legal complaint filed in federal court.

The remark apparently occurred while Fubo was negotiating a renewal of its contract to carry Disney-owned channels like ABC, ESPN and FX, and was made public this week when Fubo sued Disney and two peer media companies over plans to develop a sports-inclusive streaming service of their own.

Earlier this month, Disney, Fox Corporation and Warner Bros Discovery (WBD) affirmed the formation of a new streaming-focused joint venture that will offer sports-inclusive channels owned by the companies, including Fox, ABC, Fox Sports 1, ESPN, TBS and TNT. Early plans laid out by the companies said general entertainment and news networks like Fox News, CNN, FX and National Geographic won’t be included in the service, which is slated to launch later this year.

The plans have drawn a wave of criticism from cable, satellite and streaming cable-like services, who complain that the companies are reserving favorable distribution terms for themselves while forcing other pay TV platforms to bundle channels in a way that offers consumers fewer choices and drives up subscription prices.

Historically, cable and satellite companies have been required to offer most channels owned by a broadcaster, and some distribution contracts even dictate how those channels are sold to customers. For instance, Disney typically requires cable and satellite companies to offer ESPN in their base programming tier along with channels like FX and Disney Channel.

Over time, cable and satellite companies have chipped away at these bloated deals, with Charter leading the pack last year after it opted to drop Disney-owned channels unless it received better carriage terms. It won key concessions from Disney a short time later, including the ability to remove some low-rated cable networks and a wholesale rate for two of Disney’s streaming services, which are now offered to certain subscribers of Spectrum TV as part of their cable TV package.

But, for the most part, pay television companies — including Fubo — are stuck with carriage deals that they believe are antiquated.

A Disney executive reportedly told Fubo it didn't want the company to become "the next Netflix."
A Disney executive reportedly told Fubo it didn’t want the company to become “the next Netflix.”

That poses a problem for linear pay television services, because they’re only as good as the channels they’re able to offer. But the programming terms imposed by broadcasters means services have to charge customers higher rates or find compromises that make sound business sense — and those compromises ultimately means customers have to go without certain channels.

Since launching nearly a decade ago, Fubo has worked with all three broadcasters – Fox, Disney and WBD — who are named as defendants in their lawsuit, but has never managed to ink distribution agreements with all three broadcasters at the same time. The last time it tried this was in mid-2020, when Fubo opted to drop channels owned by AT&T’s WarnerMedia in favor of a distribution agreement with Disney.

“Fubo had to drop the Turner networks — including TBS and TNT — when it licensed ESPN,” an attorney for Fubo wrote in the complaint. “Fubo attempted to negotiate a new carriage agreement with WBD, but was unsuccessful.”

On Tuesday, Fubo CEO David Gandler said the three broadcasters have “consistently engaged in anticompetitive practices that aim to monopolize the market, stifle any form of competition, create higher pricing for subscribers and cheat consumers from deserved choice” by imposing outdated carriage terms that Fubo and other cable-like services must follow.

“By joining together to exclusively reserve the rights to distribute a specialized live sports package, we believe these corporations are erecting insurmountable barriers that will effectively block any new competitors from entering the market,” Gandler continued. “This strategy ensures that consumers desiring a dedicated sports channel lineup are left with no alternative but to subscribe to the defendants’ joint venture.”

Fox, Disney and WBD’s TNT Sports hold the exclusive broadcast rights to a number of athletic events produced by some of the most-prestigious professional sports organizations in the United States, including competitions put on by the National Football League (NFL), Major League Baseball (MLB), the National Basketball Association (NBA), the National Hockey League (NHL), NASCAR, Formula 1, Major League Soccer (MLS), FIFA and World Wrestling Entertainment (WWE).

Fox, Disney and WBD's TNT Sports hold the telecast rights to highly-sought after sporting events and competitions. (Courtesy graphic)
Fox, Disney and WBD’s TNT Sports hold the telecast rights to highly-sought after sporting events and competitions. (Courtesy graphic)

Gandler characterized the trio as a “sports cartel” that previously worked to “block our playbook for many years, and now they are effectively stealing it for themselves.” He noted live sports accounted for 97 of the top 100 television broadcasts last year, which “highlights the critical importance of sports in entertainment and the necessity for its broad dissemination.”

“Reports that the Department of Justice intends to look into the joint venture are encouraging, and it evidences the potential negative and widespread impact this alliance will have,” Gandler continued. “Fubo seeks equal treatment in terms of pricing and all relevant conditions from these media giants to ensure we can compete fairly for the benefit of consumers. Our customers deserve access to a competitively priced offering with innovative features designed by Fubo for an unparalleled sports viewing experience.”

Fubo’s lawsuit is seeking to prevent the three broadcasters from further developing their sports service or, in the alternative, to allow pay television companies to offer the same carriage terms for its channels that the sports joint venture will enjoy. If the court upholds the latter, Fubo is also seeking unspecified restitution for “substantial damages” caused by the broadcasters.


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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 10 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.
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