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Disney + will display Starz ads as part of a deal to get its own films back at launch

Disney + and ESPN + show ads promoting the premium TV channel Starz, The edge has learned.

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Disney has agreed to run the advertisements in exchange for streaming rights for some of its own films, such as Star Wars: The Force Awakens, previously licensed to Starz, according to a person familiar with the scheme. A display ad will be displayed on the Disney + and ESPN + login page based on photos seen by The edge. The ad appears in the Disney + Android app and in browsers, the person said.

A Disney spokesperson confirmed that advertisements are part of a revised licensing agreement with Starz that was made to have certain titles available on Disney + at launch. Customers see a display ad asking them to sign up for Starz, but there are no ads within the actual Disney + or ESPN + service once they log in.

Disney + was originally promoted by executives as a completely ad-free platform. Kevin Mayer, Disney & # 39; s head of direct-to-consumer entertainment and the man who oversees the whole of Disney +, told investors at an event in April that "Disney + will be a fully subscription-supported service."

The new streaming service is faced with a problem of its own. For many years, Disney has signed lucrative licensing agreements for companies such as Netflix and Starz to stream movies from Marvel, Lucasfilm and Pixar. Now that Disney is launching a streaming service for itself, the company must get those streaming rights back before its own service can show many of the biggest hits to which it is now linked. Many properties, Disney CEO Bob Iger said in a call from investors in August 2018, "Are hampered by licensing arrangements that we have with a number of different entities, in particular Netflix and Starz."

Disney teased that it worked earlier this year to reclaim those rights. "I think as you can see from what we make available, and from seeing some of the titles that we make available at launch, a lot of effort has been made to bring everything back together so that we can make it available through the service, & said Michael Paull, head of the Disney streaming services The edge in August.

Well before the announcement of Disney + 2017, Starz secured the rights Star Wars: The Force Awakens and a number of Marvel films. Analyst Todd Juenger asked Iger about the complex rights situation in August 2018, whereby the manager is asked to acknowledge The Force awakens would not be available to stream on the day of launch.

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"It is clear that from a library perspective, although there is certainly a lot of volume, the recent studiolate will never be fully available due to the existing deals and it would take time to eventually reverse those rights against us," Iger said.

In April 2019 that was no longer the case. Kathleen Kennedy, president of Lucasfilm, told investors that the "first two trilogies plus The Force awakens and Rogue One will be available on the first day. Remaining titles, including Star Wars: The Rise of Skywalker and Solo: A Star Wars Story would be available within the first year, Kennedy added. The Last Jedi should available to stream on Disney + as soon as the Disney contract with Netflix expires at the end of this year.

Rights issues are complicated – and they are also some of the most protected secrets in Hollywood. In the run-up to Disney +, Agnes Chu, head of content at Disney +, told The Hollywood Reporter that she spent her days "[browsing] sheets of paper with legal deals." Films are expensive to make, and licenses help to generate a greater return on investment, according to Jeff Ulin, a former distributor at Lucasfilm and digital rights expert.

"Historically, a movie would go through different windows," Ulin said The edge. “You would let it go to a theater, then to video, and then it would go to TV as a Showtime or HBO. You own the underlying copyright and ownership, and what that means is that you own the rights to license it. You can license it in 100 different ways. Licenses can be valid for many, many years. Where it is licensed to, to whom it is licensed, and for how long, it becomes very complicated. "

Other entrants in the streaming space, such as WarnerMedia and NBCUniversal, are now in a similar position and have to close new deals to collect streaming rights for the features they are known for. Shows as The office and friends are sold for hundreds of millions of dollars, so that the original owners can get back the rights to their own shows.