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Disney Faces Antitrust Lawsuit for ESPN and Hulu Practices

An antitrust lawsuit against Disney has progressed, honing in on the entertainment giant’s dual role as both a content provider and distributor. U.S. District Judge Edward Davila has greenlit a significant antitrust claim to move forward, scrutinizing Disney’s ownership and operational strategies concerning ESPN and Hulu.

Legal proceedings have unfolded with Judge Davila rejecting attempts to dismiss the lawsuit, which alleges that Disney utilized its acquisition of Hulu to inflate prices for live TV streamed over the internet. The court’s findings suggest that Disney may have imposed anticompetitive conditions on competitors like AT&T’s DirecTV and Dish’s Sling TV. The accusations imply that Disney compelled these rivals to include ESPN in their most economical packages and enforced most favored nation clauses. These clauses ensure that the fees ESPN affiliates negotiate with one competitor set a pricing baseline across the industry.

Nonetheless, the judge has ruled that YouTube TV subscribers involved in the lawsuit are unable to pursue damages under federal antitrust claims. They are now limited to seeking a court order to prevent further antitrust infractions but can still claim financial damages for breaches of state competition and consumer protection laws.

The landscape of TV subscriptions has undergone significant shifts in recent years. In 2013, over 90% of U.S. households were subscribed to cable or satellite TV packages. However, the emergence of streaming platforms has transformed this scenario. The transformation began in 2014 when HBO began offering its content through internet subscriptions, initiating the separation of content from traditional cable packages. The introduction of virtual multichannel video programming distributors (vMVPDs) like Dish’s Sling TV in 2015 allowed viewers to access conventional cable channels without a cable subscription. Subsequent to Sling TV, other companies such as AT&T and Google introduced comparable streaming live pay TV (SLPTV) options.

In 2022, YouTube TV subscribers lodged a lawsuit against Disney, alleging that the company artificially inflated live TV streaming prices. The lawsuit revolves around Disney’s control over ESPN, a highly desirable channel, and Hulu, a prominent SLPTV service. The plaintiffs contend that Disney’s carriage agreements for ESPN were anticompetitive, resulting in heightened subscription costs across the market. The complaint, representing approximately five million YouTube TV subscribers, cites violations of the Sherman Act pertaining to unreasonable trade restrictions and various state competition and consumer protection laws.