Starz suit seeks to limit movie sales by Disney
One of the nation’s largest cable TV networks is suing Walt Disney Co. to force it to end the downloading of such movies as “Cars” and “Pirates of the Caribbean: Dead Man’s Chest.”
Starz Entertainment, which owns the Starz and Encore channels, is asking a federal judge in Los Angeles to prevent Disney from selling movies through downloading services such as iTunes during the same period when Starz has the right to show them.
Starz said that before and during an 18-month window when it licenses Disney movies to run on its channels, the Burbank entertainment company has the right to sell DVDs of its films or offer them on the Internet for one-time use or for short periods.
But download sales violate contracts signed in 1993 and 1999 that had made Starz the exclusive cable outlet for many movies made by Disney and its various film units, according to the Starz lawsuit filed Thursday. In addition to iTunes, the lawsuit cites sales on Walmart.com.
“I applaud them for being aggressive in new technology, but not when it violates our contract,” Starz Chief Executive Robert Clasen said.
In a statement, Disney said it believed that Starz had misread the agreement and that it was allowed to sell its movies “in a wide range of mediums.”
A unit of media mogul John Malone’s Liberty Media Corp., Englewood, Colo.-based Starz reaches 15 million subscribers through its flagship channel. It also offers pay-per-view films and downloads through its Vongo service.
Disney has been quicker than its entertainment rivals to embrace iTunes, the popular music and video downloading service offered by Apple Inc., whose chief executive, Steve Jobs, is a Disney director and its largest stockholder.
But the Starz suit shows how fledgling Internet deals are upsetting distribution arrangements that studios have had in place for years. Disney was a key supplier of films that Starz needed when it launched in early 1994. Clasen said Starz’s deal with Disney was the network’s largest, with more than $1 billion changing hands to date.
The latest iteration had an original term of four years and has been extended by Disney for three more years; by the end of 2007, Disney can choose to extend it again, for movies released in theaters through 2012.
Starz has claimed Internet-sales exclusivity for years, but Disney disagreed about the meaning of the terms in the contract, Clasen said. He said two previous offers by Starz to settle the dispute were brushed aside.
The suit lists 50 movies that Disney is selling in a downloadable format during one of the multiple windows in which Starz claims exclusive rights. Among them are “The English Patient,” “National Treasure” and “Shopgirl.”
A similar suit over terms of Disney’s MovieBeam Inc. home-entertainment service didn’t reach court because MovieBeam faltered, Clasen said. Contracts with other studios have different terms, so the same issue isn’t likely to crop up, he said.