Netflix, Hulu Beat California City That Sued to Tax Streaming Services

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Netflix, Hulu Beat California City That Sued to Tax Streaming Services
Photo courtesy of Hulu

Netflix and Hulu have won another court battle against a local government trying to force the streaming giants to pay taxes typically imposed on cable TV companies.

A Los Angeles County judge ruled Wednesday that the city of Lancaster doesn’t have the right to sue the streaming services to charge so-called franchise fees, which legacy TV providers have long paid municipalities for the right to dig up streets to lay their cable wires, according to the Hollywood Reporter. L.A. County Superior Court Judge Yvette M. Palazuelos noted that even if Lancaster had the right to bring the case, Netflix and Hulu would be exempt from the fees as they don’t own or operate infrastructure on public property.


The ruling is the latest victory for streaming services facing a flurry of similar lawsuits across the country. Municipalities have argued that companies like Netflix and Hulu should pay franchise fees, which are usually up to 5% of the gross revenue generated from providing video service in a town or city. As more consumers cut the cord on traditional cable TV and opt for streaming instead, local governments are seeing less franchise fee revenue enter their coffers.

Local governments bringing legal complaints against streamers have sought both back payments and fees going forward, according to law firm Duane Morris, which has identified cases in at least 14 states and described the suits as a “billion-dollar battle.”

In addition to the Lancaster case, Netflix and Hulu have already won legal arguments in Arkansas, Nevada and Texas, according to the Associated Press. But the streaming services have lost one ruling at the dismissal stage in Missouri, THR reported. The Ohio Supreme Court considered a similar case this week, while the Tennessee Supreme Court is set to hear arguments next month.

Lawyers for Lancaster, located in northern Los Angeles County, argued in October that Netflix and Hulu were subject to the California law requiring “video service providers” to pay the fees because they used third-party broadband wires to provide similar, if not identical, video programming to cable companies

In response, Netflix noted that it does not own or operate infrastructure in public rights-of-way and argued that it does not even provide “video programming” under the state’s definition, since its services “are not live, linear, channelized, scheduled or programmed,” according to a January court filing.

The two sides have also squabbled over whether California towns like Lancaster have the right to sue for franchise fees in the first place. On Wednesday, Judge Palazuelos said they did not—adding that if Lancaster was allowed to sue Netflix and Hulu, it could open the door for the city to impose fees on a growing list of streaming services including Disney Plus, HBO Max and Peacock.

“Such an interpretation would result in a financial windfall for local entities that the Legislature did not intend,” she ruled.

In a statement to dot.LA, Lancaster assistant city manager Trolis Niebla said the city “has no comment on the ruling and has not determined next steps.” Representatives for Netflix and Hulu did not respond to requests for comment.

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LA Latino/a Founders On Why Authenticity Matters in Tech

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Latino/a Founders On Why Authenticity Matters in Tech
Decerry Donato

As one of the most diverse cities in the world, Los Angeles is home to almost 5 million people who identify as Hispanic or Latinx. Yet, many feel they still lack representation in the city’s tech space.

“I can safely say that last year’s LA tech week hosted all of the events on the west side, and very few were focused on telling Latino and Latina entrepreneurial stories,” said Valeria Martinez, investor at VamosVentures. “We wanted to change that this year.”

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LA Tech Week Day 3: Social Highlights
Evan Xie

L.A. Tech Week has brought venture capitalists, founders and entrepreneurs from around the world to the California coast. With so many tech nerds in one place, it's easy to laugh, joke and reminisce about the future of tech in SoCal.

Here's what people are saying about day three of L.A. Tech Week on social:

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LA Tech Week: Female Founders Provide Insights Into Their Startup Journeys

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Tech Week: Female Founders Provide Insights Into Their Startup Journeys
Decerry Donato

Women remain a minority among startup founders. According to Pitchbook, even though women-led startups in the United States received a record $20.8 billion in funding during the first half of 2022, U.S. companies with one or more female founders received less than 20% of total venture funding in 2022. U.S. companies solely led by female founders received less than 2% of the total funding.

The panel, titled Female Founders: Planning, Pivoting, Profiting, was moderated by NYU law professor Shivani Honwad and featured Anjali Kundra, co-founder of bar inventory software Partender; Montré Moore, co-founder of the Black-owned beauty startup AMP Beauty LA; Mia Pokriefka, co-founder and CEO of the interactive social media tool Huxly; and Sunny Wu, founder and CEO of fashion company LE ORA.

The panelists shared their advice and insights on starting and growing a business as a woman. They all acknowledged feeling pressure to not appear weak among peers, especially as a female founder. But this added weight only causes more stress that may lead to burnout.

“The mental health aspect of being a founder should not be overshadowed,” said Kundra, who realized this during the early stages of building her company with her brother..

Growing up in Silicon Valley, Kundra was surrounded by the startup culture where, “everyone is crushing it!” But she said that no one really opened up about the challenges of starting your own company. .

“Once you grow up as a founder in that environment, it's pretty toxic,” Kundra said. “I felt like I really wanted to be open and be able to go to our investors and tell them about challenges because businesses go up and down, markets go up and down and no company is perfect.”

Honwad, who advocates for women’s rights, emphasized the value of aligning yourself with people with similar values in the tech ecosystem. “[Those people] can make your life better not just from an investment and money standpoint, but also a personal standpoint, because life happens,” she said.

Moore, who unexpectedly lost one of her co-founders at AMP Beauty, said that entrepreneurs “really have to learn how to adapt to [their] circumstances.”

“She was young, healthy, vibrant and we've been sorority sisters and friends over the past decade,” she said about her co-founder Phyllicia Phillips, who passed away in February. “So it was just one of those moments where you have to take a pause.”

Moore said this experience forced her to ask for help, which many founders hesitate to do. She encouraged the audience to try and share their issues out loud with their teams because there are always people who will offer help. When Moore shared her concerns with her investors, they jumped in to support her in ways she didn’t think was possible.

Kundra said that while it is important to have a support group and listen to mentors, it is very important for entrepreneurs to follow their own thinking and pick and choose what they want to implement within their strategy. “At the end of the day, you really have to own your own decisions,” she said.

Kundra also said that while it is easy to turn to your colleagues and competitors and do what they are doing, you shouldn’t always follow them because every business is different.

“When I was in the heat of it, I kind of became [a part of] this echo chamber and that was really challenging for us,” Kundra added, “but we were able to move beyond it and figure out what worked for us [as a company] and we're still on a journey. You're always going to be figuring it out, so just know you're not alone.”

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