Disney Faces Antitrust Lawsuits Over Rising Streaming Prices

The Walt Disney Company is facing an antitrust lawsuit over rising streaming prices. According to The Hollywood Reporter, a class action lawsuit on behalf of YouTube TV subscribers was filed on Friday in California federal court against Disney accuses the entertainment giant of managing Hulu and ESPN as a single entity with business dealings that gives Disney the ability to "set a price floor" for the streaming market, thus driving up prices industry wide when it raises its own prices.

"Since Disney acquired operational control over Hulu in May 2019, prices across the [streaming live pay television] Market, including for YouTube TV, have doubled," the filing reads. "This dramatic, marketwide price inflation has been led by Disney's own price hikes for Hulu + Live TV."

At the center of the lawsuit are guidelines within Disney's live streaming pay TV contracts with competitors that require them to carry ESPN as part of their least expensive bundle, guidelines that restricts the ability of rivals to offer an option without ESPN. This requirement prevents competitors from offering "skinny" bundles — a limited offering of live TV channels for subscribers. ESPN is the most expensive cable channel Disney owns and Disney has long been criticized by cable providers for its high affiliate fees.

And it's not just the streaming price issue that the lawsuit is targeting. The lawsuit also includes the contractual requirement that ESPN be included as part of any basic cable package. The nuts and bolts is that if Disney raises the price for Hulu with Live TV, competitors have to raise prices as well. YouTube TV subscribers claim that the dealings with Disney have caused an increase in cost of the base package from $35 to $65. The lawsuit represents around five million YouTube TV subscribers.

"Together, these carriage agreement mandates—which now cover all of Disney's leading competitors in the SLPTV Market—allow Disney to use ESPN and Hulu to set a price floor in the SLPTV Market and to inflate prices marketwide by raising the prices of its own products," the plaintiffs claim in their lawsuit. "Since Disney acquired operational control over Hulu in May 2019, prices across the SLPTV Market, including for YouTube TV, have doubled," the lawsuit reads.

"This dramatic, marketwide price inflation has been led by Disney's own price hikes for Hulu + Live TV, and has directly tracked Disney's competitor-by-competitor negotiation of new SLPTV carriage agreements over this time period."

Bob Iger returns to Disney

The lawsuit was filed just days before Bob Iger returned as CEO of The Walt Disney Company, replacing his successor, Bob Chapek. "We thank Bob Chapek for his service to Disney over his long career, including navigating the company through the unprecedented challenges of the pandemic," Susan Arnold, Chairman of the Board, said in a statement distributed by the company late Sunday night. "The Board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the Company through this pivotal period."

"Mr. Iger has the deep respect of Disney's senior leadership team, most of whom he worked closely with until his departure as executive chairman 11 months ago, and he is greatly admired by Disney employees worldwide–all of which will allow for a seamless transition of leadership," she said. 

Iger later sent a company-wide email to employees of Disney regarding his return. You can read the whole email here.