Four YouTube TV subscribers sued Walt Disney Company last Friday in a case that challenges the bundled model of channels long found in American cable, satellite and now live streaming services. Biddle v. Walt Disney Company, which could become a class action, argues that the entertainment conglomerate has negotiated anti-competitive carriage agreements for ESPN and its related channels, and wields too much power over pricing for streaming live pay television (SLPTV) providers.
The subscribers blame Disney for the “near doubling of their subscription prices.” The base package for YouTube TV, which is controlled by Google, has increased from $35/month when it debuted five years ago to $65/month. The subscribers also note that when Google and Disney were unable to reach a new contract in late 2021, Google briefly dropped Disney channels (including ABC, FX, Freeform, Nat Geo, History and ESPN among others) and lowered the price to a more affordable $50. (The two sides later reached a deal, and the price was brought back to $65.)
Disney controls Hulu + Live TV, the second-largest competitor in the SLPTV market after YouTube TV. It also owns 80% of ESPN, which is said to be the most expensive channel on basic cable and streaming plans; some estimates price it at $9 or more per month.
According to the complaint, Disney’s carriage agreements mandate that if an SLPTV provider carries ESPN, it must be included in the lowest-priced bundles. Market-leading SLPTV services (YouTube TV, Hulu + Live TV and DirecTV Stream) include ESPN. Consumers who don’t want to pay for ESPN, the complaint charges, have no option to opt out. This generates a so-called “ESPN tax” that forces subscribers who don’t watch ESPN to pay for it nonetheless. That, in turn, benefits Disney as well as subscribers who watch ESPN but don’t need to pay more for it in a premium package.
The plaintiffs contend that Disney has damaged consumer choice in ways that run afoul of antitrust law. “Customers that left cable and satellite TV in favor of an SLPTV product in order to escape mandatory high-cost channels in their cable or satellite base package are faced with the same inefficient and unwanted product in the SLPTV Market,” the complaint charges. Disney is accused of using ESPN in deals with streaming live TV providers to “inflate prices to pre-cord cutting, cable-TV levels.”
The plaintiffs also maintain that the SLPTV market has many barriers to entry, making it difficult for a new SLPTV service to surface and leading to a less competitive marketplace for consumers, particularly those that do not want ESPN.
Biddle v. Walt Disney Company also accuses Disney, including through its Hulu, ABC and ESPN subsidiaries, of violating Section 1 of the Sherman Antitrust Act by allegedly raising prices and/or setting price floors for streaming live pay television. These moves supposedly exert “upward pressure” on prices. In a more competitive marketplace, the plaintiffs contend, Disney would not “use ESPN to maintain minimum prices” or preclude “skinny bundles” where ESPN is absent.
The plaintiffs have petitioned for their case to be certified as a class action on behalf of “all persons, business associations, entities, and corporations who paid for a YouTube TV monthly subscription from the period beginning April 1, 2019, through the present.” Biddle v. Walt Disney Company was filed in San Francisco’s federal district court by attorneys from Bathaee Dunne. Judge Edward J. Davila, who on Friday sentenced Elizabeth Holmes to 11 years in prison for defrauding Theranos investors, is presiding. Whether Davila certifies the case as a class action would be decided in future proceedings.
Disney did not respond to a request for comment, but attorneys for the company will answer the complaint in the coming weeks and seek its dismissal. Expect Disney to assert factual claims in the complaint are inaccurate or exaggerative.
The company will also maintain that it has not violated antitrust law. Expect Disney to argue that its use of bundling reflects a longstanding industry practice that complies with the law. Disney could also assert that its pricing model simply reflects substantial demand for its channels and content. It could further point out that inflation has caused prices to rise in many industries, including for TV services.
Further, Disney might suggest that if subscribers to a live streaming service are unhappy with the price or content, they should communicate that point to the service or shop around for alternatives. Philo, for example, offers live TV and 60 channels (not including ESPN or Disney) for plans starting at $25 a month.