Disney faces an antitrust lawsuit over the practices of ESPN and Hulu

An antitrust lawsuit against Disney was moving forward, focusing on the entertainment giant’s dual role as a content provider and distributor. U.S. District Judge Edward Davila allowed a key antitrust claim to be heard, examining Disney’s ownership and business practices surrounding ESPN and Hulu.

Legal development

According to the Hollywood Reporter, Judge Davila rejected attempts to end the lawsuit, which accuses Disney of using its purchase of Hulu to inflate prices for TV shows streamed live on the Internet. The court found that Disney could impose anticompetitive terms on competitors such as AT&T’s DirecTV and Dish’s Sling TV. The allegations suggest that Disney ordered these rivals to include ESPN in their cheapest packages and imposed most-favored-nation clauses. These clauses ensure that ESPN’s affiliate fees negotiated with one competitor become an industry-wide floor price.

However, a judge ruled that YouTube TV subscribers involved in the lawsuit could not seek damages under federal antitrust claims. Currently, they can only enforce injunctions intended to prevent further antitrust violations, but they can still seek monetary damages for violations of state antitrust and consumer protection laws.

Read more: Disney wants to dismiss antitrust class action lawsuit filed by TV operators over subscription price increases

Changes in the TV subscription landscape

As recently as 2013, more than 90% of U.S. households subscribed to cable or satellite TV packages. That changed dramatically with the advent of streaming platforms. The shift began in 2014, when HBO made its catalog available via online subscription, separating its content from traditional cable TV packages. The rise of virtual multichannel video programming distributors (vMVPDs) such as Dish’s Sling TV in 2015 allowed viewers to access traditional cable channels without a cable subscription. After Sling TV, other companies such as AT&T and Google introduced similar live pay TV (SLPTV) options.

The essence of the lawsuit

In 2022, YouTube TV subscribers filed a lawsuit against Disney, accusing it of inflating prices for live TV streaming. The lawsuit focuses on Disney’s control over ESPN, a highly sought-after channel, and Hulu, its leading SLPTV service. The plaintiffs allege that Disney’s carriage deals for ESPN were anticompetitive, leading to higher subscription costs across the market. The complaint, representing approximately five million YouTube TV subscribers, alleges violations of the Sherman Act’s unreasonable restraints of trade provisions and various state competition and consumer protection laws.

Source: Hollywood Reporter