To receive the latest economic news, subscribe to our weekly newsletter.
A lawsuit filed Thursday by 25 cities in Texas says Disney, Hulu and Netflix have been stiffening cities for years from the dollars that streaming giants are required to pay under state law – and now cities are coming to collect.
Austin, Houston, Dallas and Fort Worth are among the cities that have sued Dallas County streaming services to recoup the money they say they are owed since 2007 and require the services to pay each year in the future. Under state law, services must pay cities a franchise fee – which traditional cable TV operators also pay – in exchange for public road rights to use communication lines to get their services home.
As more and more people switch from cable subscriptions to streaming services, cities are losing revenue from franchise fees – money dedicated to financing city services such as the police and fire department, as well as roads, parks, and libraries.
Cities did not make up for this revenue with streaming service fees, said Steven Wolens, a former Texas lawmaker and chief lawyer for cities. Wolens said that although state law classifies them as video service providers who have to pay fees, the main streamers did not pay the city a penny.
“They should have paid this fee right from the start,” Wolens said. “Shame on them because they enjoy the public right of way for which every other company pays the city.”
It’s not known exactly how much streaming giants owe Texas cities, Wolens said. For a smaller city, he said, losses could be hundreds of thousands of dollars. In the case of a larger city, this number could be millions.
Other cities in Texas that have joined the trial include Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Wacó.
Cities are looking for funding timed to launch services – Netflix in 2007, Hulu in 2008, and Disney +, The Walt Disney Co.’s streaming service, in late 2019. Their subscriber bases are in the tens of millions worldwide and Netflix is on . top with over 220 million subscribers.
Disney, Hulu and Netflix officials did not immediately respond to requests for comment.
When you join us at The Texas Tribune Festival on September 22-24 in downtown Austin, you’ll hear from change makers driving innovation, lawmakers taking control of new politicians, industry leaders driving Texas forward, and more. See a growing list of speakers and buy tickets.