Disney agrees to $50 million settlement over ESPN carriage practices

The Walt Disney Company has agreed to pay $50 million to settle a class action lawsuit that claimed Disney used ESPN carriage agreements to inflate prices for streaming TV services such as YouTube TV and DirecTV Stream.

The lawsuit was initially filed in November 2022 in the Northern District of California.

“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 complaint says.

As is the case with most settlement agreements, Disney continues to deny the claims made by the plaintiffs. The agreement also requires Disney, over the next three years, to “consider an option that allows the SLPTV Distributor to offer its subscribers a monthly paid subscription service that offers less than all Disney networks.”

The agreement also notes that “nothing in this provision obligates or can be construed to obligate Disney to negotiate or agree to any new, amended, or renewed carriage agreement with any SLPTV Distributor.”

According to AL.com, the settlement still needs to be approved by a judge, which will not occur until a final hearing on Jan. 14, 2027.

These carriage agreements have long been extremely lucrative for top-tier cable channels like ESPN. Currently, cable channels charge distributors a fee for every subscriber who receives the channel.

With exclusive live sports, ESPN is a highly desirable channel that can command high fees. Sportico reported in 2023 that ESPN had an average carriage fee of $9.42 per subscriber per month.

That would seem to give Disney a significant amount of leverage in negotiations. If cable companies do not want to pay for ESPN, the contractual bundling means those companies and their customers could also lose access to other Disney-owned networks.

While that is certainly beneficial for Disney’s bottom line, this negotiating practice is not necessarily illegal. Despite the $50 million settlement, Disney admits no wrongdoing, does not have to change its practices, and reached the agreement before a jury could rule on the case.

Any person who purchased a YouTube TV, DirecTV Stream, DirecTV Now, or AT&T TV Now streaming subscription from April 1, 2019, to March 31, 2026, is eligible to receive a portion of the settlement. A settlement website has been established where eligible subscribers can file a claim.