A U.S. District Court has ruled against Warner Bros. Discovery in its attempt to prevent Dish Network from selling short-term subscription offerings through Sling TV. The court’s decision, delivered on March 5, 2024, allows Dish to continue offering day and weekend passes, priced as low as $4.99, which provide viewers access to popular channels such as TNT, CNN, and ESPN without the need for a full monthly subscription.
The ruling, issued by Judge Arun Subramanian, centers on the definition of a “subscription” within the context of existing licensing agreements. This marks the second legal victory for Dish, reinforcing its innovative approach to streaming services. In August 2023, Dish introduced its short-term packages, which sparked legal action from Warner Bros. Discovery and Disney. The entertainment giants claimed that Dish’s offerings violated their licensing agreements, fundamentally threatening their established business model that relies on consistent monthly revenue.
The controversy includes significant implications for major events such as the U.S. Open, which Disney acquired rights to based on multi-week packages. Disney’s strategy hinges on the assumption that subscribers will pay for access to a full array of matches, even if only a few attract viewership. The introduction of one-time access through Sling’s day passes disrupts this economic structure.
At the heart of the dispute is the absence of explicit language in the licensing agreements regarding short-term passes. According to the court, the term “subscription” is not defined in the contracts, leading to ambiguity. Dish maintains that any individual with access to Sling qualifies as a subscriber. The court agreed, stating that the definitions are broad enough to allow Dish to offer these short-term passes.
ESPN faced similar setbacks in its legal challenges against Dish, with the court determining that its definition of “subscriber” was even broader than Warner Bros. Discovery’s. The court emphasized that the agreements lacked specific terms mandating a recurring purchase for access to qualify as a subscription. Judge Subramanian noted that, despite the detailed nature of these agreements, the absence of precise definitions for subscription-related terms allowed for multiple interpretations.
Furthermore, the court assessed conventional definitions of subscription services. It questioned whether a subscription necessitates recurring payments or if it could simply be a temporary access arrangement. Ultimately, the court concluded that the existing agreements do not explicitly restrict the sale of short-term passes.
A significant concern for Warner Bros. Discovery and Disney is that users of these short-term passes do not contribute to conventional subscriber metrics, potentially skewing their reported numbers. They argued it was unlikely that the original intent of the agreements would allow for such arrangements. The court acknowledged this viewpoint, asserting that while a monthly subscription model was anticipated, the absence of prohibition on partial-month subscriptions remains.
Despite the court’s ruling, Dish is still required to pay Warner Bros. Discovery a full-month licensing fee for certain active pass users who sign up mid-month. This presents a challenge for Warner Bros. Discovery, which has previously insisted on minimum subscription lengths in other agreements. As the case progresses, it is expected that these companies will seek to revise their contracts to include clearer definitions regarding subscription lengths.
Dish has positioned its offerings as a response to consumer demand for flexibility, promoting a “customer-first” approach that aims to dismantle the traditional rigid bundles of television services. The legal implications of this ruling highlight the evolving landscape of media consumption and the ongoing adjustments major players must make to keep pace with changing viewer preferences.
