Media giant Walt Disney Company finds itself in the crosshairs of the U.S. judiciary following a federal judge's ruling that has shaken the foundations of the live-streamed pay-TV market.
San Jose District Judge Edward Davila has ruled that Disney must respond to lawsuits filed by consumers alleging that Disney has engaged in business practices harmful to competition in the industry, which in turn has led to higher prices for live pay-TV services.
The allegations looming over Disney are not minor, as subscribers to YouTube TV, owned by Google, and DirecTV Stream, under the umbrella of AT&T, have filed lawsuits.
These consumers argue that Disney has established "onerous" contracts that, according to them, impose unfair obstacles for potential competitors in the live television market. The result: restricted competition and rising prices.
Judge Davila has determined that the plaintiffs have grounds to take Disney to court, but his ruling also states that they cannot claim damages at this stage. In addition, the judge has stressed that the existence of an illegal agreement between the streaming TV competitors has not been proven.
Disney and its absolute power
The class action lawsuits filed by consumers allege that Disney exercises "absolute power" in the live television market by requiring its competitors to include the ESPN sports network in their lower-priced channel packages. Disney, as the owner of ESPN, has used this leverage to maintain its dominant position.
In addition, the plaintiffs argue that Disney's infrastructure in streaming television, along with its content agreements, has created significant barriers to new entrants in the market. According to them, there has not been a competitor "at scale" that has not had a pre-existing video streaming infrastructure.
The Disney storyline
For their part, Disney's lawyers at Farella Braun + Martel and Cravath, Swaine & Moore have stated that "the antitrust laws exist to protect competition, not individuals." This defense suggests that Disney believes that its business practices have not violated the antitrust laws and that the consumers' claims are not well-founded.
Outlook still undefined
Disney's legal and commercial outlook in the live television market is far from clear. Judge Davila's ruling sets the stage for a legal proceeding that could have a significant impact on the live broadcast pay-TV industry in the United States.
The class action lawsuits seek not only recognition of Disney's anticompetitive practices, but also an injunction to enjoin them.
This case illustrates once again the importance of maintaining a balance in the power of corporations in the marketplace, and how business practices can directly affect consumers. As Disney defends itself against the allegations, the future of live television and competition in the industry is at stake.