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With the Department of Justice scrutinizing some Hollywood studios' plan to get into the video-on-demand game, News Corp.'s Fox Entertainment Group is pulling out of a joint venture VOD deal with Walt Disney Co.

"After considering the potential regulatory process and logistical issues and carefully examining technological and marketplace developments, (Fox) determined that the joint venture was not an appropriate initiative at this time," Fox said in a statement.

The deal was first announced last September, just weeks after five major motion picture studios formed a joint venture, dubbed Movielink, to deliver films on demand to broadband users in the United States. The five studios include Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. In Demand has a similar VOD deal with Sony Corp.'s Columbia TriStar International Television.

Unlike the other VOD partnerships, the Fox-Disney joint venture planned to offer new releases from the studios on Movies.com on an exclusive basis for a limited time ahead of the traditional pay-per-view window, which is normally 45 to 60 days after the video rental release. It is this idea of exclusivity that may have raised some eyebrows at the DOJ, which is examining whether these types of ventures by the major movie studios curb competition. The broadband entertainment channel, which was to replace Disney's existing Movies.com Web site, was expected to launch this year.

Disney has decided to go it alone. The company will continue to operate the existing Movies.com Web site. Disney plans to license and aggregate feature film content from multiple studios to deliver on-demand content via cable, satellite and broadband connections. Fox said it is willing to license its feature films to Disney on a non-exclusive basis, if acceptable business terms can be reached.

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