Texas cities say streaming giants Disney, Hulu and Netflix owe them millions of dollars in unpaid fees

A lawsuit filed Thursday by 25 Texas cities alleges that Disney, Hulu and Netflix have cheated cities for years out of dollars the streaming giants are required to pay under state law, and now the cities are coming to collect.

Austin, Houston, Dallas and Fort Worth are among the cities that have sued streaming services in Dallas County to recover money they say they are owed since 2007 and to require the services to pay every year going forward. Under state law, utilities must pay cities a franchise fee, which is also paid by traditional cable providers, in exchange for using communication lines over public rights-of-way to transmit their services to homes.

As more people ditch cable subscriptions in favor of streaming services, cities have lost revenue from franchise fees — money that goes to fund city services like police and fire protection, as well as roads. , parks and libraries.

The cities have not offset those revenues with fees from streaming services, said Steven Wolens, a former Texas lawmaker and lead attorney for the cities. Although 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 beginning,” Wolens said. “Shame on them because they are using the public right of way that all the other companies pay the city to use.”

Exactly how much the streaming giants owe to Texas cities is not known, Wolens said. For a smaller city, the losses could run into the hundreds of thousands of dollars, he said. For a larger city, that figure could be in the millions.

Other Texas cities that have joined the lawsuit include Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land. , Tyler and Waco.

Cities are seeking funding from the time 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 at the top with more than 220 million subscribers.

Representatives for Disney, Hulu and Netflix did not immediately respond to requests for comment.

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From the Texas Tribune

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