Venu Fallout: Disney Hit With Antitrust Lawsuit From Fubo Subscriber

In the wake of Disney abandoning sports-focused streaming service Venu, the entertainment giant has been sued for alleged antitrust violations related to its dual role as a content supplier and distributor in business dealings.

A Fubo subscriber, in a proposed class action filed in New York federal court on Tuesday, claims Disney’s ownership of ESPN “enables it to extract monopoly rents” in the streaming live pay TV market by forcing services to carry non-ESPN content to access the sports channel, which must be included as part of the cheapest package for consumers.

“These anticompetitive tactics restrain competition from rivals to Disney’s Hulu in the SLPTV market and force independent streaming services such as Fubo to charge higher prices to their customers than they would in a free market,” states the complaint.

On Friday, Disney, Warner Bros. Discovery and Fox Corp. said Venu will not move forward. It followed Disney unveiling plans to merge its Hulu + Live TV service with competitor Fubo in what will be the second-biggest streaming MVPD after YouTube TV.

But by that point, the legality of Disney’s bundling requirements were already undercut. In its order temporarily blocking the release of Venu, the court stated that bundling had been “uniformly and systematically imposed on each distributor in the live pay TV industry except the JV, preventing any other distributor from offering a multi-channel sports-focused streaming service.”

Fubo’s case revolved around arguments that Disney, Fox and Warners leverage their control of must-have sports to force rivals into carrying dozens of pricey, unpopular channels as a take-it-or-leave-it condition of licensing critical sports channels. These anticompetitive bundling requirements, it alleged, lead to increased costs for consumers because they’re forced to pay for content they don’t watch.

Tuesday’s lawsuit build on Fubo’s arguments. It alleges that Disney imposes anticompetitive terms on rivals by forcing them to carry ESPN as part of the cheapest bundle they offer and instituting so-called most favored nation clauses, which ensure that ESPN affiliate fees negotiated with any given competitor represent an industrywide price floor.

“Disney’s anticompetitive conduct includes using its dominant share of broadcast licenses for commercially critical sports content to force Fubo to license and broadcast unwanted, expensive, non-sports content,” the complaint states. “This prevents Fubo from offering the sports-centric package of channels that its customers want.”

The lawsuit alleges violations of federal and state antitrust laws. It seeks treble damages, disgorgement of profits and a court order declaring that most favored nation terms and bundling agreements violate antirust law.

Disney didn’t immediately respond to a request for comment.

Last year, a federal judge advanced key antitrust claims from YouTube TV subscribers who filed an identical lawsuit against Disney. Declining to dismiss the lawsuit, U.S. District Judge Edward Davila found that the company could’ve leveraged its ownership of Hulu to raise prices of live TV streamed over the internet across the market.

Like the lawsuit from the Fubo subscriber, the crux of that lawsuit revolved around Disney’s control of a highly desired channel in ESPN and an SLPTV in Hulu and whether the entertainment giant negotiated anticompetitive carriage agreements for ESPN, raising subscriptions prices across the market.