posted 04-04-2011 10:01 PM                

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The MPAA is taking action against one of the hottest, if legally questionable, online streaming services, Zediva, which has gained a boisterous following since its launch earlier this year by going places that Netflix won't -- streaming relatively recent films like The Fighter, The Social Network and Black Swan.

Zediva claims its business model is innovative yet completely legitimate. The company rents its users a DVD player and a DVD, and customers use their computers like remote controls, playing a movie from afar. Streaming 10 movies costs users only $10, a cheap enough price that consumers, perhaps looking for piracy alternatives, have been signing up in growing numbers.

The question, though, is whether Zediva needs a studio's license before exhibiting these films to audiences.

Zediva believes itself to be akin to a traditional brick-and-mortar rental company like Blockbuster in the 1990s. It points out that when a customer "rents" a movie, that film is taken out of circulation. Zediva doesn't create a digital copy. Instead, it's just playing a video remotely at a customer's bequest in what it deems to be a private exhibition.

In a federal copyright lawsuit filed Monday in California District Court, the MPAA disputes the private nature of the streaming service. Instead, the movie industry believes that Zediva is infringing its "exclusive rights to perform their works publicly."

According to the complaint, Zediva's comparison of its service "to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law. Defendants operate an online VOD service, not a neighborhood rental store."

Zediva will likely hope a court will see this issue similar to how the Second Circuit Court of Appeals saw a plan a couple years back from Cablevision to begin offering its customers remote storage DVR capabilities for television programming. In that lawsuit, studios sued on the ground that Cablevision was violating its copyrights and its exclusive authority over public performances, and similarly to the latest lawsuit, claimed Cablevision had created "an unauthorized video-on-demand service."

The Second Circuit disagreed, ruling that Cablevision had no control over what programs were being delivered and saying that a single customer transmitting to oneself wasn't any more public than a customer recording a program with his or her own DVR.

However, television is a different bulwark than movies. By the time Cablevision's remote-DVR plan had hit the court, services like Tivo and Slingbox had already established itself on the marketplace without much legal challenge. Cablevision was merely asking a court to let it take a step a few mere inches forward.

In contrast, movie studios are arguing that Zediva's plans will upend their business model and relationships with iTunes, Amazon, Netflix, and others, and can point to its own body of favorable case law on the subject.

Copyright scholar James Grimmelmann, for one, points to several cases that will work against Zediva, including one involving a brick-and-mortar rental store named Maxwell’s, which rented videotapes to customers, along with private 4’x6’ exhibition booths in the rear of the store. Similar to how Zediva operates, Maxwell’s customers reserved a so-called "private exhibition" of these movies as the video stores' clerks queued up the videos from afar. A court later found this operation to be "not distinguishable in any significant manner from the exhibition of films at a conventional movie theater."

It was, in the court's opinion, a "public performance."

The MPAA is claiming maximum statutory damages in the amount of $150,000 per infringement for Zediva's alleged copyright violations.

Zediva hasn't yet issued a response to the movie industry's claims.

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posted 08-02-2011 09:59 PM                    

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Judge Halts Zediva Movie Streaming

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.

A representative from Zediva was not immediately available for comment.

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