Should Disney, Fox and Warner Bros. Discovery Give Up Venu and Let Distributors Sell Smaller Packages?
Should Disney, Fox and Warner Bros. Discovery Give Up Venu and Let Distributors Sell Smaller Packages?
The three companies vowed to appeal the temporary injunction ruling in Fubo’s antitrust lawsuit against Venu, but there’s no certainty they’ll succeed.
Disney, Fox and Warner Bros. Discovery were dealt a serious blow on Friday. The three companies saw their joint venture sports streaming service Venu Sports put on ice on Friday, as a U.S. District Court judge agreed to Fubo’s demand for a temporary injunction against the service. That means Venu can’t be sold to customers until the injunction is lifted, and though Venu’s originators have vowed to appeal the decision, it may be time for them to think about moving on from their joint venture and allowing distributors like Fubo to sell slimmed-down packages of their own.
Key Details:
- Fubo’s key argument in its antitrust argument against Venu is that it has not been allowed to sell packages without certain channels from Disney, Fox and WBD in the past.
- The appeals process is uncertain at best, and could take months or years to work through.
- The three companies have already sunk $400 million each into Fubo.
Fubo filed an antitrust lawsuit against Venu just weeks after the streamer was announced in February. At the heart of its argument was the fact that for years, it has been forced to sell lower-demand cable channels in its packages in order to get popular networks like ESPN and FS1.
The idea behind Venu was admittedly quite forward-thinking. The streamer would have distributed streams of 14 sports-themed cable channels, such as ESPN, ESPN2 FS1, TNT, TBS and others. It’s hard to blame Disney, Fox and WBD for wanting to try to sell such a product directly to consumers, instead of allowing companies like Fubo to continue as the channel-distributing middle-men they have always been. Linear cable and satellite companies lost 7 million customers in 2023, and it’s hard to blame channel owners for wanting to try to get the most out of their networks without having to share revenue with distributors when they’re hemorrhaging customers.
But distributors like Fubo clearly aren’t ready to give up the ghost just yet. Fubo was the only official plaintiff in the antitrust lawsuit against Venu, but it got early statements of support from companies like DIRECTV and DISH, who operate the live TV streaming services DIRECTV STREAM and Sling TV respectively. Venu’s backers tried to make the case that their service was less likely to pull customers away from existing services than it was to attract people who had already left cable behind, but ESPN chairman Jimmy Pitaro was forced to admit last week in court that there was a good chance Venu would indeed draw subscribers away from their current cable plans.
Should Venu Exit Stage Left?
Disney, Fox and WBD were quick to promise they’d appeal the ruling for a temporary injunction against Venu. In a best-case scenario, however, that appeal could take months to resolve. There is now no chance that Venu will launch in time for the start of the 2024-25 NFL season, and there’s a decent probability that it won’t be available to customers at any point this fall.
If the three companies responsible for Venu lose their injunction appeal, they’ll have to wait for the trial process in Fubo’s lawsuit to play out before they can start trying to sell the streamer. That process could take years to finish, which means the legal fees will continue to pile up for the companies, and there’s still no guarantee they’ll emerge from a trial as winners.
I think it might be time for Disney, Fox and WBD (but especially Disney) to think about relenting, and allowing distributors to sell Venu-style packages for themselves without forcing them to carry less popular entertainment channels in the same plans. The companies won’t make as much money from such a strategy as they would by selling these a product like Venu directly to consumers, but it’s still a way to keep revenue flowing from channels like ESPN, which is still a key piece of Disney’s financial puzzle.
Allowing cablers to distribute their own Venu-style packages could abrogate the need to wade through an appeals process, and potentially a trial that may be doomed from the start. A jury trial in the near future may not be in Disney’s best interest; the company is facing a very public backlash for trying to argue that an unrelated wrongful death lawsuit being brought by visitors to Walt Disney World should be dismissed because the plaintiff in that case agreed to terms of service on Disney+ which prevent them from originating such a suit.
The problem here for the three companies is that they’ve already sunk $400 million each into Venu. Walking away from the streamer now and pivoting to allowing cable distributors to selling similar products to customers would be essentially setting that money on fire, and that’s a tough pill for any company to swallow. It may be far too tough a pill for WBD investors, as that company’s financial position (including a long-term debt load of more than $30 billion) is already such that committing such a large amount in a new streamer only to see that investment evaporate may cause some heads to roll at the corporate level.
WBD may have been counting on the success of Venu more than Disney and Fox. The company is facing the same pressures as every other owner of top-line cable networks these days; ad revenues are falling as subscribers are moving to streaming services and other video platforms, and WBD’s on-demand streamer Max isn’t ready to pick up the slack yet. Moreover, WBD has a good chance of losing NBA broadcasts starting in 2025; if it does, there’s a good chance distributors will push back hard against the $3 per customer that TNT demands in carriage fees — a figure that was confirmed in court documents released after the injunction ruling was handed down Friday. If WBD sees carriage fees decline from its cable channels significantly in the coming months, its balance sheet will look even worse than it already does.
Simply put, Disney, Fox and WBD are in a tight spot. They thought they were looking at a bright future, where they could continue to pull revenue from their cable networks while making the transition to digital-first entertainment and sports offerings. Now, they’re faced with some tough choices, and each of the options in front of them appear fraught with risk. The safest course may be to give up on Venu and allow distributors like Fubo to sell similar products for them.
Fubo
Fubo is a live TV streaming service with about 90 top channels that start at $79.99 per month. This plan includes local channels, 19 of the top 35 cable channels, and regional sports networks (RSNs). In total, you should expect to pay about $94.99 per month, after adding in their RSN Fee. Fubo was previously known as “fuboTV.”