Disney had agreed last November to team with News Corp.'s satellite TV company, Sky Television, but problems quickly arose. According to the announcement, Disney will sell its stake in the joint venture back to Sky for an undisclosed sum and will license motion pictures from its Touchstone and Hollywood Pictures units to the British company over a five-year period.
The suit, filed less than three weeks ago, had appeared to pit Disney Chairman Michael D. Eisner against his former boss, Barry Diller, who now heads Fox Inc., the Los Angeles entertainment conglomerate also owned by News Corp.
The suit claimed that Diller had begged Disney executives to cooperate with the satellite TV venture.
In an interview Friday, however, Eisner insisted that there was no quarrel between the two men, who worked together for nearly 16 years at Paramount Pictures and ABC.
"I never had any quarrel with Barry, and Disney never had a quarrel with 20th Century Fox. Our dealings were always with the British subsidiary of News Corp.," said Eisner, who added that he negotiated directly with Murdoch to settle the dispute.
"I believe Rupert Murdoch acted extremely honorably, and I do believe he has a strong likelihood of being successful with the Sky services," Eisner said.
Sky Television, launched Feb. 5, operates four direct broadcast British TV channels. Disney had agreed to launch its Disney Channel in the new market and was also to help operate a pay service called Sky Movies.
According to the lawsuit, however, Disney failed to supply its share of funding and dragged its feet on decisions in an effort to force a change in terms. Despite Diller's plea for cooperation, the suit said, the agreement was "repudiated" on May 12.
The News Corp. lawsuit sought $1 billion in punitive damages and $500 million in actual damages.
Sky Television, one of several ventures launched in the newly deregulated European television market, has a goal of reaching 1 million British homes by year's end. Part of its success hinges on the availability of satellite receiving dishes, which were in scant supply at the outset. Satellite TV involves broadcasting over-the-air to a receiver, rather than via cable.
According to the settlement, Disney and Sky will continue to discuss terms of a possible Disney Channel launch, but Disney is no longer obligated to supply its popular pay-television programming.
Diller, the chairman of Fox--which includes the film studio as well as the Fox TV network and Fox TV stations--could not be reached for comment.