Despite their longstanding relationship, Disney has turned down a proposal by THQ to develop a Toy Story 3 videogame, choosing instead to produce the title itself.

According to a Wall Street Journal report, the move comes as a result of Disney’s desire to stake a larger claim in the lucrative and fast-growing game development business. Videogame sales in the U.S. grew 34 percent last year according to NPD Group numbers, compared to box office revenue growth of only four percent, while home video sales actually shrunk by 3.2 percent. Strauss Zelnick, chairman of Take-Two Interactive and a former movie studio executive, said interactive entertainment is “the only growth business for now and the foreseeable future.”

Disney, along with other studios, is also said to be displeased with the poor reputation of the movie game sub-genre, as well as the profits earned by videogame companies on the backs of licensed properties like Harry Potter and Lord of the Rings.

“Our ambition is not to be the largest videogame publisher, but to be a leading publisher of high-quality games, which we feel we’ve made great strides in achieving over the last few years,” said Graham Hopper, head of Disney Interactive Studios, which currently employs 800 people. Disney currently plans to self-publish 80 to 90 percent of its games within two years.

THQ had developed games based on the last four movies by Disney-owned Pixar, but THQ CEO Brian Farrell claimed the decision wasn’t entirely unexpected. “We would have loved to keep the business, but when you see a company like Disney scaling up we weren’t surprised when they went internal with it,” he said. He also expressed reservations about the ability of traditional movie studios to succeed in the videogame business, adding, “I’ve seen this before and the jury is still out on it.”

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