Sports-focused virtual MVPD Fubo got a favorable call in the court room last week amid its antitrust lawsuit against Disney, Fox, and Warner Bros. Discovery and their Venu Sports streaming joint venture. On Friday, a judge granted the streaming pay TV provider’s request for a preliminary injunction, temporarily blocking the JV and its planned launch of a sports streaming service.
The bar for a preliminary injunction is high and U.S. District Judge Margaret M. Garnett for the Southern District of New York entered a 69-page opinion and order following a six-day evidentiary hearing. Judge Garnett’s ruling found Fubo met four factors needed to grant the motion, including that the vMVPD is likely to succeed on the merits of its antitrust case that the JV launch could substantially hurt competition, that absent an injunction the vMVPD would likely suffer irreparable harm, and that doing so serves public interest.
In temporarily blocking the launch, the order stated that Fubo succeeded in showing “it will suffer imminent and irreparable injury if this Court does not enjoin the JV from launching until a full trial on the merits can be held.”
The Venu Sports joint venture, announced earlier this year, brings together the collective sports assets of Disney’s ESPN, Fox, and Warner Bros. Discovery. It intended to launch this fall, priced at $42.99 per month with a bundle of 14 linear networks as well as the ESPN+ streaming service and ability to bundle with Disney+, Max and/or Hulu. Networks include ESPN, FS1, FS2, TNT Sports, and TruTV, among others, and the entities hold rights to games for professional leagues including NFL, NBA, MLB, NHL, and a wide range of college and other sports.
Venu Sports claims to be primarily targeting cord cutters and cord nevers, with a lineup of premium sports-only content in one subscription service. Still, some industry observers previously pegged the JV as a threat to both Fubo and traditional pay TV providers that are facing broader linear TV industry declines, while recent data from Circana found non-pay TV subscribers are least likely to say they’d subscribe to Venu.
Fubo for its part has been in the streaming game offering a cable-like lineup of pay TV channels with an emphasis on sports-first since its debut in 2015. Its lawsuit against the JV entities, filed in February shortly after the plans were announced, alleged the companies engaged in years-long anticompetitive practices that stifled its ability in the market, with Venu just the latest example.
Fubo cheers, Venu calls foul
Reached by StreamTV Insider via email, Disney’s ESPN in a statement disagreed with the decision.
“We believe that Fubo’s arguments are wrong on the facts and the law, and that Fubo has failed to prove it is legally entitled to a preliminary injunction,” stated ESPN. “Venu Sports is a pro-competitive option that aims to enhance consumer choice by reaching a segment of viewers who currently are not served by existing subscription options.”
Fubo, meanwhile, cheered success in stopping the launch of Venu, which it claims would’ve controlled roughly 60%-80% of live broadcast sports content. The company said it will continue to pursue its antitrust lawsuit against the JV partners.
“Today’s ruling is a victory not only for Fubo but also for consumers. This decision will help ensure that consumers have access to a more competitive marketplace with multiple sports streaming options,” said Fubo Co-founder and CEO David Gandler in a statement Friday. “But our fight continues. Fubo has said all along that we seek equal treatment from these media giants, and a level playing field in our industry. The proposed joint venture was only the latest example of anticompetitive practices that The Walt Disney Company, FOX Corp. and Warner Bros. Discovery have consistently engaged in for many years. We believe these practices monopolize the market, stifle competition and cheat consumers from deserved choice.”
A skinny sports bundle void only Venu can fill?
The order and opinion laid out constructs of a pay TV world, where issues appear to stem from programmers’ (both broadly and including JV entities) role in creating a consumer gap in the industry for affordable live sports-only TV options - that the JV companies then collectively collaborated to fill while excluding others and also having power to exert control or stifle would-be competitors.
It’s worth noting that even though some SVODs like Netflix and Amazon Prime Video have more recently added live sports, the order showed the court didn’t view SVODs as an acceptable substitute for MVPD, vMVPD or DTC subscriptions when it comes to options for sports fans and the broader pay TV market – so they were not part of the competition discussion.
Here’s some background about the programmer/distributor relationship that Garnett's opinion and order called out as it relates to the Fubo/Venu Sports decision.
As traditional programmers, Disney, WBD and Fox all license their programming or TV networks (both sports and non-sports or entertainment channels) to pay TV distributors on a per subscriber-basis under carriage agreements. That includes to traditional MVPDs like DirecTV and Dish, and newer vMVPD streaming entrants like Fubo or YouTube TV – which the court decision views as essentially the same except programming is delivered virtually, hence virtual MVPD.
And there have been years-long industry-wide practices of bundling channels – wherein programmers require distributors to pay for and carry less-watched entertainment networks that consumers don’t necessarily want in order to get those must-have live sports networks in TV lineups.
The order used an example where for the right to distribute Disney’s ESPN to their pay TV customers, a distributor like Fubo could be required by Disney to also carry its Disney entertainment channel in the lineup. Programmers also have minimum penetration requirements, meaning a carriage agreement could say Fubo has to distribute a channel to a certain percentage of its subscriber base and pay related per-subscriber affiliate fees, no matter how many customers actually watch the channel. By combining less-desirable channels with “must have” sports networks, the judge noted programmers can “extract significant value” from lower-performing channels, sometimes using this channel bundling tactic “to get twice the revenue they otherwise would from certain linear channels.”
In turn, this leads to the bigger, pricier consumer pay TV packages as service providers raise rates to cover their costs for securing rights to distribute those desirable sports networks – all amid the backdrop of wider traditional linear pay TV declines as consumers continue to exit or cut the cord, often in favor of lower cost streaming options. As the order noted, this channel bundling isn’t a practice exclusive to Fubo or the JV entities and can be seen broadly in the industry through other carriage agreements with the likes of DirecTV, Dish, Comcast, Charter and others.
The JV partners dispute Fubo’s claim of “forced bundling” but even if true, contend it’s a legal business practice, per the order. Either way, the judge's decision clearly stated that the court wasn’t weighing in on the question of the legality of channel bundling at this stage of the case. Still, it indicated the issue could come up at a later trial – either in regard to Fubo specifically or the practice at large.
That said, according to the court filing, the record firmly established the JV partners had a “longstanding and unbroken practice of bundling sports with non-sports content..” and that before Venu, Disney, Fox and WBDs’ sports-focused channels had “never [emphasis judge’s] been unbundled from their non-sports offerings…”
A key element in the Venu decision, according to analysts at LightShed Partners, is that the JV was created by “multiple companies working together, who also agreed not to create separate ventures with others,” rather than a single entity going it alone. In an August 19 note to investors, LightShed analyst Richard Greenfield said that Disney, for example, on its own “is free to unbundle its network itself, such as creating ESPN flagship DTC or create an ESPN/ABC bundle that is not made available to third-parties.”
By engaging in earlier bundling and minimum penetration practices, the order said Disney, Fox and WBD created a so-called “void” for consumers in the pay TV market for those that want a lineup of sports-only networks – one which is “tailor-made for the live-sports-only JV to fill.”
“Put simply, the antitrust problem presented by the JV is as follows: if the JV is allowed to launch, it will be the only option on the market for those television consumers who want to spend their money on multiple live sports channels they love to watch, but not on superfluous entertainment channels they do not,” the judge’s opinion and order stated.
Although JV entities contend Venu is pro competition, the order suggests there isn’t a reason for the programmers to then license networks to others in a way that could compete with Venu, giving veracity to Fubo's argument of resulting harm to consumers and competitors.
Garnett' continued, “the multi-year monopolistic runway [the defendants] have created for themselves will provide powerful incentives to thwart competition and hike prices on both consumers and other distributors.”
And even if the entities promise they won’t hike prices or exclude competition, the judge saw evidence as showing there’s good reason to believe that would occur, while noting one purpose of an injunction, “is to prevent anticompetitive incentives from forming in the first place so that American consumers do not have to simply take their word for it and hope for the best.”
Imminent harm to Fubo
Skinnier and affordable sports bundles are something that Fubo itself and others have wanted to offer, where the vMVPD previously pegged Venu as an existential challenge to its business.
For Fubo specifically, the court decision noted that while the relative startup vMVPD expects to break even in 2025 and hasn’t yet had a profitable quarter, evidence “firmly establish” that if the JV launched it would likely result in “a swift exodus of large numbers of Fubo subscribers” and that a bankruptcy and delisting of the company’s stock would likely follow.
The judge cited Fubo executives as saying they were confident if the JV launched that the company would lose approximately 300,000-400,000– or nearly 30% - of its subscribers before year-end, causing an almost immediate revenue loss of $75 million - $95 million.
“These are quintessential harms that money cannot adequately repair,” wrote Garnett.
The injunction was also granted because “the balance of the hardships tips firmly in Fubo’s favor.” Meaning, the risk of harm to Fubo from not granting it (ie, imminent subscriber and revenue losses, likely bankruptcy) outweighed what the JV faces from a wrongly issued injunction – namely “a mere delay in the launch of their JV,” as the judge put it, albeit ahead of the NFL season that would likely be valuable in attracting signups.
The Venu Sports entities, meanwhile, maintained the JV is pro-competitive and that they would continue to independently license their respective networks to other distributors. Per the order, defendants argued they’re entitled to sell or license their networks to different buyers on any lawful terms they choose.
In approving Fubo’s motion for a temporary block, the judge noted carriage agreements in the pay TV ecosystem are “hard-fought negotiations” where programmers currently have incentive to keep discussions going so that they don’t lose a distributor’s entire audience. However, the order says the launch of Venu Sports would change that, in part because vMVPD and MVPD subscribers would have the option to get those networks directly from Venu at a cheaper price – increasing Disney, WBD and Fox’s negotiating leverage for higher fees and lowering risk if distributors won’t agree.
Per the order, Disney, WBD and Fox “will receive affiliate fees and advertising revenue generated from every subscriber to the JV” – and once launched, if MVPDs don’t want to pay the amount asked for sports networks “the JV Defendants know that they will not lose all of the MVPD’s customers if they walk away” as those customers could be “recaptured by the JV.”
To that point, the judge’s order noted Disney, Fox and WBD “expect at least 50% of the JV’s subscribers will be ‘trade downs,’ from existing MVPD or vMVPD services.”
While Fox CEO Lachlan Murdoch previously disclosed estimates for 5 million Venu subscribers by 2028, the order revealed “that number is based only on a comparison to Hulu + Live TV and tends to contradict the JV Defendants’ own commissioned research studies which indicate that a skinny sports offering like the JV will have significantly broader appeal.”
A chorus of vocal supporters and skeptics also doesn't appear to have hurt Fubo's hand.
The order mentions that the court’s concerns over anti-competitive results from Venu are also shared by Fubo competitors like Dish and DirecTV, which submitted supporting declarations, and by the public sector including consumer advocacy groups, members of Congress and the U.S. Department of Justice. Meanwhile, Venu Sports doesn’t have any third-party promoters on the sidelines vocalizing public support of the launch or pro-competitive aspects of the JV.
After the order, DirecTV voiced support for the ruling.
“We are pleased with the court decision and believe that it appropriately recognizes the potential harms of allowing major programmers to license their content to an affiliated distributor on more favorable terms than they license their content to third parties,” stated DirecTV’s Jon Greer.
Order tidbits
LightShed’s note called out a few other interesting tidbits that arose from the court decision.
One is that the JV partners get to keep all of the advertising across the networks supplied to Venu, which LightShed is distinct from how all other MVPDs and vMVPDs do business, “where generally speaking two minutes of advertising time per hour is retained by the distributor to sell on their own.”
So while Disney, WBD and Fox don’t include their entertainment networks in Venu, “they would be able to partially compensate for that through a higher share of advertising time on their most valuable-to-advertiser networks,” wrote Greenfield.
According to Lightshed, the JV partners were aware of cannibalizing existing MVPD/vMVPD subscribers but per court filings the entities believed “if even 1 of 4 subs was ‘new,’ it would be meaningfully additive financially for the JV partners.”
As noted by the firm, average affliate fees for distributors to carry certain sports networks were also disclosed.
Per the order, on average, sports network cost $1.30 per subscriber per month for distributors to license, compared to the average cost of non-sports networks of $0.71 per subscriber per month. ESPN is the most expensive, which costs distributors an average of $9.42 per subscriber per month, while WBD’s TNT costs about $3.00 per subscriber per month. Regional sports networks serving live sports in local market range in fees from around $3.50 to $8.50.