Disney, Fox & Fubo Lawyers Clash In NY Court As Venu Sports Antitrust Lawsuit Goes Before Judge

Lawyers butted heads Tuesday in a key hearing in the antitrust lawsuit Fubo filed against Disney, Fox and Warner Bros. Discovery, a case with broad implications for the pay-TV business.

The parties met at U.S. District Court in Lower Manhattan after Fubo’s request for a preliminary injunction. If granted (a high bar to clear, realistically), the injunction would delay the planned launch of Venu Sports. The streaming sports joint venture was announced in February, and immediately prompted the suit by Fubo, which maintains it would do “irreparable harm” to its pay-TV business. Fubo CEO David Gandler is set to take the stand later in the day, fresh off the company’s strong second-quarter earnings report.

Venu aggregates the feeds of 15 linear networks owned by the companies and provides them in a package for $43 a month, well below what Fubo and other operators charge. The JV member companies have said they view the service as a complement to the main TV bundle, where it will continue to license its programming. Fox CEO Lachlan Murdoch has said his management team projects Venu will attract about 5 million subscribers in its first five years of operation.

In his opening argument, Fubo lawyer Mark Hansen said the company has long sought to offer a “sports-only” bundle with fewer channels at a lower price point. Programmers, including the three behind Venu, have blocked them from doing so, he said. In carriage negotiations, he said, “They’ve said, ‘Sure, you can have some sports, but you have to take a lot of other stuff.’” That, in turn, forces a price increase to cover the additional programming cost.

Hansen noted the quarterly earnings news earlier in the day as proof that Fubo has a “path to profitability” if it is not “preyed upon by the Raptor.” (The internal code name for what became Venu Sports was Project Raptor and that name has been used in court by both sides.) While some industry voices have derided Fubo as a “weak sister” that is “going to die,” Hansen argued the opposite is true. He took note of the huge hit the company’s stock took in February after the Venu announcement, however, which he offered as proof of the threat it represents.

Disney/Fox/WBD, in response, say it’s a free market and a ruling in Fubo’s favor would harm consumers by preventing a new, better-priced commercial entrant in the marketplace. Attorneys for all three companies were present, but representatives for Disney and Fox delivered opening arguments.

Wes Earnhardt, an attorney for Disney, tore into Fubo’s argument in his opening. Even if Fubo’s claims were true (and he asserted that they aren’t), “The Supreme Court has said that we are allowed to do what they say we are attempting to do,” Earnhardt said.

“This should not be a referendum on bundling,” he said, noting that bundling is omnipresent in the TV business. “If they wanted to complain about bundling, they should have come here 40 years ago.”

James Trautman, head of the media and entertainment practice of Bortz Media & Sports Group, was called as an expert witness by Fubo. A slide he created was shown on a video monitor showing a price spectrum, with subscription streaming outlets like Netflix and Disney+ on one side in the $10 to $15 monthly range, and MVPDs and vMVPDs (Comcast, YouTube TV, Fubu, etc.) on the other, at $70 and up. In between was a picture of an ocean, representing the “ocean of opportunity” for Venu at $43.

That same “ocean” graphic used by the plaintiff was turned around on Trautman as he was shown an email exchange among executives at the JV companies. The exec used the phrase “ocean of opportunity” to describe the chance to lure customers back into the pay environment at a more attractive price point.

U.S. District Court Judge Margaret Garnett, who is hearing the case, seemed to buck the trend of consequential media and tech cases being decided by magistrates with a fairly clear allegiance to the analog age. She peppered Trautman with questions, asking him to define the terms “cord-cutter” and “cord-never” and also posited that there are three main “buckets” of sports fans – “omnivores” who watch everything; single team fans and devotees of niche sports like golf or tennis. She showed fluency in the various pay-TV distributors in the market and also indicated a familiarity with the sports landscape, referencing professional golfer Rory McIlroy and the NBA’s League Pass package.

Amid the legal wrangling, Fubo and WBD also failed to reach terms on a carriage deal. As a result of the impasse, all WBD channels went dark on Fubo as of April 30, adding to the friction between the parties. WarnerMedia’s channels, prior to its merger with Discovery in 2022 in a deal that created WBD as a combined entity, had been dark on Fubo since 2020.