Flag on the play: SDNY District Court grants preliminary injunction halting joint venture set to offer a “skinny” sports bundle package, citing antitrust concerns

In the battle to capture the streaming sports market, fuboTV Inc. and fuboTV Media Inc. (“Fubo”) have secured an early win, obtaining a preliminary injunction against several prominent US media companies with significant live sport profiles. Since filing an antitrust lawsuit in February, Fubo has sought to block the launch of the traditional media companies’ joint venture (“JV”), which would offer consumers a package of 14 channels featuring popular live sports without the dozens of other channels that can increase costs to consumers. In August, the District Court for the Southern District of New York (“SDNY”) granted Fubo the preliminary injunction.

Fubo alleges that Defendants’ “skinny” sports package is anticompetitive, arguing that the JV would harm television distributors like Fubo who have been prevented from offering the same type of sports package to fans and obligated to offer dozens of additional general entertainment channels as a condition of licensing Defendants’ sports channels on its platform – a decades-long industry practice known as “bundling.” Indeed, Fubo alleges that its original goal of being a highly specialized sports streaming service has been significantly hampered by these practices and that it has “morphed into the opposite of its original vision: a ‘bloated’ bundle of channels, not unlike every other multi-channel TV distributor, with little choice but to charge steep prices to its customers just to stay afloat and cover its licensing costs.”

The media Defendants, on the other hand, assert that the antitrust laws protect competition, not competitors, and that Fubo is seeking to protect itself at the expense of competition – framing Fubo as the incumbent doing “nothing different or better than other companies” who have “struggled to stay afloat in a highly competitive market,” positioning their JV as the innovative new competitor.

SDNY District Court preliminarily sides with Fubo

In granting Fubo’s preliminary injunction motion, the court found that the JV would mark the first time that the Defendants’ live sports programming would be offered on an unbundled basis—creating potential anticompetitive effects for other distributors who are prevented from offering a multi-channel sports-focused streaming service of their own. Similarly, the court held that the JV permitted the Defendants to capture demand in the market that was created by the Defendants’ own historical and ongoing practice of bundling sports content with non-sports offerings. The court found that not only did the JV seek to capitalize on the demand for unbundled sports content, but also that it was structured in such a way as to maximize the extent to which they could keep the demand to themselves.

Specifically, the court found that the JV was structured to: (1) include a three-year non-compete agreement among the Defendants, preventing them from investing in other skinny sports bundles; (2) incentivize the Defendants to suppress other sports-focused bundles from emerging and gaining market power; (3) deter the Defendants from unilaterally entering the market and competing against each other; (4) allow the Defendants to raise prices and impose onerous bundling requirements on other distributors; and (5) create an unchecked runway for the Defendants to eventually raise prices. Consequently, the court found that Fubo was likely to succeed on the merits of its argument and would also face imminent and irreparable harm that could not be adequately compensated by money damages if the JV was allowed to launch.

Takeaways

In the streaming services era, access to live sports has been a critical offering for linear cable providers. The JV here is just one example of how that dynamic, too, is undergoing a rapid and consequential transformation. But the court’s findings underscore that the shifting landscape of sports broadcasting, and the significant money at stake, will not occur without disputes, many of which may ultimately be resolved in the courtroom.

The rapid rise of streaming platforms has prompted companies to explore innovative, albeit sometimes contentious, methods to capture and retain market share. While these developments offer consumers greater flexibility and choice, they also raise important questions about maintaining fair competition within the industry.

In addition to standard considerations, such as market definition and market power, companies at the forefront of innovation would be well served to consider a variety of potential steps to minimize the risk of legal challenge, including:

• Avoiding extensive non-compete clauses or unduly onerous licensing agreements as they can raise red flags concerning restrictive practices that limit competition;
• Ensuring that terms of a joint venture or business collaboration do not include language that could suppress the emergence of new competitors or alternative products in the market;
• Regularly conducting market analyses to understand how any venture or partnership might impact market dynamics, including assessing the risk of anticompetitive outcomes;
• Maintaining space for parties to both enter joint ventures and compete in the market independently; and
• Considering the potential impact to consumers and whether the business arrangement might lead to higher prices or reduced choices for consumers.

By keeping these takeaways in mind, businesses can navigate joint ventures while potentially minimizing the possibility of antitrust challenges.

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