(Bloomberg) -- The streaming sports service FuboTV Inc. came out swinging in a Manhattan courtroom in its fight to block Fox Corp., Warner Bros. Discovery Inc. and Walt Disney Co. from launching a joint platform it says would be a Fubo killer — and hurt consumers, too.
The new service from the three entertainment giants would drive away competitors and force fans to pay higher prices to watch live events, a lawyer for Fubo told US District Judge Margaret Garnett on Tuesday as he argued for a preliminary injunction to bar the service’s fall launch.
Attorney Mark C. Hansen told Garnett that everyone in the courtroom could probably agree on one thing: Americans love watching sports on TV. He then showed a clip of a University of Notre Dame football game, playfully confessing he was pandering to the judge, who earned her undergraduate degree from the school.
Hansen acknowledged that there has been a “dramatic transformation” in how people watch sports on screens. But he said consumers are still required to subscribe to a package, or bundle, of channels to get access to major athletic contests, while having to pay for unwanted content.
The Skinny Bundle
“No one gets the must-have sports channels without swallowing a bunch of other stuff,” he told the judge. “These three defendants control the vast majority of sports streaming in the United States.”
Fubo sued the companies in February, arguing the venture would block competitors from offering a product with a package of sports channels only. It claims the three are leveraging their control of the rights to coveted leagues to force rivals to license and distribute dozens of less popular general entertainment channels, if those competitors want to carry networks such as ESPN and Fox.
The new service, to be called Venu Sports and to launch at $42.99 a month, comes as more and more viewers have jettisoned increasingly costly cable television packages in favor of lower-priced alternatives. The pay TV industry lost almost 30 million users from 2015 to 2023 and could shed another 6 million by the end of the year, according to a report on Venu by Bloomberg Intelligence.
Fubo says the service, which will feature programming from about a dozen channels, is essentially the kind of “skinny sports bundle” it has tried to offer for almost a decade. Consumers have been eager for such a service, Hansen argued on Tuesday, saying the three companies waited “until they could do it as a cartel, as a monopoly.”
Meanwhile the US Justice Department plans to scrutinize the new platform over concerns it could harm consumers, media rivals and sports leagues.
Fox, Disney and Warner say what would reduce competition is blocking the new service, by robbing consumers of lower-cost options for watching games and limiting innovation in the marketplace. They argue that Fubo is a “weak competitor” that “adds little value to the TV ecosystem.”
‘The Last Straw’
Nineteen witnesses are expected to take the stand during the multi-day hearing. Fubo’s second witness was its chief executive officer, David Gandler, who testified that the new service would give the three big companies “no incentive or very little incentive” to negotiate with other distributors.
Gandler told the judge he was “frustrated, angry, upset” by the announcement that the three companies were joining together, saying it was “the last straw for him” as the trio was “forcing us to bundle unwanted channels and charge consumers more.”
Gandler said he expects “the floodgates will open” once the new service starts operating and that subscribers will flee Fubo. He said internal estimates that at least 300,000 to 400,000 of its 1.4 million paying customers could leave are “very conservative” and include churn rates that are “modest relative to what I think is going to be a massive marketing blitz.”
Big Deals, Legal Battles
The launch also comes amid big deals, and legal battles, in the sports broadcast and streaming space.
Warner Bros. recently lost out on media rights to National Basketball Association games and is suing the league following a $76 billion deal between the NBA, Disney, Comcast Corp. and Amazon.com Inc. And a federal judge in Los Angeles recently tossed out a $4.7 billion verdict against the National Football League in a fight over pricing of its Sunday Ticket game broadcast package.
Disney, Fox and Warner announced in February that they were joining forces to launch the sports-focused streaming service, featuring major college and professional events, including ESPN’s Monday Night Football and NCAA college basketball. The move came after some major sports programming, such as the NFL’s Sunday Ticket and Thursday Night Football, moved to streaming services.
‘Firewall’ Against Collusion
Wes Earnhardt, a lawyer for Disney, told the judge on Tuesday that the rise of on-demand streaming has increased competition for content.
Venu will “simply be one more distributor in the downstream market” and “will not change Defendants’ licensing practices,” he argued, noting that there is a “firewall” in place between the companies to ensure there is no collusion in their licensing of content to distributors.
Earnhardt added that bundling has been around for four decades. He told Garnett it is “good for consumers” and “fully consistent with a free and competitive marketplace.”
The case is FuboTV Inc. v. Walt Disney Co. et al., US District Court, Southern District of New York (Manhattan).
(Adds Fubo CEO’s testimony in third section.)
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