Zediva has new movies, low prices, legal questions

John Moe Mar 16, 2011

A web service called Zediva
is offering rentals of new release movies before Netflix or Redbox. For only $1.99, you can watch the movie on your computer, Blu-Ray player, Google TV system, or Android device. You have 14 days to watch the movie and you can watch it as often as you like during that time. It’s a pretty amazing deal when you factor in the selection, the price, and the generous window you get to watch the thing. But it might not be legal.

Unlike Redbox and Netflix, which have deals with various studios giving them access to cheaper DVDs in exchange for a 28-day window after DVDs go on sale, Zediva purchases its movies at retail and rents them right away, invoking the first sale doctrine to do so. (The first sale doctrine also helped Netflix get off the ground when it first started its DVD-by-mail service, and was used by Redbox as well before they began striking deals with the Hollywood studios.) And because Zediva’s streams have a physical DVD and DVD player connected to them, it argues that it’s offering a DVD rather than a digital rental, allowing it to circumvent requirements to strike digital licensing deals with the Hollywood studios.

One tends to get dubious about the long term prospects of entrepreneurs exploiting possible loopholes that involve Hollywood not getting paid. I understand there are some lawyers in Hollywood.

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