By Dawn Chmielewski and Jack Queen
(Reuters) -A U.S. judge on Friday temporarily blocked the launch of a new sports streaming service backed by three media giants, Walt Disney (NYSE:DIS), Fox and Warner Bros Discovery (NASDAQ:WBD), which aims to capture younger sports fans who do not watch games on TV.
In February, rival sports streaming service FuboTV (NYSE:FUBO) sued the big media companies, accusing them of antitrust practices that would thwart competition and inflate prices for consumers. The judge found it is likely to succeed in its antitrust claims, and issued the injunction.
The media companies had planned to launch Venu Sports, which would combine thousands of live professional and collegiate sporting events into a single app. The new service was scheduled to debut this fall.
"If the JV is allowed to launch, it will be the only option in the market for those television consumers who want to spend their money on multiple live sports channels they love to watch, but not on superfluous entertainment channels they do not," U.S. District Judge Margaret Garnett wrote.
Venu's media partners could "exercise near-monopolistic control" over sports rights to prevent rivals from emerging, Garnett wrote, adding that the joint venture partners "explicitly agreed to 'stay clear' of supporting another platform" like Venu "for at least the next three years."
Fubo argued it was frustrated in its ability to launch a pure sports service because the media companies who provide its content forced it to carry "unwanted non sports networks that its consumers rarely watch."
"We certainly have been damaged throughout the last year," Fubo CEO David Gandler told Reuters. "The stock hasn't recovered to the price we achieved prior to the announcement of Venu."
The three companies said in a statement they believed Fubo's arguments were wrong and that they would appeal the court's ruling.
"Venu Sports is a pro-competitive option that aims to enhance consumer choice by reaching a segment of viewers who currently are not served by existing subscription options," they said.
Emarketer analyst Daniel Konstantinovic said that if Venu is forced to launch late into the NFL professional football season, it could lose out on potential consumers.
Professional sports rights continue to rise in cost because such games still attract sizeable audiences and advertisers hoping to reach them. For instance, the National Basketball Association reached an 11-year carriage deal valued at $77 billion.
One way for media companies to defray that cost is to attract new viewers, like those who eschew traditional television for streaming services.
"To compete against Netflix (NASDAQ:NFLX), cross-company cooperation in various strategic bundles and partnerships will be increasingly necessary," said Brandon Katz, senior entertainment industry strategist, for Parrot Analytics. "The companies must reduce cost and churn in the challenged streaming landscape at a time when legacy media is desperately hoping to create a replacement for the lost revenue of the declining pay TV bundle."
Judge Garnett in New York said "absent an injunction, Fubo has made a clear showing that it faces imminent subscriber loss, likely followed by bankruptcy, de-listing, and the collapse of its business."
Shares of the Disney, Fox and Warner Bros Discovery were flat in after hours trading on Friday. They closed up between 0.5% and 2.4%.