When thinking about entertainment companies, The Walt Disney Company is undoubtedly near the top of everyone’s list. Not only does Disney own the hit network ABC, but they also own Marvel Studios, LucasFilm, Pixar, and ESPN. In addition to that, they are majority shareholders in the massive streaming platform Hulu and, in 2019, launched its own streaming platform, Disney+.
Disney is one of the biggest players in the streaming game, which has caused them to be the target of a huge antitrust lawsuit.
The lawsuit was launched by YouTube TV subscribers, who claim that Disney is effectively allowed to set a “price floor” for streaming services because of its ownership of both Hulu and ESPN. Here is more on the lawsuit from The Hollywood Reporter.
“Since Disney acquired operational control over Hulu in May 2019, prices across the [streaming live pay television] Market, including for YouTube TV, have doubled,” reads the complaint. “This dramatic, marketwide price inflation has been led by Disney’s own price hikes for Hulu + Live TV.”
The suit points to guidelines in Disney’s contracts with live-streaming pay TV competitors that require them to carry ESPN as part of the cheapest bundle they offer. The term effectively restricts the ability of Disney’s rivals to provide an option that omits ESPN, cable’s most expensive channel that Disney owns.
Absent this requirement, Disney wouldn’t be able to prevent competitors from selling so-called skinny bundles that gives subscribers a limited offering of live TV channels, according to the complaint.
The suit also takes aim at ESPN contractually requiring that ESPN be included as part of any basic cable package and by imposing as part of these agreements so-called most favored nation clauses, which ensure that ESPN affiliate fees negotiated with any given competitor represents an industrywide price floor. This means that if Disney raises the price for Hulu with Live TV, which it operates, its competitors have to do so as well.
YouTube TV subscribers say that Google’s dealings with Disney have resulted in an increase of the base package from $35 to $65 per month. In 2021, YouTube TV stated that it could provide a base plan without ESPN at $15 less than it was charging during a feud with Disney over a content agreement.
This is not the first time that Disney has been accused of violating antitrust laws. Antitrust laws are regulations to prevent companies from forming monopolies, and the laws were enacted to help encourage competition in the marketplace. For years, Disney required its cable partners to include ESPN in its lowest-prices packages. However, some providers — like Verizon — stopped offering ESPN when streaming came into prominence. Disney then launched lawsuits to require those carriers to make ESPN a part of their streaming packages.
It is important to note that, now that Disney is back in Bob Iger’s hands, bundling agreements could change, which may cause the lawsuit to be dropped. The lawsuit was filed several days before Disney CEO Bob Chapek was fired, and Bob Iger was brought back in. Disney has not responded to the lawsuit.