AUSTIN (Talk1370.com) -- The cities of Austin, Houston, Dallas, Fort Worth, and 21 other Texas cities are going after some of the giants of the streaming media world, claiming the companies have been depriving the cities of fees required under state law.
The lawsuit, filed on Thursday, names Disney DTC LLC, Hulu, LLC, and Netflix Inc. as defendants, claiming the companies owe millions of dollars in municipal franchise fees, dating as far back as 2007. The cities claim that the streaming services fall under the definition of video service providers under the Texas Public Utility Regulatory Act (PURA).
Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Waco are also a part of the legal proceedings, with additional cities expected to join the lawsuit.
Austin City Council members voted to approve proceeding with the lawsuit in December 2021 on a contingency agreement. Dallas-based McKool Smith is co-counsel on the lawsuit with Austin-based Ashcroft Sutton Reyes and St. Louis-based Korein Tillery.
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Under Austin's agreement, the firms will receive 30% of any funds recovered without going to trial. If a trial is needed, the firms' share will go up to one third - 33 1/3% - of the recovered fees.
“Disney, Hulu and Netflix have long withheld statutorily required payments to cities throughout Texas, depriving them of fees that help fund essential city services,” said McKool Smith principal Steven Wolens, who along with co-counsel represents the Texas cities in the suit. “This case was filed on behalf of our municipal clients to ensure future compliance with PURA and recoup significant fees owed by some of the nation’s largest streaming services.”
Under Texas law, video service providers - such as cable TV and telephone companies - are able to place transmission lines on public right-of-way in exchange for remitting 5% of their gross revenues back to local municipalities. With consumers continuing to "cut the cord" and switching from traditional pay television services to streaming services, that franchise fee revenue has begun to decrease.
The suit is seeking past fees, along with interest, dating back to the services' inception. Netflix has been in operation since 2007; Hulu began its streaming service in 2011; and Disney Plus began in 2019.