Fubo is suing Fox Corporation, The Walt Disney Company, and Warner Bros. Discovery (WBD) over their plans to launch a unified sports streaming app. Fubo, a live sports streaming service that has business relationships with the three companies, claims the firms have engaged in anticompetitive practices for years, leading to higher prices for consumers.
In an attempt to understand how much potential the allegations have to derail the app’s launch, Ars Technica read the 73-page sealed complaint and sought opinions from some antitrust experts. While some of Fubo’s allegations could be hard to prove, Fubo isn’t the only one concerned about the joint app’s potential to make it hard for streaming services to compete fairly.
Fubo wants to kill ESPN, Fox, and WBD’s joint sports app
Earlier this month, Disney, which owns ESPN, WBD (whose sports channels include TBS and TNT), and Fox, which owns Fox broadcast stations and Fox Sports channels like FS1, announced plans to launch an equally owned live sports streaming app this fall. Pricing hasn’t been confirmed but is expected to be in the $30-to-$50-per-month range. Fubo, for comparison, starts at $80 per month for English-language channels.
Via a lawsuit filed on Tuesday in US District Court for the Southern District of New York, Fubo is seeking an injunction against the app and joint venture (JV), a jury trial, and damages for an unspecified figure. There have been reports that Fubo was suing the three companies for $1 billion, but a Fubo spokesperson confirmed to Ars that this figure is incorrect.
“Insurmountable barriers”
Fubo, which was founded in 2015, is arguing that the three companies’ proposed app will result in higher prices for live sports streaming customers.
The New York City-headquartered company claims the collaboration would preclude other distributors of live sports content, like Fubo, from competing fairly. The lawsuit also claims that distributors like Fubo would see higher prices and worse agreements associated with licensing sports content due to the JV, which could even stop licensing critical sports content to companies like Fubo. Fubo’s lawsuit says that “once they have combined forces, Defendants’ incentive to exclude Fubo and other rivals will only increase.”
Disney, Fox, and WBD haven’t disclosed specifics about how their JV will impact how they license the rights to sports events to companies outside of their JV; however, they have claimed that they will license their respective entities to the JV on a non-exclusive basis.
That statement doesn’t specify, though, if the companies will try to bundle content together forcibly,
“If the three firms get together and say, ‘We’re no longer going to provide to you these streams for resale separately. You must buy a bundle as a condition of getting any of them,’ that would … be an anti-competitive bundle that can be challenged under antitrust law,” Hal Singer, an economics professor at The University of Utah and managing director at Econ One, told Ars.
Lee Hepner, counsel at the American Economic Liberties Project, shared similar concerns about the JV with Ars:
Joint ventures raise the same concerns as mergers when the effect is to shut out competitors and gain power to raise prices and reduce quality. Sports streaming is an extremely lucrative market, and a joint venture between these three powerhouses will foreclose the ability of rivals like Fubo to compete on fair terms.
Fubo’s lawsuit cites research from Citi, finding that, combined, ESPN (26.8 percent), Fox (17.3 percent), and WBD (9.9 percent) own 54 percent of the US sports rights market.
In a statement, Fubo co-founder and CEO David Gandler said the three companies “are erecting insurmountable barriers that will effectively block any new competitors” and will leave sports streamers without options.
The US Department of Justice is reportedly eyeing the JV for an antitrust review and plans to look at the finalized terms, according to a February 15 Bloomberg report citing two anonymous “people familiar with the process.”
Fubo accuses Disney, Fox, WBD of years of anticompetitive practices
In a statement, Gandler said, “Each of these companies has consistently engaged in anticompetitive practices that aim to monopolize the market, stifle any form of competition, create higher pricing for subscribers, and cheat consumers from deserved choice.”
Fubo’s lawsuit blames anticompetitive prices from the three companies for its price hikes and lost customers. In its announcement, Fubo claimed that it has “incurred billions of dollars in damages as a result of” the companies’ allegedly anticompetitive strategies.
Fubo’s lawsuit specifically blames ESPN and Fox for its most recent price hike, adding that the firms’ heightened prices “forced Fubo to drop valuable channels.”
Fubo also claims the companies have forced it to license dozens of channels it doesn’t want by bundling them with sports content. The lawsuit accuses Disney and Fox of forcing Fubo to spend millions annually on stuff it doesn’t want.
When asked how strong of a case Fubo might have, Hepner said that if true, “forcing Fubo to bundle non-sports content that doesn’t appeal to their subscribers is unfair competition designed to undercut Fubo’s sports-first business model.”
It could be hard for Fubo to prove that this breaks antitrust laws, though, because, according to Singer, beyond providing evidence for its claims, Fubo would also have to prove that Fox or Disney individually had “monopoly power in the sports programming market” when this happened, which was before they announced the JV.
Fubo blames anticompetitive practices for death of PlayStation Vue, others
Fubo’s lawsuit argues that the planned JV could kill off multi-channel video programming distributors, like itself, and that related anticompetitive practices have already killed other streaming services.
Fubo cited PlayStation Vue as an example. In January 2020, Sony shut down PlayStation Vue, saying that “the highly competitive pay TV industry, with expensive content and network deals, has been slower to change than we expected.”
Fubo also named T-Mobile’s TVision as a victim of anticompetitive practices. T-Mobile announced TVision in October 2020 and closed it in April 2021, opting for a multi-year agreement with Google to make YouTube TV its live TV service. Ahead of TVision’s closing, then-Discovery CEO and current WBD CEO David Zaslav expressed public disapproval of the service. Reports also claimed that programmers like NBCUniversal and ViacomCBS (now Paramount) were unhappy with the service (neither NBCUniversal nor Paramount are defendants in Fubo’s lawsuit).
Finally, Fubo pointed to Duo Broadband’s streaming service. The New Jersey-based ISP said this year that it was ending the service “because of extreme price increases from programmers”; Duo also shuttered its cable business this year.
Other allegations in Fubo’s lawsuit include claims that Disney and Fox have been charging Fubo content licensing rates that are 30 to 50-plus percent higher than what they charge other distributors. Strategies like higher licensing fees and imposing “non-market penetration requirements (the percentage of total subscribers to which a content package must be sold to or cannot exceed)” have cost Fubo “billions” in damages, Fubo’s announcement said.
However, this claim could be one of the harder ones for Fubo to prove, according to Singer:
Disney, [for example] could legitimately offer a large distributor a volume discount. Perhaps Fubo could bring this under the Robinson Patman Act, which sought to protect smaller distributors from this sort of price discrimination. But The Sherman Act is not very sympathetic to this type of claim.
Behemoths versus juggernauts
Some believe that the joint app’s real threat isn’t to streaming services like Fubo but to the rights holders of live sporting events, like the NFL and NBA.
Obtaining the rights to sports events has become extremely competitive and expensive as streaming services like Amazon Prime Video and Netflix show growing interest. As a unified front, Disney, Fox, and WBD could have an advantage in getting lower prices than other firms, like Paramount.
Singer pointed out that sports rights holders might protest the idea of the three companies suddenly collaborating to no longer compete for bids and eventually drive down the prices they pay for sports rights.
“That would be a clear antitrust violation,” he said. “You don’t have a Get Out of Jail card under the antitrust laws because you turn around and take your underpayments that only come about from a violation of the antitrust laws and then splash a little of the benefits in the direction of consumers.”
The NFL is reportedly concerned about the venture, too (interestingly, the NFL is rumored to have had discussions about buying a stake in Disney’s ESPN).
Some are skeptical about this concern squashing the proposed app, though. For example, New Street Research analyst Blair Levin said in a February 12 research note that this is partially because sports leagues “are themselves monopolists who benefit from exemptions to the antitrust law,” as quoted by StreamTV Insider.
Levin noted that it’s also possible that Disney, Fox, and WBD are planning to continue to compete for sporting events rights “as they all continue to have their own brands and distribution options.”
A turning point for streaming
Beyond Fubo, the DOJ, and the NFL, there are also reportedly anticompetitive concerns about the JV from other distributors, like Comcast, Charter, and DirectTV, as well as ACA Connects (a trade association for small- to medium-sized telecommunication service providers).
Whether it’s successful or not, Fubo’s lawsuit highlights the uncertainty and obstacles surrounding increasing discussions around the streaming industry being poised for more consolidation and bundling. Streaming is at an inflection point, and we can expect stakeholders to attempt big moves and collaborations to try to boost profits. But these big moves should expect heightened scrutiny, too.
“Streaming platforms today have immense control over what content is created and how that content is distributed,” Hepner said. “Historically, the answer has been to break up distribution from content ownership, which in this case would give distributors like Fubo a fair opportunity to innovate and grow their business on equal terms.”
At this point, it seems that if the joint app does launch, there will be limitations to how the companies will be able to operate together, and the three may create bad blood in the process.
Fubo declined to comment further for this story. Disney declined to comment, and Fox and WBD didn’t respond to requests for comment.