Why a judge has blocked the Disney-Fox-WBD sports streaming JV

A plan by Disney, Fox and Warner Bros. Discovery (WBD) to launch a sports streaming service this fall has been put on ice after a New York district judge approved a preliminary injunction on antitrust grounds.

The temporary injunction arrives about six months after Fubo, a sports-focused streaming service sued the programmers on antitrust allegations, arguing that the new offering would harm competition and raise consumer prices. Fubo also argued that the emergence of that new streaming service, recently branded as Venu Sports, would lead to Fubo's financial ruin.

Following a multitude of filings and hearings, "it appears to the Court that Fubo is likely to succeed on its claims" that the streaming JV would "substantially lessen competition and restrain trade," New York District Judge Margaret Garnett explained in the 69-page order and opinion (PDF) filed on August 16.

The temporary injunction stands "pending final adjudication of the merits of this case or further order of the Court," she wrote.

Disney, Fox and WBD will fight back. "We respectfully disagree with the court's ruling and are appealing it," they said in a joint statement distributed to multiple news outlets. "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."

Related:The Disney-Fox-WBD streaming JV has a name: Venu Sports

Big setback for Venu

The decision is a major setback for Venu. The JV has yet to announce a launch date, but it was expected to debut this fall amid the kickoff of the NFL's regular season. Venu's plan was to launch a service starting at $42.99 per month for a lineup of more than a dozen channels (ABC, ESPN, ESPN2, SEC Network, ACC Network, ESPNEWS, Fox, FS1, FS2, Big Ten Network, TNT, TBS and truTV), plus the ESPN+ premium streaming service. It's estimated that Venu would control about 54% of all US sports rights and at least 60% of all nationally broadcast US sports rights.

"When it comes to live sports programming, the JV Defendants dominate," the judge wrote. "[T]he ability to broadcast live sports has remained a crucial and irreplaceable source of revenue and power."

Fubo believes it will go under if the JV is allowed to go forward. The court agreed that Fubo would quickly find itself on the financial ropes soon after Venu entered the market.

Fubo execs told the court that the company expected that, if the JV were to launch this fall, it would lose between 300,000 to 400,000 subscribers before the end of 2024, causing an "almost immediate" loss of $75 million to $95 million in revenues. Fubo ended Q2 2024 with 1.45 million paid subs in North America.

Related:DirecTV exec has 'grave concerns' about sports streaming JV

Launched in 2015, Fubo has yet to reach profitability. It posted a loss of $25.8 million in Q2, but reiterated to the court that it was on a path to at least break even sometime in 2025. The court agreed with testimony and documentary evidence that Fubo faces a "likely" path to bankruptcy and a delisting of the company's stock if the JV launches.

"These are quintessential harms that money cannot adequately repair," said Garnett. "The Court finds that the JV's risk of imminent harm to Fubo and to consumers justifies a preliminary injunction ... Fubo has made a credible showing that, if the JV is permitted to launch, its business will likely cease to exist shortly thereafter."

Sports streaming JV presents an 'antitrust problem,' judge says

Fubo also claimed that it so far has been unable to achieve what the JV intends to do – offer a sports streaming service that effectively unbundles sports channels from other channels that are typically forced to be tied together in a bundle.

In an example cited by Garnett, to secure rights to ESPN, distributors typically might be required to also offer other channels in the Disney stable such as Disney Channel or Freeform. Fubo held that these bundling restrictions have forced it to sell an expensive, "bloated" bundle of channels. The court document also notes that Fubo's least-expensive package, which does not include WBD networks, is nearly double the cost of Venu's starting price.

Related:Disney-Fox-WBD sports streaming JV catches more heat

Garnett noted in the opinion and order that the JV defendants argued bundling is not "imposed" or "forced" because, in their view, no distributor has "ever come right out and asked for a 'skinny sports bundle'." However, the judge found that the record is clear that if the programmers in the JV were willing to unbundle live sports content, "distributors would jump at the opportunity to offer sports-only content and have long desired to offer such a sports-focused package to their customers."

Venu's backers argued in part that the new offering would aid competition and would not concentrate market power because the programmers would continue to independently license their respective channels to other distributors. Further, the JV would erect "extensive firewalls" to prevent sensitive trade information from being shared among Disney, Fox and WBD. They also claimed that Fubo's complaints of "forced bundling" are false.

But the court didn't buy those arguments. "Put simply, the antitrust problem presented by the JV is as follows: if the JV is allowed to launch, it 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," Judge Garnett wrote.

And it appears that the JV participants intended to keep it that way for a while. Prior to the announcement of the JV, Disney, Fox and WBD "explicitly agreed to 'stay clear' of supporting another platform like the JV for at least the next three years," Garnett said in her opinion and order. "[T]he multi-year monopolistic runway they have created for themselves will provide powerful incentives to thwart competition and hike prices on both consumers and other distributors," she added.

The judge also found some contradiction in Venu's proposed focus on the video market. While the general, stated idea is to target pay-TV cord-cutters and consumers who had yet to subscribe to a pay-TV service, internal documents estimated that between 50% to 70% of the JV's subs would be viewers who drop a current pay-TV subscription to instead subscribe to Venu.

The judge also raised concerns about future pricing. The JV "may have an unchecked ability to raise prices to the limit of consumer tolerance," Garnett explained, noting that the programmers in the JV had envisioned a price that would rise by about $5 per year.

Fubo said Friday (August 16) that it intends to move forward with its lawsuit against the JV. A court date for that suit has yet to be announced.

Other nuggets from the opinion and order: