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New Online Rental Service Streams DVDs

16 Mar, 2011 By: Chris Tribbey

A new movie-streaming site offers the latest films released on DVD, rents them for $1.99 each, and doesn’t suffer from the 28-day windows imposed on the likes of Redbox and Netflix.

And it has zero studio support.

Zediva.com launched out of beta trials March 16, offering roughly 100 titles recently released on DVD, including The Fighter, 127 Hours and Hereafter. Sign up for a free account, pick a title, rent it once for $1.99 (or pay $10 for 10 credits) and in seconds the film’s DVD menu pops up, and “play” is selected.

News of the site spread quickly: One day after its launch, Zediva.com was closed to new registrations, with newcomers asked to join a waiting list.

What makes this offering unique is when you rent a movie from Zediva, you’re not renting a digital file, but a Flash-based stream of an actual DVD playing on a DVD player. If too many people are renting the same title, and Zediva doesn’t have enough discs available, you’re out of luck.

“Look, we are renting DVDs,” said Zediva founder and CEO Venky Srinivasan, who said the DVD streams are relayed via a “Slingbox-like technology.” “Look at the annual reports from Redbox, Blockbuster and Netflix. They do the same thing. It’s a well-established business, for the last 25, 30 years.”

However, even though the Santa Clara, Calif.-based start-up is buying physical DVDs and not altering the content into new digital files, experts in copyright law expressed doubt about Zediva’s legal footing.

“The first-sale doctrine protects the use of the physical good, but it doesn’t allow for public performance,” said Robert Rotstein, an adjunct professor at Loyola Law School in Los Angeles, and copyright attorney with Mitchell, Silberberg & Knupp. “Even if they have a limited number of DVDs, under the law it’s still public performance.”

Robert Garrett, a partner with Washington D.C.’s Arnold & Porter law firm, agreed: Simple ownership and usage of a physical DVD is protected by the first-sale doctrine, but showing that DVD content publicly isn’t protected under federal copyright law.

“I don’t think it makes any difference whether they turn it into a digital file,” he said. “It’s a public performance of content being sent to multiple subscribers.”

Both Rotstein and Garrett offered up court rulings that suggest Zediva’s business model will fail, including a 1991 case between On Command Video Corporation and the major studios. On Command’s system, which delivered VHS movies to hotel guests via VCRs stored in hotel equipment rooms, was deemed a violation of copyright law.

“A likely consideration would be whether the public performance right is implicated by the business’s activities,” said Abigail Phillips, a senior staff attorney with the Electronic Frontier Foundation. “If there is deemed to be a public performance on the part of the business, other considerations might include whether the business’ purchase of the DVDs allows for public performance, whether the business’s conduct is volitional, and so forth.

“The thing to keep in mind is that in these kinds of cases, details really matter. It will be interesting to see if the studios raise any concerns,” she added.

The Motion Picture Association of America declined to comment.

For now, Zediva is going full-speed ahead, giving consumers a DVD experience without the DVD players. Users are able to pause, switch languages and choose subtitles. If the user wants to take a break, they can pause the film and finish it within 14 days. Users can rewind and fast-forward for up to four hours total, but if the film is paused for longer than an hour, that specific DVD will be freed up for other users.

“Just as you can only watch a DVD rented from a bricks-and-mortar DVD rental store — not download it or watch it after your rental has ended — you cannot download or copy your rented DVD,” the site tells customers. “Our technical infrastructure is designed to prevent any downloading or saving of movies, and doing so would be a violation of the terms of use of the Zediva service.”

Zediva does not currently rent Blu-ray Discs; however, the company hopes to soon, and Srinivasan said the company aims to expand its DVD selection but stay close to the most-popular, newly released titles available on street date.

“Much like any video store, we estimate how many people are coming in on a Friday or Saturday night,” he said when asked how many DVDs of one specific title Zediva plans to carry.

The company is supplementing its service with a DVD-by-mail offering, requiring a $25 deposit and shipping costs, with renters required to return the DVD within 14 days.

Yet Srinivasan admitted that the attraction to his service is online viewing. And he hopes the studios take notice.

“We plan to purchase many millions of dollars of DVDs, and we’re eager to partner with them,” he said.

However, Garrett said attention Zediva gets from studios probably wouldn’t be the kind Srinivasan wants.

“They compare themselves to Netflix. Netflix negotiates deals for the rights to its content,” he said, adding, “If it sounds too good to be true, it probably is.”

Doug Lichtman, a professor of law at the University of California, Los Angeles, was blunt in his assessment: “This is clearly an end-run around the legitimate business models that Netflix, Amazon Unbox, Hulu and other entities are pioneering. It also deprives the movie studios of the financial return they rightly earned. It is one thing if Blockbuster acquires a DVD and then rents it out to a small number of people over a period of time. It is quite another if Zediva's model allows it to take that same single purchase and then somehow justify massive distribution to a huge number of viewers, possibly as many as one every two hours.” 

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