Disney Asks Judge to Dismiss Antitrust Lawsuits Brought by YouTube TV, DIRECTV STREAM Customers

The Walt Disney Company may be best known for its kid-friendly animated movies and magical theme parks, but it’s all business when it comes to the courtroom. Disney is asking a judge to dismiss a pair of antitrust lawsuits leveled by users of virtual multi-channel video programming distributors — also known as vMVPDs or live TV streaming services — in several states.

The plaintiffs in the cases allege that because Disney forces live TV streamers like YouTube TV and DIRECTV STREAM to carry ESPN in their base packages, and because ESPN has a higher carriage fee than any other channel, users who don’t want to watch sports are essentially subsidizing ESPN audiences with their subscription dollars.

That issue is exacerbated by the fact Disney owns a live TV streamer in Hulu + Live TV, which the plaintiffs allege allows Disney to set a price floor in the live streaming market and inflate the cost of live TV streaming market-wide. Combined with the high carriage fee of ESPN, the claimants are arguing that this creates a less competitive marketplace, in violation of antitrust laws.

“Together, these carriage agreement mandates — which now cover all of Disney’s leading competitors in the [vMVPD] Market—allow Disney to use ESPN and Hulu to set a price floor in the [vMVPD] Market and to inflate prices marketwide by raising the prices of its own products,” the plaintiffs in one suit claimed in their first filing. “Since Disney acquired operational control over Hulu in May 2019, prices across the [vMVPD] Market, including for YouTube TV, have doubled.”

A crucial piece of evidence that the plaintiffs are hinging on is a statement from YouTube TV’s parent company Alphabet stemming from renegotiated carriage agreements in late 2021. At that time, Alphabet stated publicly that if its Disney agreement were not in force, it would offer an ESPN-less base plan of YouTube TV for $15 cheaper. Currently, a base plan for YouTube TV runs $64.99 per month, and if a $50 plan were available it would likely attract a large swath of customers, despite not having ESPN.

It’s impossible to argue that prices of live TV streaming services have been on the rise across the board recently. DIRECTV STREAM raised its subscription prices by at least $5 per month in January, as did the sports-focused streamer fuboTV. Similarly, Sling TV and Hulu + Live TV enacted price hikes in November and December of 2022, respectively.

However, Disney is arguing that rising prices do not necessarily entail a less competitive marketplace. Disney’s lawyers are seeking to dismiss the lawsuit, claiming the plaintiffs have failed to show “a relevant antitrust market in which competition was harmed.” They also assert that “the antitrust laws exist to protect competition, not individuals.”

It will bear watching to see whether the judges in these cases decide to grant Disney’s motion to dismiss. One problem for the plaintiffs might be that the increasing prices in the vMVPD market are not solely due to Disney’s practices. Channel providers are pulling in less and less revenue from traditional cable and satellite providers, due to the increasing rate of cord-cutting around the United States.

That means that they have to turn elsewhere to try and recoup some of that lost revenue, and that can lead to higher carriage fees for vMVPDs. YouTube TV recently dropped the MLB Network in a carriage dispute because the two sides could not agree on a proper fee, signifying that there are industry-wide issues at play.

Still, there can be no doubt that the high carriage fee of ESPN and Disney’s ownership of Hulu + Live TV have contributed to price increases at other vMVPDs. Now it’s up to Judge Edward Davila to decide whether that constitutes an antitrust violation or not.