Disney digital plans hit by Liberty lawsuit

Walt Disney’s plans to distribute its content over new digital platforms came under pressure on Thursday when Liberty Media sued the company, saying lucrative licensing contracts had been violated by the sale of Disney films over the internet.

Starz Entertainment, a pay-TV service owned by Liberty, which is controlled by John Malone, licenses Disney films for broadcast.

But Starz alleged in a suit filed in California that the sale of Disney films over the internet on Apple’s iTunes platform and via Walmart.com breached its licensing deals with Disney.

Recent Disney films to have been sold on iTunes include Pirates of the Caribbean: Dead Man’s Chest and Cars. Starz contends these films should have not been made available for digital download until they had appeared on the company’s own services.

Starz filed the suit against Buena Vista Television, a subsidiary of Disney. In the court papers, Starz claims to have paid more than $1bn over last 10 years for exclusive rights to Disney content.

Robert Clasen, chief executive and chairman of Starz Entertainment, said talks had ended in failure, and the the company had been left with “no choice”.

“Our agreements clearly prohibit them from selling their movies by electronic download over the internet while they are exclusive to Starz. If Disney is permitted to violate our contract in this manner, it will undermine the integrity of copyright in general which is a cornerstone of our industry.”

Mr Clasen said Hollywood studios had aggressively moved to protect the copyright of their content on the internet. “Starz must be equally aggressive in protecting the value of the deal it made.”

The suit seeks to prevent Buena Vista Television “from continuing to infringe on Starz’s rights”.

Buena Vista said: “We believe Starz misreads the agreement with Buena Vista Television and that its claim is without merit. Buena Vista Television retained and has the right to distribute its motion pictures in a wide range of mediums.”

Digital distribution of content has become a central part of Disney’s growth strategy under Bob Iger, the media group’s chief executive. The group has led its peers, signing the first distribution deal between a Hollywood studio and Apple’s iTunes platform.