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MPAA Sues Zediva, Calls It A "Sham"

Posted by: , 17:27 AEST, Wed April 6, 2011

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Six major Hollywood studios sue Zediva, who allows users to rent DVDs and then have the DVD streamed to their homes digitally

Zediva has an interesting business model. A hybrid between an online disc rental service, and a video streaming service, Zediva allowed users to rent DVDs and then watch them over the Internet. What is unique is that Zediva actually has a physical copy of the DVD that the user rented, and places this copy out of circulation. In other words, you rent the disc, and then play that disc for you, over the Internet.

But six major movie studios under the banner of the Motion Picture Association of America (MPAA) has decided what Zediva doing isn't very clever at all, having just launched a lawsuit against the company.

The MPAA contends that Zediva needs to properly license content for streaming purposes and is a "sham", while Zediva says they're no different to a brick and mortar disc rental store, with the only difference being that they will play the disc for the user, over the Internet.

Studios make more money with streaming licenses then they would normally have with disc rental agreements, and it is believed this is the primary motivator behind the MPAA's actions. With digital streaming, studios often place timed exclusion periods for new releases, meaning new releases can't be viewed digitally for 30 or even 60 days after the release of the rental copy. This release window is made to allow studios to maximize rental revenue, although some have claimed this leads to increased piracy as users are unable to stream movies legally during this period. However, the fact that Zediva actually reserves a copy of a physical disc for each rental means that, compared to normal physical disc rentals, Hollywood is not losing a cent. 

In other words, Hollywood studios expect to make more money off value-added services such as video-on-demand streaming, even if they do not actually contribute anything to the process, technical or otherwise. It is this that has some critics calling Hollywood anti-innovation, and that this lack of innovation is what is driving many towards piracy.

The MPAA feels otherwise, saying that without bumped up licensing fees for streaming content, content providers would not be able to produce new products.

Do you think Zediva has a right to operate their business this way, or do you think they're only trying to avoid paying licensing fees? Post your opinion in this news article's comments section, or in this forum thread:


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