A court has denied Warner Bros. Discovery’s bid to block Dish Network’s Sling TV from selling a suite of short-term offerings that allow users to sign up for as little as one day at a fraction of the full monthly subscription cost. The ruling, issued on Tuesday by U.S. District Judge Arun Subramanian, swung on what exactly a “subscription” means under the contracts and is the second in favor of Dish allowing it to continue offering the first-of-its-kind packages.
In August, Sling TV rolled out day, weekend and week passes, which don’t require subscriptions, that give viewers access to its bundle for as little as $4.99 and has popular networks like TNT, CNN and ESPN, among several others. In response, Warner Bros. Discovery and Disney filed breach of contract lawsuits accusing Dish of violating the terms of their licensing agreements.
At the heart of the dispute: the possibility of short-term offerings, like the one rolled out by Dish, undercutting studios’ longstanding business model, which is dependent on regularly recurring monthly subscriptions. Consider the U.S. Open, which Disney bought the rights to based on a packaged multi-week event. The company can’t pick and choose which matches to acquire, even though viewers only watch a handful. Disney justifies the acquisition because subscribers pay for monthly subscriptions. Offering one-time access to the event by way of a day pass upends these economics.
To start, the licensing agreements don’t explicitly spell out whether short-term passes allowed or minimum subscription length to be counted as a subscription. Under the contracts, Dish is allowed the right to distribute WBD’s networks through “Dish OTT Services,” which “means a video programming subscription service offering through which multiple linear video programming services are distributed.” Warner Bros. Discovery argued that the term “subscription service” moves Sling’s offering out of the boundaries of the licensing agreements when users access it through passes. Dish maintained that the passes are, in fact, subscriptions.
In the ruling, the court sided with Dish since “subscription isn’t defined in the contract.” The definition of “service subscriber,” which the licensing agreement simply says is a “customer that is intentionally authorized by DISH to receive the applicable Service” didn’t help either, according to the order.
The upshot is essentially that the definitions of the terms can be understood to be broad enough to at least not bar Dish from offering short-term passes. To the company, any person with valid access to Sling is a subscriber and has a subscription, which the court agreed with for now.
So far, ESPN, which also failed to get a preliminary injunction, hasn’t fared any better in its lawsuit against Dish. In that case, the court found that ESPN’s definition of “subscriber” was broader than Warner Bros. Discovery’s since it defined the term as any “person intentionally authorized by DISH to receive any level of video programming service or package of programming networks via the Sling Platform.”
What Disney and Warner Bros. Discovery are missing, the court said, is language defining “subscriber” or “subscription” to require a recurring, monthly purchase agreement. “That’s notable because these are sophisticated parties and each Agreement is detailed, with over ten pages of defined terms,” Subramanian wrote. Expect the companies to try and insert those provisions in the next round of contract negotiations.
The court’s analysis didn’t stop there. It also considered the conventional understandings of the terms. Here the question was whether a “subscription” requires a recurring payment or agreement for multiple periods of time (which would exclude Passes), or merely requires that a customer receive access for a particular time. Subramanian concluded that they “don’t clearly include or exclude the passes.”
A major issue for Warner Bros. Discovery and Disney was that pass users aren’t counted by some subscriber metrics, so some will fall through the cracks. They leveraged that to argue that it couldn’t have been their intent to allow that, though the court didn’t agree.
“True enough, just as in ESPN, this payment framework suggests the parties contemplated that subscribers would at least generally be monthly in nature,” the ruling stated. “But nothing in the License Fee provision says that partial-month subscribers are foreclosed.”
Still, Dish must pay Warner Bros. Discovery a full-month license fee for some active pass users on the 21st day of a month even though they’re only signed up for a fraction of that time.
An obstacle for Warner Bros. Discovery, which didn’t immediately respond to a request for comment, as the case moves forward will be that it knew to include minimum-subscription-length provisions in other contexts.
Distributors have reached out to Disney and Warner Bros. Discovery asking about similar offering short-term packages. Dish has said that its customer-first offering is intended to break the “mold of expensive, rigid bundles” through “pay-as-you-want instant access.”
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