A New Model For Streaming Video On the Internet (Or Is It?)

Posted by: David Brookshire

Recently demand for internet streaming of movies exploded with Netflix Instant Streaming accounting for up to 20% of total United States bandwidth use at peak hours. Dozens of competitors are vying to digitize and stream as much content as they can to attract customers. As a result, the content industry has acquired some major leverage with their licensing. While copies of newly released DVDs of movies may be immediately available for purchase or rental, studios attempt to delay online licensing in order to boost purchases of physical copies. Frequently when the online streaming licenses are finally granted they are usually first signed with a firm granted an exclusive license for a limited period, blocking out other competitors for a period of time.
With the difficulty and expense of buying a license for streaming content it was only a matter of time before someone attempted a short cut. Enter Zediva, a new startup specializing in streaming video over the web. Zediva claims to have new movies online the day they come out in stores, in other words, before Netflix and any other company have been able to acquire the licenses to stream. This is because Zediva says that they are not “streaming” the content, just “renting” it over the internet. So Zediva purchases new DVDs and allows users to “rent” them instead of “streaming” them. Sounds like the perfect model, right? Zediva gets to save on licensing fees and gets the movies quicker then any of their competitors. What could go wrong?
Well, Zedia’s business model may open it up to suits for copyright infringement because without a license they are probably infringing the copyright owner’s exclusive right of public performance.

Zediva claims they purchase several copies of new DVDs which they put in specialized DVD players that then stream the content over the internet. Zediva argues that they are merely renting the DVD and the player just like a physical store would, except instead of renting the physical DVDs they are digitally renting them. The founder describes the system as “a really long cable and a really long remote control.”
The problem with this argument is that movie rental stores do not infringe copyright because they do not violate the copyright owner’s exclusive right of public performance. Under the Copyright Act a motion picture is performed publicly when it is performed or displayed in a place open to the public OR if the performance is transmitted to the public by means of a device.
It may be helpful to think about a television broadcast which you are watching in your home. There are actually two performances in this case, the transmission by the television station, and the display on your TV at home, but only the broadcast station is engaging in a “public” performance. Thus if they had no license to publicly perform the work they would be infringing the copyright owner’s right. DVD rental stores do not violate this right because the movies are taken home by the customer and played privately in their home. There is only one performance and it is made by the customer.
Zediva would like to claim they are exactly like the physical video rental store, the customer may perform the work but Zediva does not; they claim Zedivaonly provide all of the equipment for their customers and therefore do not violate the copyright owner’s right. But this is not exactly true. Zediva is much more like a potentially infringing broadcast station then a DVD rental store. Even though the customer may press play on their computer, Zediva still has to transmit the movie to them. Thus, like the broadcast, there are actually two performances: the performance by Zediva in transmitting the work to the public, and the performance on the customer’s computer. Without acquiring a license to publicly perform the content, Zediva may be infringing on the copyright owner’s exclusive right and theereby opening up themselves to lawsuits.
Zediva might claim that they are not transmitting the work to the “public”, because only one customer at a time can view the movie. Unfortunately for them, the definition of public performance in the copyright act apparently excludes this possible interpretation because the statute specifically includes transmissions that are watched at the same time or at different times. And as the 3rd Circuit explained in Columbia Pictures Industries Inc. v. Aveco, Inc. a performance does not have to be displayed in a crowded room to be in public. After all, a public restroom stall is definitely considered public even though it can only be occupied by one person at a time.
It won’t be long before movie studios take note of Zediva’s system because, if allowed to continue, this model will destroy their carefully crafted and incredibly lucrative licensing system.
The long and the short of it is, you cannot stream copyrighted content over the internet without a license and without without rising some serious potential infringement issues. So Zediva might consider not organizing its entire business plan around this concept.


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