Disney Streaming Lawsuit: ESPN Deals Allegedly Inflating Prices

A California federal judge was left unenchanted by Disney’s attempts to toss out a class action lawsuit alleging anticompetitive behavior, ruling the mass media and entertainment company must face a proposed class action lawsuit accusing it of raising prices for live TV subscribers through “carriage agreements” with other streaming live TV providers. 

According to the lawsuit, Disney forbids other streaming services who want to stream its ESPN channel to have any streaming packages offered for less money than the ones that include ESPN - a notoriously pricey, and popular, add-on.

While Judge Edward J. Davila denied most of Disney’s motion to dismiss the lawsuit, he did toss out some aspects saying certain claims were outside the scope of the law.

Disney's ESPN Power Play? Lawsuit Claims Streaming Costs Doubled Due to Anti-Competitive Deals

The proposed class action lawsuit was filed by 25 subscribers to YouTube TV and DirecTV Stream, two of the largest providers of live television streaming over the Internet, who accuse Disney of violating the federal Sherman Act, as well as a range of states’ antitrust laws. 

The streamers of both providers say that when Disney entered into “anticompetitive agreements” with the companies, their subscription fees more than doubled.

“Google’s carriage agreements with Disney have resulted in a 100% price increase of YouTube TV’s base package, from $35 to $73. And indeed, during hard-nosed carriage agreement renegotiations in late 2021, YouTube TV publicly stated that absent its agreement with Disney, it would provide an ESPN-less base plan at $15 less than it otherwise charged for its baseline product,” the lawsuit states.

They plaintiffs argue that Disney has  entered  into  horizontal  agreements  with  terms that directly  increase streaming live TV prices,  set a  price  floor  for  the  entire  market,  reduce consumer  choice,  and strengthen significant barriers to entry.

Judge Allows Antitrust Lawsuit to Proceed, But Limits Damages

Davila ruled that the subscribers sufficiently alleged Disney barred streaming providers for charging less for basic packages that don’t include ESPN, and that they “plausibly alleged that Disney’s conduct restrains trade and injures competition in the relevant SLPTV market.”

The streamers also successfully alleged that Disney implemented the agreements so that its competition in the market couldn’t undercut the subscription prices of Hulu, which Disney owns.

“Plaintiffs allege that Disney uses the carriage agreements and its control of Hulu to decrease competition in the relevant downstream SLPTV market to sell subscription packages to consumers,” Davila said. 

The judge did, however, reject the streamers' claims for damages under the Sherman Act, ruling that the law didn’t allow for non-direct purchasers to sue for damages. In this case, the price increase had been passed down to them from the streaming providers. That fact means that the possible outcome for the streamers is just injunctive relief, with no monetary compensation. 

Davila also tossed claims under Tennessee and Illinois law, saying they interpreted antitrust laws differently than the other states included.

Beyond Streaming: Disney's Growing Legal Troubles

Disney is currently embroiled in various legal battles that extend beyond its digital platforms to encompass its theme parks, hotels, and other physical assets.

In late 2023, the company faced a class action lawsuit from female middle managers who accused Disney of systemic underpayment and discriminatory promotion practices compared to their male counterparts.

More recently, in June, two California-based Disney employees initiated another class action lawsuit, alleging they were coerced into relocating to Florida for a project that never came to fruition. Maria De La Cruz and George Fong, respectively a vice president and a creative director of product design, claim Disney threatened their employment to pressure them into the move. Their lawsuit seeks to represent potentially hundreds of other employees who may have suffered similar treatment.

Additionally, last month saw Disney begin disbursing a $9.5 million settlement to Disneyland annual passholders who claimed their passes were advertised without blockout dates. Over 100,000 passholders, who had each paid nearly $1,400, will receive approximately $67.41 as part of the settlement.

Disney will also be under the Justice Department’s spotlight in the near future, with the government agency saying earlier this year it would review a new streaming service proposed by Disney, Fox Corp. and Warner Bros. over concerns it would negatively impact consumers and rival streamers.

Case Details

• Lawsuit: Biddle et al v. Walt Disney Co.
• Case Number: 5:22-cv-07317
• Court: U.S. District Court for the Northern District of California

Plaintiffs' Attorneys

•  Bathaee Dunne LLP and Korein Tillery PC