Fubo files antitrust lawsuit against Disney, Fox, WBD ‘sports cartel’

Virtual MVPD Fubo in a new lawsuit against Disney, Fox and Warner Bros. Discovery accuses the media companies of stealing from its playbook and individually engaging in anti-competitive behavior.                                 

On Tuesday Fubo announced filling an antitrust lawsuit against The Walt Disney Company, Fox, and Warner Bros. Discovery and their affiliates, alleging a years-long campaign to stymie the sports-focus streaming service – where Fubo says the three entities’ newly formed sports streaming venture is just the latest example.

Disney, Fox and WBD made waves earlier this month when they announced plans to join forces and launch a new app this fall that will combine linear networks, certain streaming services and sports rights (on a non-exclusive basis) of the companies into a single direct-to-consumer experience.

Fubo’s stock took a big hit following the JV news in early February and the company earlier this month put out a statement suggesting the joint venture could be anticompetitive.

Now Fubo, which positions itself as a sports-first pay TV aggregator with a cable-like TV lineup delivered in a single app, has taken formal action in filling a suit against the companies. Analysts have previously pointed to the JV as posing a risk to Fubo’s competitive advantage in the sports streaming space, but in its complaint the vMVPD contends the forthcoming app is just the latest example in what it claims is a long-running pattern by the defendants to block its streaming service, resulting in significant harm to both Fubo and its customers.

“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,” said Fubo CEO and co-founder David Gandler in a statement. “By joining together to exclusively reserve the rights to distribute a specialized live sports package, we believe these corporations are erecting insurmountable barriers that will effectively block any new competitors from entering the market. This strategy ensures that consumers desiring a dedicated sports channel lineup are left with no alternative but to subscribe to the Defendants’ joint venture.”

Fubo said the media companies have individually engaged in anti-competitive behavior against Fubo, leading to harm to consumers. It said that together the three companies control “more than half of the U.S. sports rights market” and by combining to license their sports content to the JV, “other distributors, including Fubo would be at an extreme competitive disadvantage to the detriment of millions of U.S. consumers.”

Here are some of the allegations in Fubo’s complaint, according to the announcement (some of which are similar to what traditional MVPD and pay TV providers in the space have complained about in regards to separate carriage disputes with programmers at large):

  • Fubo claims the defendants have taken approaches to prevent the vMVPD from competing fairly in the marketplace, including forcing it to bundle dozens of expensive non-sports channels that aren’t popular among consumers as a condition of carrying the media companies’ sports channels.
  • Allegedly charging Fubo content licensing rates “that are as much as 30%-50%+ higher than rates they charge other distributors;” imposing non-market penetration requirements (meaning the percentage of total subscribers to which a programming package must be sold to or can’t exceed), individually and collectively increasing costs Fubo passes onto subscribers. Fubo said it believes it’s “incurred billions of dollars in damages" as a result of the defendants' actions.
  • Claims the defendants have restricted Fubo from offering compelling streaming products, despite similar offers from traditional pay TV and streaming services, including Disney’s Hulu services.
  • Alleges the new JV is the latest “coordinated step” in a campaign to “eliminate competition in the sports-first streaming market” to capture for themselves.

“Simply put, this sports cartel blocked our playbook for many years and now they are effectively stealing it for themselves,” Gandler continued. “Fubo seeks equal treatment in terms of pricing and all relevant conditions from these media giants to ensure we can compete fairly for the benefit of consumers. Our customers deserve access to a competitively priced offering with innovative features designed by Fubo for an unparalleled sports viewing experience.”

In its complaint, Fubo is seeking, among other aims, to enjoin the joint venture, or alternatively, require restrictions on Disney, WBD and Fox in order to proceed, such as economic parity of licensing terms and “substantial damages” from the defendants.

Fubo isn’t the first to raise anticompetitive concerns, with ACA Connects, representing smaller and independent communications service providers, putting out a statement following the JV’s formation that voiced issues, saying “this clearly isn’t a functioning free market.”

Last week, Bloomberg reported that the Department of Justice could investigate the joint venture, once terms were finalized.

In announcing the lawsuit, Gandler called reports of the DoJ’s intention to look at the JV “encouraging," adding that “it evidences the potential negative and widespread impact this alliance will have.”

Earlier on Tuesday in a note to investors, New Street Research analyst Blair Levin unpacked the potential for a DoJ investigation, and while not unexpected, said the firm is skeptical that the DoJ would block or make material changes to the combination or ultimately conclude the JV app harms competition.