For some reason the case of Zediva (www.zediva) just fascinates me. The service was shut down in early August 2011. It was really just waiting to happen. The company was distributing content over the Internet without the permission of the rights holders so the shutdown was inevitable.
Zediva’s plan was to enable consumers to stream content from a DVD over the Internet. Zediva claimed that the user was simply renting the DVD but playing it on Zediva’s DVD player – and watching that DVD through the Internet. Their theory that this was the same as going to a movie rental store (like Blockbuster) and renting the physical DVD. The difference was, of course, that the consumer didn’t have the DVD in hand.
Zediva believed that they did not have to obtain a separate license for streaming content (vs. DVD rentals) from the studios to distribute the content over the Internet. They claimed that since they had the content they could deliver it however they wanted. In part, their theory was that if they had 100 DVDs of a movie, then they would simply limit the number of online streams to 100 at any one time. Therefore, if the 101st customer came along, then they would have to wait for someone to finish watching the movie before they could rent it. This strategy was very beneficial for Zediva as it meant they could control what content they distributed without getting permission from the studios
While it is clear what Zediva did was illegal as they didn’t have the rights to distribute content over the Internet, their goal was to get content out to consumers when they want it. A challenge that the studios have, especially for older content, is getting the rights to stream content over the Internet. When studios made initial deals with producers, actors, musicians, and more, for “older” content, the Internet didn’t exist – and wasn’t even a thought in their heads so the studios didn’t ask for those rights or they didn’t think the Internet would ever be a real distribution channel, so it didn’t get addressed in contracts. Studios are still working on getting those rights in some cases, but it takes both time and money to obtain those. Of course, consumers don’t always want to wait – nor do they even understand why they can’t find the content.
Ensuring that content is available for consumers is paramount to the studios. One of the reasons for piracy is that consumers want content but can’t find it so instead they go to places where they can get it – and the studios may not get compensated at all for it. The fact that content isn’t available doesn’t justify piracy but it is one reason for it.
I’m definitely not saying that companies should go create services that violate studio’s rights. The studios have the right to do whatever they want with their content. It’s theirs. I am saying that studios need to continue to spend time looking at what consumers want and ensuring that they are doing the best they can to meet their demands for where and how they want to consumer content. This means testing out new ideas and distribution strategies, as Disney did with DIRECTV’s premium VOD test and Warner Bros. did with Facebook. These haven’t resulted in large amounts of revenue but that doesn’t matter. The only way to know if it will work and make money is to test it out Studios weren’t all that keen on home video to begin with and now that’s a bigger revenue stream than theatrical revenue. You never know what will happen.