Disney Sues Dish

The house of the Mouse upset about free Starz fare

Walt Disney Co. is suing Dish Network in Manhattan Federal Court, claiming that the second largest U.S. satellite TV provider is cutting into the Mouse’s profits by airing its movies for free on its Starz channel.

The media company-cum-theme park operator is also asking a federal judge to block future airing of Disney fare to Dish subscribers.

Under an agreement between the two companies, Dish was entitled to show Disney movies on its premium channels, such as HBO, Cinemax, and, until recently, Starz.

In February, Dish began providing Starz for free as part of its 30th anniversary special offer.

Despite that fact that these movies have been out of the theaters for more than a year, Disney still planned to squeeze as much profit out of the films through a tiered strategy known as "windowing."

Under the plan, Disney would release the movie for a limited time, or window, to various outlets. For instance, first Disney will offer a movie in hotel rooms as a pay-per-view and video on demand, then on DVD and cable on-demand, then on premium channels like HBO or Showtime, and then last and least basic cable and network TV.

Disney claims that by giving away the movies as part of its package, Dish is devaluing its movies—films like Toy Story 3, Up, and Alice in Wonderland—and cutting into its profits.

"This value decreases with each prior airing because television viewers are less likely to watch a movie that they have seen before,” the movie company asserts in the suit.

"Dish Network pays hundreds of millions of dollars for the right to distribute Starz content to our customers, which includes the rights to a number of Disney movies," the satellite company said today in a statement.

"Dish Network does not have visibility to the contract between Starz and Disney," the company added, "but we will vigorously defend our rights against any attempt to drag our customers into the middle of their dispute."

For its part, Starz Entertainment also filed suit against Dish Tuesday in Denver Federal Court for breach of contract. Starz alleges that Dish offered the premium channel for free to counteract the negative reaction from customers when it raised subscription rates in February.

Starz says that Dish never consulted with them about the one-year offer and refused to heed its warnings in March that the terms of the contract had been violated.