Co. says Mouse's VOD venture violates deal

NEW YORK — As if Disney didn’t have enough on its hands in the runup to its shareholder meeting next month, John Malone-owned pay movie outlet Starz Encore has sued the Mouse House for violating its exclusive movie licensing deal.

In a complaint filed in Los Angeles federal court last month , Starz! claims Disney is illegally licensing its own theatrical titles to its nascent terrestrial video-on-demand platform MovieBeam, thereby broaching Starz!’s exclusive pay TV and subscription VOD windows.

According to Starz!, its licensing deal, hammered out with Buena Vista in 1999 during “spirited negotiations,” explicitly prohibits Buena Vista TV from exhibiting the films on television prior to Starz’s first window except under very narrow circumstances such as pay-per-view or true VOD. Since MovieBeam charges customers a $6.99 monthly fee, in addition to $3.99 per download per film (less for older titles), Disney’s use does not qualify under the exception, the complaint claims.

While Disney claims its MovieBeam service conforms to the definition of VOD, as outlined in the Starz! license agreement as permissible exception to its two-year exclusive window, Starz! counters that MovieBeam is, in fact a subscription VOD package, with a monthly fee.

Starz! has retained Disney’s litigation nemesis Greenberg Glusker Fields Claman Machtinger & Kinsella to push the case.

Starz!, which is obliged to pay an estimated $125 million to Disney for continued exclusive rights to its first-run films on its 15 pay nets and SVOD services, is also due to pay Disney a hefty $60 million-plus bonus this quarter for the privilege of extending the output deal for another three years. Some speculate Starz! may be trying to get around or at least delay that payment.

Regardless of Starz!’s intent, such disputes between distributors and rights holders over rights and windows are bound to come up more frequently as programmers seek to carve out new VOD revenue streams that may be in conflict with existing pay TV deals.

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