A federal judge has blocked a joint venture from media giants teaming up to pool together their sports licensing rights to form a new streaming service, which was challenged by rival sports streamer Fubo.
U.S. District Judge Margaret Garnett on Friday ruled against The Walt Disney Co., Fox Corp. and Warner Bros. Discovery in barring Venu to proceed with its planned release slated for later this year. She found that Fubo is likely to prevail on claims that the partnership will “substantially lessen competition and restrain trade.”
If the platform launches, the court concluded there will likely be a “swift exodus” of Fubo’s subscribers that will lead to the company’s bankruptcy. Venu 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,” Garnett wrote.
In a statement, ESPN said it will appeal the order. “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,” it added. “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.”
The streaming bundle is targeting a fall launch at $42.99 per month, with plans to offer it as a bundle with Max, ESPN+ and Hulu. Subscribers, who will be locked in at that price for a year, will be able to access a number of live, linear channels, including ESPN, Fox, ABC, TNT and TBS, as well as ESPN+. Between the three networks, they have rights to the NFL, NBA, MLB and NHL, plus college sports and pro tennis. They collectively control over half the country’s TV rights to professional and college sports.
The service is slated to compete against YouTubeTV, which costs roughly $70 per month but also provides access to sports from NBC and CBS, and Fubo, which in February sued the media giants over the joint venture.
Fubo’s case revolved around arguments that Disney, Fox and Warners leverage their control of must-have sports to force rivals into carrying dozens of pricey, unpopular channels as a take-it-or-leave-it condition of licensing critical sports channels. These anticompetitive bundling requirements, it alleged, lead to increased costs for consumers because they’re forced to pay for content they don’t watch.
But through Venu, the media giants have “given themselves—and themselves alone—the rights to offer a premium sports package without the dozens of unwanted channels that drive up costs and turn consumers away,” Fubo said. The platform will feature just 15 channels, all featuring popular live sports, according to court filings. Fubo claimed that Venu will corner the market for a sports bundle offering because Disney, Fox and Warners bar other distributors from offering a competing product.
To obtain a preliminary injunction, Fubo had to substantiate allegations of so-called “irreperable harm” absent a court order blocking the platform’s release. It said that it’d be driven out of the market, giving Venu’s owners free reign to raise prices. Fubo alternatively sought a court order striking down the implementation of certain contractual terms, like having to carry unwanted channels, based on arguments that they constitute illegal tying arrangements under section one of the Sherman Act, an antitrust law that bars restraints on trade.
The defense from Disney, Fox and Warners was grounded in arguments that Fubo is looking to insulate itself from competition from rivals with plans to release an innovative new product.
“Sports fans would be deprived of a new, lower-cost option for watching games; innovation would be thwarted; and output would be suppressed,” Warners stated in a court filing. “Competition would be hindered.”
The companies also stressed that Fubo is simply a “weak competitor” that adds little value to the TV ecosystem. Unlike them, Disney, Fox and Warners said Fubo didn’t risk billions of dollars to acquire unique content and then billions more to turn that content into desirable programming. The company “remains an undercapitalized startup with minimal differentiation that acts as a middleman aggregator of content that other companies make possible,” they said.
The media giants maintained that each member of the joint venture, which is subject to a nine-year term, will continue to negotiate individually with leagues to acquire sports rights and will have no say in how they license their content to others, with a firewall preventing the sharing of sensitive information.
Venu won’t include CBS Sports or NBC Sports, meaning there won’t be several NFL and college games available on the service. And since the NBA reached new deals with NBC and Amazon, it’s slated to lose roughly half its pro basketball games.
In 2022, Disney was sued by YouTube TV subscribers, who alleged violations of antitrust law and pointed to business dealings that effectively grant the company the ability to “set a price floor” for the market and push up prices across the industry by raising the prices of its own offerings.
More to come.