Disney Hit With Antitrust Lawsuit Over Streaming TV Prices – The Hollywood Reporter

An antitrust lawsuit has been filed against The Walt Disney Company in a case focusing on the entertainment giant’s dual role as a distributor and content distributor in business operations.

Disney operates Hulu, the country’s second-largest live streaming pay TV provider, while also controlling ESPN. The proposed class action accuses Disney of controlling the business as a single entity, alleging that the deal allows the company to negotiate anti-competitive deals with competitors who have raised the cost of live television.

The lawsuit pits YouTube TV subscribers, who filed the lawsuit Friday in California federal court, against Disney. They point to business activities that effectively give a company the ability to “set the price” for the market and raise prices across the industry by raising the prices of its own products.

“Since Disney acquired operational control of Hulu in May 2019, prices nationwide [streaming live pay television] The market, including YouTube TV, has doubled in size,” reads the complaint. “This massive market inflation has been driven by Disney’s own price hike for Hulu + Live TV.”

The issue points to guidelines in Disney’s deals with live-streaming pay TV competitors that require them to carry ESPN as part of the cheapest package they offer. The term effectively limits the ability of Disney’s rivals to offer an option that has left ESPN, the most expensive cable channel that Disney owns.

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Without this requirement, Disney would not be able to prevent competitors from selling so-called “skinny” packages that give subscribers a limited edition of live TV channels, according to the complaint.

Cable TV providers have long criticized Disney’s affiliate fees to broadcast ESPN and its sister networks as part of a cable package. It is widely believed that such fees have been the main driver of inflation in the past decade. In 2015, ESPN’s affiliate fee was four times more expensive than TNT’s broadcast fee, which had the second highest fee behind ESPN.

ESPN’s success was lost with the advent of cord-cutting and viewers shunning cable TV. In large part, this was due to consumers’ aversion to paying for channels they didn’t watch or want. They gathered for low cost or free alternatives.

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The first big volley came from traditional cable and satellite television providers who also controlled internet service providers. For example, Verizon in 2015 began to offer so-called “skinny” packages, taking advantage of the complexity in contracts that did not cover the distribution of ESPN on the Internet, to end Disney’s longstanding obligations on pay-TV packages. Disney sued Verizon, claiming ESPN’s downgrading as an add-on was a violation of its carrier agreement. Verizon finally agreed.

The lawsuit also targets ESPN for contractually requiring that ESPN be included as part of any basic cable package and for placing as part of these agreements so-called “most-favored-nation” clauses, which ensure that ESPN affiliate fees negotiated with any competitor are representative. an industry-wide price floor. This means that if Disney raises the prices of Hulu and Live TV, which is working, its competitors should do the same.

YouTube TV subscribers say that Google’s deal with Disney has led to an increase in the basic package from $35 to $65 per month. In 2021, YouTube TV said it could offer a basic plan without ESPN for $15 less than it was charging during the contention dispute with Disney.

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The lawsuit was filed just days before Bob Iger returned to Disney to lead the company. Iger, who succeeded Michael Eisner as CEO in 2005, shepherded Disney through a period of tremendous growth by pursuing mergers that enhanced its reputation as the world’s leading source of content. He acquired Pixar for $7.4 billion in 2006, Marvel for $4 billion in 2009, Lucasfilm for $4 billion in 2012 and Fox for $71.3 billion in 2019 as part of a deal that included the studio 20th Century Fox, Fox Searchlight and FX Networks .

Today, some acquisitions may be opposed by competition regulators who have turned their attention to consolidation in the information industry.

The complaint, which seeks to represent approximately five million YouTube TV subscribers who say they are paying inflated subscription fees, alleges violations of the Sherman Act.

Disney did not immediately respond to requests for comment.


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