As people have cut cable subscriptions in favor of streaming services over the years, Texas cities say they have lost out on revenue from franchise fees they claim are owed by streaming giants like Disney, Hulu and Netflix.
A lawsuit filed Thursday by 25 Texas cities claims that Disney, Hulu and Netflix have for years stiffed the cities out of dollars the 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 sued the streaming services in Dallas County to recover money they say they has been owed since 2007 and to require the services to pay each year going forward. Under state law, the services have to pay cities a franchise fee — which traditional cable providers also pay — in exchange for using communication lines over public rights of way to transmit their services into homes.
As more people abandon cable subscriptions in favor of streaming services, cities have lost franchise fee revenue — money that goes to fund city services like police and fire protection as well as roads, parks and libraries.
Cities haven’t made up that revenue with fees from streaming services, said Steven Wolens, a former Texas lawmaker and lead attorney for the cities. Even though state law classifies them as video service providers that must pay the fees, the major streamers haven’t paid cities a dime, Wolens said.
“They should have been paying this fee from the very beginning,” Wolens said. “Shame on them because they are using the public right of way that every other company pays the city to use.”
Exactly how much the streaming giants owe Texas cities isn’t known, Wolens said. For a smaller city, the losses could number in the hundreds of thousands of dollars, he said. For a larger city, that figure could be in the millions.
Other Texas cities that joined the lawsuit are Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Waco.
The cities are seeking funds dating to when the services launched — Netflix in 2007, Hulu in 2008 and Disney+, The Walt Disney Co.’s streaming service, in late 2019. Their subscriber bases number in the tens of millions worldwide, with Netflix on top with more than 220 million subscribers.
Representatives for Disney, Hulu and Netflix did not immediately return requests for comment.
BY JOSHUA FECHTER with Texas Tribune.