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Judge Halts Zediva Movie Streaming

2 Aug, 2011 By: Erik Gruenwedel

Judge says unlicensed streaming service "threatens" burgeoning VOD industry

A U.S. District Court judge has issued a preliminary injunction against Zediva.com, a Santa Clara, Calif.-based service that allowed users to rent Flash-based streams of new-release DVD movies.

Judge John Walter Aug. 1 said Zediva’s unlicensed business model threatened the development the subscription video-on-demand market, which includes services such as Netflix, Amazon Prime and Hulu Plus. Zediva claimed it was a virtual video store utilizing the first-sale doctrine that allows the owner of a legally made copy of a movie (DVD) to resell or rent it.

Dan Robbins, SVP and associate general counsel for the Motion Picture Association of America, hailed the decision as support for the nascent VOD and streaming market of Hollywood movies.

“Judge Walter’s decision is a great victory for the more than 2 million American men and women whose livelihoods depend on a thriving film and television industry,” Robbins said in a statement. “Judge Walter rejected Zediva’s argument that it was ‘renting’ movies to its users, and ruled, by contrast, that Zediva violated the studios’ exclusive rights to publicly perform their movies, such as through authorized video-on-demand services.”

Indeed, streaming services such as Netflix and Amazon Prime pay studios and media companies hundreds of millions of dollars in license fees to stream content to myriad subscribers.

The MPAA in April filed a copyright infringement lawsuit against Zediva. The service in June countered in court papers that it operated a business model no different than Blockbuster and Redbox, whereby a legally obtained movie is rented to one customer at a time.

“Blockbuster is free to rent the same movie to many different customers in its stores,” Zediva said in its filing. “Netflix is free to mail DVDs to its rental customers. They must buy the DVDs from the studios, but once they do, the studios have been paid, and they have no right to demand a share of the rental fee.”

“Look, we are renting DVDs,” Zediva CEO Venky Srinivasan told Home Media Magazine March 16.

But with the home entertainment industry steadily evolving from physical to digital distribution, upstart companies looking to buck the Hollywood food chain are in for a fight.

“The court found Zediva’s service threatened the development of these lawful VOD and Internet-based services,” Robbins said.

In a statement Zediva wrote: “Today’s ruling represents a setback for the hundreds of thousands of consumers looking for an alternative to Hollywood-controlled online movie services. Zediva intends to appeal, and will keep fighting for consumers’ right to watch a DVD they’ve rented, whether that rental is at the corner store or by mail or over the Internet."



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