Zediva is nuked, Hollywood rejoices

A federal court has issued a preliminary injunction against Santa Clara–based Zediva, essentially ordering a shutdown of its low-cost streaming-movie-rental service. The decision comes less than six months after the launch of the service, which aimed to curtail streaming licensing fees by renting and streaming DVDs over the Internet. Zediva launched in March, hoping to build a business from what it saw as a loophole in the way that DVDs are rented and how streaming-video-on-demand services license content. It built out a data center that housed numerous DVD players, which were hooked up to servers to deliver streaming “rentals” of those DVDs over the Internet. As a result, Zediva was able to offer streaming rentals at a much lower price than competing services that licensed the content for streaming. While most new releases on online VOD services like iTunes or Vudu are priced at around $5 each, Zediva was offering rentals for $1.99 or a package of 10 rentals for $10. It was also able to offer new releases sooner than competing subscription VOD services like Netflix, which must wait for titles to hit a certain distribution window before they’re available for streaming. Because it was buying the DVDs, it could offer new titles as soon as new releases were available for sale in stores.

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