Hollywood Studios: VidAngel Threatens the Legitimate Streaming Market

Disney, LucasFilm, 20th Century Fox and Warner Bros. want the court to pause VidAngel's $1 movie rental service.
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The day Star Wars: The Force Awakens was released for home video purchase, one company offered to let users stream it for $1 — and now the studio is rallying the full strength of the Resistance to put a stop to the unauthorized practice. 

VidAngel customers "buy" a movie like The Force Awakens for $20, set filters to remove offending content, watch it and then can "sell back" the film to the company for $19 — leaving them having paid $1 to stream it. (Watch the company describe its service here.) 

Disney, LucasFilm, 20th Century Fox and Warner Bros. sued VidAngel in June, claiming the company is blatantly violating their rights by masquerading an unauthorized streaming service as a mission to clean up Hollywood content. 

VidAngel fired back in July, accusing Hollywood studios of engaging in a "conspiracy to restrain the market for online filtering services," and arguing that its service is protected by the Family Movie Act of 2005, the first-sale doctrine and fair use.

Then the company added insult to injury by beefing up its in-house legal team with the Academy's former general counsel David Quinto, and bragging about "stealing" him on its blog

Now the studios are arguing that VidAngel's defenses are meritless and the court should issue a preliminary injunction.

"VidAngel’s illegal conduct threatens imminent, irreparable harm by depriving Plaintiffs of their rights to control their content, interfering with relationships with licensees, and undercutting the growth of the legitimate on-demand streaming market," writes attorney Kelly Klaus. 

VidAngel's reliance on the FMA is faulty, Klaus argues, because it does not create a wholesale exemption from the Digital Millennium Copyright Act — it requires any filtering to be done from an "authorized copy."

VidAngel also argues its service does not violate the studios' public performance rights because users purchase discs, making viewing a private performance. (However, VidAngel's own YouTube ads describe the service as $1 streaming.)

The studios say that claim is nothing more than “slight of hand” and that a long line of precedent supports their position — most recently the Supreme Court’s decision in American Broadcasting Companies v. Aereo, which held that advanced technology doesn’t necessarily make digital services legally different than cable services.

“What matters is whether VidAngel is transmitting performances to the public, not the label that VidAngel uses to describe its transactions,” Klaus writes. "VidAngel’s business model depends on consumers treating the 'buy-sellback' option just like an on-demand streaming rental service, and it encourages this behavior at every turn by repeatedly reminding users to 'sellback,' sending email reminders, and even offering 'auto-sellback.' VidAngel’s labeling of the transaction cannot disguise what is really taking place."

Read the full injunction motion below.