Last year, Disney was served with an antitrust lawsuit by a group of YouTube TV subscribers from four different states, who claim that the business deals it has done with live TV service providers have inflated the amount consumers have to pay.
Disney requires live TV platforms like YouTube TV, Sling TV and Hulu+Live TV to include ESPN in their base package, meaning that customers have to pay much more, even if they don’t want to watch ESPN. The lawsuit alleges that Disney uses ESPN and Hulu to set a price floor in the SLPTV Market and inflates prices marketwide by raising the prices of its own products. It also says that Disney owning Hulu and Hulu+Live TV is an antitrust violation as a barrier to entry by a rival company.
Last week, the class action antitrust lawsuit was in front of federal judge Judge Edward Davila of the U.S. District Court in San Jose, California and has agreed that the case can go forward for the entry portion of the lawsuit. However, he has struck down a large chunk of the case about pricing claims and related damages.
“The Court agrees with Disney that, to the extent Plaintiffs rely on allegations of reduced consumer choice and increased subscription prices, these allegations are insufficient to allege an injury to competition. Plaintiffs also allege that, in addition to increased prices, the infrastructure and agreements have produced barriers to entry. Detailed allegations of barriers to entry are sufficient to allege anticompetitive harm.”
While there are many live-streaming TV platforms, any new company coming into the market, would be required to enter into enough carriage agreements to secure a critical mass of channels, so Disney is incentivised not to do business with a new company since it could undo its position in the market. And that Disney was able to enter the Live TV business more easily due to the existence of its Hulu servers, which use Amazon Web Services, something a new business couldn’t do as easily due to scale. The judge has ruled that the plaintiffs won’t be able to get any damages.
Disney and Comcast are currently negotiating a deal to allow Disney to gain full ownership of Hulu and it’s planning on integrating Hulu content into Disney+ later this year. Disney is also looking into potentially leaving the linear business and also looking for a new strategic partner for ESPN, as it looks to move forward with its plans to launch a full ESPN direct-to-consumer product, which offers everything ESPN has, online, something that ESPN+ currently isn’t able to do.
Hulu+Live TV offers live and on-demand content from over 90 top channels including sports and news, plus the ability to stream full seasons of exclusive series, hit movies, and current episodes, plus it also includes Disney+ and ESPN+. Recently, Disney made a deal with Charter Communications to offer Disney+ and ESPN+ to Spectrum cable customers. As of the first of July 2023, Hulu+Live TV has 4.3 million subscribers in the US, though it may have gained a boost following the recent carriage dispute with Spectrum. But overall, this year, Hulu+Live TV has been losing subscribers as more customers shift to just having streaming platforms, since Hulu+Live TV is more of a hybrid cable/streaming platform.
The court orders final comments state:
For the foregoing reasons, Defendant’s motion to dismiss for failure to state a claim is GRANTED IN PART and DENIED IN PART with leave to amend. The Court DENIES Disney’s motion to dismiss Plaintiffs’ claim that Disney violated the Sherman Act 1 under the rule of reason and GRANTS Disney’s motion to dismiss Plaintiffs’ claim that Disney per se violated the Sherman Act 1 and for damages. Should Plaintiffs choose to file an amended complaint, they must do so by October 16, 2023. Plaintiffs may not add new claims or parties without leave of the Court or stipulation by the parties pursuant to Federal Rule of Civil Procedure 15. In light of the Court’s ruling on the motion to dismiss, Defendant’s motion to stay discovery pending resolution of the motion to dismiss at ECF No. 43 is TERMINATED AS MOOT.
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