(CN) — A federal judge trimmed a putative antitrust class action against Disney over the prices it charges streaming services to carry its ESPN channels on Tuesday, though he allowed significant parts to survive.
The plaintiffs in the case, subscribers to either YouTubeTV, owned by Google, or AT&T's DirecTV Stream, say that Disney purposely raised the prices "with impunity" for online streamers that are not part of its agreement with Hulu — which it owns a controlling share of — to carry live TV channels like ESPN.
This, the plaintiffs say, essentially remade the old world of cable TV, where no outside cable providers or live TV streamers are able to compete on price.
Disney, in its motion to dismiss the suit, argued that its actions hadn't restrained competition. But U.S. District Court Judge Edward Davila disagreed, finding that the plaintiffs had "plausibly alleged that Disney’s conduct restrains trade and injures competition in the relevant [streaming live pay TV] market."
That finding allow one element of the plaintiff's claim under the Sherman Antitrust Act to survive, though he agreed to dismiss another Sherman count, finding that the plaintiffs were "indirect purchasers" and lacked standing.
For that same reason, Davila also agreed to dismiss claims made under the Illinois Antitrust Act, but allowed 14 other claims, based on various states' fair competition laws, to survive.
Most of the plaintiff's claims under the Sherman Antitrust Act did survive as the judge determined they fell in the relevant market of streaming live play TV.
"Plaintiffs therefore plausibly allege that Disney’s combined actions in the upstream and downstream markets prevent players in the relevant downstream SLPTV market—e.g., AT&T’s DirectTV Stream—from engaging in competitive actions such as lowering price to gain additional subscribers," Davila wrote.
Though the model of television watching has in recent years primarily swung away from cable TV to streaming services like HBO Max, Amazon Prime and Netflix, a new kind of streamer began to emerge in the mid-2010's: Virtual Multichannel Video Programming Distributors, like Sling TV, YouTubeTV and Hulu.
Disney purchased a controlling share of Hulu in 2019, adding to its already formidable slate of content, including Disney Plus, ABC and the sports broadcast giant ESPN — the single most expensive channel for a cable station or live TV streamer to carry, via so-called "carriage agreements."
ESPN's carriage fees are more than three times more expensive than the second most expensive channel, TNT. This dominance is owed, in part, to "NFL Monday Night Football," the second-most watched TV show, after "NFL Sunday Night Football," which airs on NBC.
"Disney operates these businesses (ESPN and Hulu) as a single economic entity, allowing it to negotiate horizontal, anticompetitive carriage agreements" — meaning the fees that for ESPN and ESPN-related channels," the plaintiffs say in their complaint.
If the streamer simply refused to offer ESPN, Disney responded with publicity campaigns pressuring customers to switch their TV providers in order to watch Monday Night Football. This forced live TV streamers to add ESPN, and to raise their prices by $15-a-month.
"The competitors charge roughly the same price for their services," the subscribers say in their complaint. "No price increase for either service has been met with price competition in the form of lowered prices by a competitor." The plaintiffs say this lack of competitions "is a direct consequence of Disney’s 'web' of carriage agreements that force ESPN on providers and consumers and sets a price floor on subscriptions."
As recently as 2013, more than 90% of households in the U.S. had either cable or satellite TV. That began to change with the widespread availability of broadband internet, followed by the meteoric rise of streaming services like HBO Max, Amazon Prime and Netflix.
Neither sides' attorneys immediately responded to an email requesting a comment on the ruling.
In 2023, Davila made a similar ruling in a similar case over streaming package prices.
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