A proposed class action alleges certain “anticompetitive agreements” between The Walt Disney Company and its direct competitors in the live TV streaming market have caused subscriptions to YouTube TV and other services to nearly double.
The 85-page antitrust suit was filed by subscribers to YouTube TV, the largest live TV streaming service, who allege that Disney’s control over Hulu + Live TV, the second largest live TV streaming service, and ESPN, which costs live streaming providers the most to carry on their platforms, has allowed the House of Mouse to essentially control prices across the market through horizontal, anticompetitive carriage agreements for ESPN and related channels.
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More specifically, the suit says Disney’s carriage agreements with its live TV streaming competitors contain two terms that provide the defendant with “power over the entire market.” First, the agreements contain language that requires the base or lowest-priced bundles offered by live TV streaming providers to include ESPN, the case states. Second, the agreements include “most favored nation” clauses that apply upward price pressure on “every rival [live TV streaming product],” the complaint alleges. Per the case, a most favored nation clause essentially requires Disney to offer ESPN at the same price for all similar-sized providers.
“Together, these carriage agreement mandates—which now cover all of Disney’s leading competitors in the [live TV streaming market]—allow Disney to use ESPN and Hulu to set a price floor in the [market] and to inflate prices marketwide by raising the prices of its own products,” the lawsuit contends. “And this is exactly what Disney has done in the past three years, since it took operational control of Hulu.”
Since Disney acquired and took control over Hulu in May 2019, prices across the live TV streaming market, including for YouTube TV, have doubled, a marketwide price inflation led by Disney’s own price hikes for Hulu + Live TV, the filing says. The price increases have “directly tracked” Disney’s negotiations of new carriage agreements with each of its live TV streaming service competitors over the same time period, the suit adds.
Per the complaint, YouTube TV owner Google’s carriage agreements with Disney have “resulted in a near-100% price increase” of the platform’s base package, from $35 to $65. During “hard-nosed carriage agreement renegotiations” in late 2021, YouTube TV said publicly that without its agreement with Disney, it could provide an ESPN-less base plan at $15 per month, the case relays.
According to the case, Disney’s anticompetitive carriage agreements harm competition in the live TV streaming market by setting a price floor that prevents competition on price, providing Disney a cost input into competitors’ products, making it difficult for new competitors to enter the market, and reducing consumer choice by forcing base packages on consumers that necessarily include ESPN.
The net result of Disney’s conduct, the suit alleges, is that prices have consistently gone up in the live TV streaming market, such that they now “approach traditional cable and satellite TV prices.”
“This not only allows Disney to prevent cord-cutting, it allows it to continue to extract high affiliate fees from both [virtual multichannel video programming distributors] and [traditional cable and satellite TV services], which were rapidly dropping prior to the commencement of Disney’s anticompetitive conduct,” the filing contends.
The lawsuit looks to cover all persons, business associations, entities and corporations who paid for a YouTube TV monthly subscription from April 1, 2019 through the present.
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