Why has the fight between Fubo versus Venu Sports – the stayed streaming app from Walt Disney, Fox and Warner Bros. Discovery – become so political?
Last week the Department of Justice asked the 2nd Circuit Court of Appeals if it could file an amicus brief on behalf of Fubo, followed by a similar motion this week from New York State, which pledged to round up presumably other left leaning states to join its cause.
Last month saw a group of Republican Congressmen and GOP-leaning states led by Florida file amicus briefs on behalf of the pay TV providers. And earlier this year Sens. Bernie Sanders and Elizabeth Warren wrote DOJ asking the agency to investigate Venu.
At immediate issue is a lower court August decision to grant Fubo’s motion to enjoin Venu from launching. In the background is the future of channel bundling and whether the rapidly changing pay TV ecosystem will be reined in by regulators or more free to act under GOP-friendly policies.
“In the case of Venu, you have Fox, Disney, Warner Brothers Discovery… it would not surprise me to the extent Justice’s point of view is that this effort to bundle the sports content assets in one place in the way that Venu’s proposing is essentially an illegal or unlawful attempt at a consolidation of those assets within a particular actor,” said Corey Martin, managing partner of Granderson Des Rochers, LLP, where he is chair of the entertainment practice.
“The Justice Department under the Biden administration across a number of different industries has expressed skepticism when it comes to consolidation, and in particular, activities that they have deemed or have perceived to be anti competitive, and B, essentially kind of backdoor mergers, or backdoor approaches to consolidation.”
That is the contention of Fubo, that by creating an app with their 14 channels that show sports, the three pay TV companies had monopolized the market for skinny sports bundles. Fubo contends Pay TV providers are forced to license sports channels with news and entertainment, while Venu has no such obligation and thus can offer a sports dominant bundle.
After the district court judge all but agreed with Fubo, the three companies appealed her ruling. Then they almost certainly lobbied on Capitol Hill and in the states to secure amicus filings decrying the injunction as misguided and the effect it would have on innovation.
“It’s highly likely that the defendants who are taking the appeal reached out to Congress just based on how things get done, to see if they would be, if congressmen would be willing to file the brief,” said Frank Hawkins, a sports media consultant and a former top NFL executive.”And DOJ and New York, probably with some consultation (filed), but not have any formal outreach by Fubo, because Fubo is not going to have the juice to get it done.”
The appeals court granted DOJ’s and New York attorney general Letitia James’s request to file amicus briefs by November 24. The appeals court has already scheduled a December 24 hearing on the appeal.
While the appeal is directed just at the preliminary injunction, bundling practices could get attention from the DOJ. They are part of Fubo’s overall lawsuit against Venu Sports, and have long been controversial. But the leading court decision on bundling – a 9th circuit ruling Brantley v NBCUniversal – blessed the practice.
“DOJ will probably drop a footnote or two about bundling… but that’s not going to be a huge focus of their argument, New York may go further,” Hawkins said.
The lower court judge notably wrote, “the Court need not (and does not) determine the legality of programmers’ bundling practices in order to decide the Motion, it is difficult to avoid the conclusion that, on balance, these practices are bad for consumers… These mind-bending costs do not just hurt the wallets of sports-loving consumers by making them pay for non-sports channels they don’t want, but also hurt those customers who only want entertainment channels but pay significantly higher costs because they are made to pay for unwatched sports, the most expensive of all content.’’
So what happens to the DOJ’s brief if Donald Trump reclaims the White House? While speculative, the working assumption is Justice would withdraw its amicus.
“There’s going to be, again, across a number of different sectors, but certainly in media, a wave of deregulation” including at Justice, Martin said of a prospective Trump approach. “A lot of folks I know in media are actually putting a pause on their exploration of M&A opportunities to kind of take a wait and see approach to see what happens with the election. And to the extent there ends up being a Republican administration, they are more than likely going to be more aggressive in terms of pursuing some of the M&A opportunities that they’ve identified.”
While Venu is not an acquisition it is a joint venture and presumably would see even greater acceptance within a second Trump administration then M&A.
