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Disney Must Face Antitrust Lawsuit Over ESPN and Hulu Practices

 |  June 26, 2024

An antitrust lawsuit against Disney has advanced, focusing on the entertainment giant’s dual role as both a content supplier and distributor. U.S. District Judge Edward Davila has allowed a key antitrust claim to proceed, scrutinizing Disney’s ownership and business practices involving ESPN and Hulu.

Legal Developments

According to the Hollywood Reporter, Judge Davila dismissed attempts to terminate the lawsuit, which accuses Disney of leveraging its purchase of Hulu to inflate prices for live TV streamed over the internet. The court concluded that Disney may have enforced anticompetitive terms on competitors, such as AT&T’s DirecTV and Dish’s Sling TV. The allegations suggest Disney mandated these rivals to include ESPN in their cheapest bundles and imposed most favored nation clauses. These clauses ensure that ESPN affiliate fees negotiated with one competitor become a price floor industry-wide.

However, the judge ruled that YouTube TV subscribers involved in the lawsuit cannot seek damages under federal antitrust claims. They are now restricted to pursuing a court order to prevent further antitrust violations but can still claim monetary damages for violations of state competition and consumer protection laws.

Read more: Disney Seeks Dismissal of Antitrust Class Action by TV Streamers Over Subscription Price Hikes

Shifts in TV Subscription Landscape

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

The Lawsuit’s Core

In 2022, YouTube TV subscribers filed a lawsuit against Disney, alleging that the company inflated live TV streaming prices. The lawsuit centers on Disney’s control over ESPN, a highly sought-after channel, and Hulu, a leading SLPTV service. The plaintiffs argue that Disney’s carriage agreements for ESPN were anticompetitive, leading to increased subscription costs across the market. The complaint, representing approximately five million YouTube TV subscribers, cites violations of the Sherman Act regarding unreasonable restraints of trade and various state competition and consumer protection laws.

Source: Hollywood Reporter