Hollywood Studios File Suit Against Service Streaming $1 Movies

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Every few years, a new tech service comes along purporting to have cracked the copyright code and offering consumers the ability to watch film and television content on demand for a cheaper price. And just as often, the big film studios object that such services are anything but lawful.

The latest controversy pertains to VidAngel, which was sued in California federal court on Thursday by Disney, 20th Century Fox and Warner Bros. Entertainment.

"You buy a movie for 20 dollars," VidAngel explains to potential customers. "Don't worry, it ends up being one dollar. Since you own the movie, you can legally set your filters. Now watch your movie. Then, with the click of a button, sell it back to us for 19 dollars of credit. That means each movie is only one dollar. It's that simple. Buy for 20, set filters, watch it, sell it back for 19. Enjoy your one dollar movie."

The film studios are troubled because there's more to what happens.

VidAngel insists that it is not a "rental" service — a few year ago, an upstart called Zediva tried that — because it was selling physical DVD and Blu-ray discs. But the Hollywood studios look at VidAngel providing streams of whatever customers purchase and don't see any distinction. And because of Hollywood's windowing system, VidAngel's model means that a film released on physical but not digital channels becomes available on the latter. The company specifically advertises that many of its films aren't yet on Netflix.

"Recently, VidAngel exploited this competitive advantage to offer Star Wars: The Force Awakens for $1 a day at a time when lawful VOD services did not yet have the right to offer that work for single-day access at all," the complaint states.

The three studios, represented by Munger Tolles lawyers who have represented the MPAA (which makes the absence of Sony and Paramount curious), lay out where VidAngel has allegedly gone wrong in running what they consider to be an "unlicensed VOD streaming service."

First, states the complaint, VidAngel is only able to stream by circumventing the encryption on DVD and Blu-rays that protect against unauthorized access. That would be a violation of the Digital Millennium Copyright Act.

Next, by copying and streaming, VidAngel is alleged to be violating the plaintiffs' exclusive rights to reproduce and publicly perform the works.

VidAngel also touts filtering capabilities that let users skip profanity and nudity, but Warner, Fox and Disney say that any attempt to bless the service under the Family Movie Act of 2005 is wrong. According to the complaint, "The FMA requires that any copy or performance made pursuant to that statute be otherwise 'authorized'— that is, not violating the copyright owner’s other exclusive rights."

The studios are seeking an injunction and either profits or statutory damages. Here's the full complaint.