In the early 2010s, as streaming services like Netflix and Hulu were rapidly transforming how people consumed media, a small startup called Zediva emerged with a disruptive new approach. Founded by Venky Srinivasan, Vivek Gupta, and Michael Billard, Zediva sought to bypass the costly licensing deals required by most streaming services. Instead, they offered users a clever alternative: renting and streaming a physical DVD remotely from a DVD player in Zediva’s data centers.
This audacious business model briefly offered consumers access to newly released movies for a fraction of the cost of traditional services. But it wasn’t long before Hollywood’s major studios took notice and filed a lawsuit that ultimately forced Zediva to shut down. The company’s short-lived existence remains a fascinating chapter in streaming history, raising key questions about content rights, innovation, and the lengths the entertainment industry will go to protect its revenue streams.
The Content is Coming from WHERE?!?
Back in 2010, while I was working at Float Left, the app development company I co-founded with Tom Schaeffer, I received a call from a company called Zediva. I had never heard of them at the time, but they were looking for someone to build their Roku app. I remember the conversation clearly because it took a rather odd turn.
During our call, I asked the typical question, “Where is the content stored?” Basically, I was trying to figure out which online video platform we would need to integrate their Roku app with. The typical answers at the time were companies like Brightcove, Unicorn Media, or Limelight. But the response I got was something I wasn’t expecting.
The Zediva rep said something along the lines of, “Oh, we don’t use any of those platforms. We actually have a bunch of DVD players in a data center.”
This caught me completely off guard. I was sure this person was confused. It was 2010, and streaming video apps were still in their early stages—it was all kinda confusing. So I wrapped up the call, convinced that I was talking to someone who didn’t quite understand how streaming worked. I figured I’d sort it out later.
But then, after some research, I discovered that Zediva was indeed doing exactly what they said. Sure as shit, they had an entire data center filled with physical DVDs. When a user wanted to watch a movie—say, Top Gun—a robotic arm or some automated system would literally grab a physical DVD from a shelf, load it into a DVD player, and stream the content directly to the user. The user would essentially “rent” both the DVD and the DVD player for the duration of the stream. It was unlike anything else in the industry at the time, and I realized this was no mistake—this was their actual business model. And I wasn’t the only one who found it fascinating.
A Business Model Born From a Loophole
Zediva’s entire business model was based on exploiting a legal loophole known as the first-sale doctrine, a principle that allows the owner of a physical copy of a copyrighted work, such as a DVD, to resell or rent it out without needing permission from the copyright holder. This is the same legal doctrine that allowed video rental stores like Blockbuster to operate.
Zediva’s founders believed that they could apply the first-sale doctrine to their online service. Instead of buying digital streaming rights for movies, which could be expensive and involve lengthy delays, Zediva rented out physical DVDs from their data center. Customers would rent the DVD and a dedicated DVD player, which would remain in Zediva’s facility. The company would then stream the movie directly to the customer over the internet, allowing them to watch it remotely.
Venky Srinivasan, one of Zediva’s co-founders, described it as “a really long cable and a really long remote control.” Essentially, users were controlling a DVD player remotely, making it feel like a traditional DVD rental but with the added convenience of internet streaming.
- The Cost Advantage: This loophole allowed Zediva to offer movies far earlier than competitors like Netflix, often for as little as $1.99 per rental. Because the service was based on physical DVDs, Zediva didn’t have to pay for expensive digital streaming licenses, which made their pricing extremely competitive.
- The Loophole: Zediva relied on the belief that by renting physical DVDs rather than offering digital streams, they weren’t subject to the same licensing rules as services like Netflix or Amazon. Zediva saw itself as a rental service, not a streaming service. The key distinction was that Zediva wasn’t distributing digital files—they were simply giving customers remote control of a DVD player, making it akin to a brick-and-mortar video rental store.
The Legal Battle: The Loophole Closes
Unsurprisingly, Hollywood’s major studios did not see things the way Zediva did. In 2011, the Motion Picture Association of America (MPAA), representing the major studios, filed a lawsuit against Zediva, accusing the company of violating copyright law. The MPAA argued that by streaming the DVDs over the internet, Zediva was essentially performing a public broadcast of the films—something that required a separate license.
- The MPAA’s Argument: The studios claimed that while Zediva was technically renting physical DVDs, the act of streaming the content to users over the internet constituted a public performance, which required additional licensing. This meant that Zediva was not just renting out DVDs but offering an unlicensed streaming service.
- Court Rulings: The court sided with the MPAA, ruling that Zediva’s model did not fall under the first-sale doctrine. While that doctrine allowed Zediva to rent out physical DVDs, it did not permit them to transmit the content over the Internet. This transmission, the court argued, violated the public performance rights of the studios, and Zediva was ordered to shut down its service and pay a $1.8 million settlement. The ruling made it clear that even innovative business models had to adhere to the established licensing agreements in the entertainment industry.
Legacy and Lessons for Streaming
Zediva’s bold attempt to circumvent traditional streaming models offered a glimpse into how the digital distribution landscape could have evolved if content licensing were less restrictive. However, the legal battle that led to its downfall also highlighted the entertainment industry’s determination to tightly control how and when consumers access their content.
- Content Rights and Control: Zediva’s case reinforced the notion that no matter how innovative the technology, content rights would remain the gatekeepers of the entertainment industry. Hollywood’s victory in the lawsuit ensured that any future streaming service would need to play by the established rules, paying for digital licenses and adhering to the studios’ release schedules.
- Timing and Impact: Had Zediva launched just a few years earlier, when streaming technology and its associated laws were still in their infancy, the company might have had more time to grow and challenge the status quo. However, by 2011, the streaming market was already maturing, and Hollywood had built up significant legal defenses to protect its digital revenue streams. Zediva’s timing left it vulnerable to swift legal action.
Despite its brief existence, Zediva stands as a testament to innovation’s possibilities—and limitations—in the streaming era. For today’s streaming platforms, Zediva’s story serves as both inspiration and caution, reminding them that while technology can reshape content delivery, navigating the legal landscape is just as crucial to long-term success.
Innovate or and Die?
Zediva’s rise and fall is a case study of the digital age’s tensions between innovation and regulation. The startup’s founders—Venky Srinivasan, Vivek Gupta, and Michael Billard—developed a creative, low-cost way to deliver movies to consumers, sidestepping the complexities of digital content licensing. However, their approach ultimately clashed with the entrenched power of Hollywood studios, leading to a legal defeat that ended the company’s ambitions.
For a brief moment, Zediva challenged the streaming status quo, showing the world what could happen if the rules were bent. But its downfall also served as a reminder that in the world of content distribution, even the most clever business models must contend with the weight of existing legal frameworks.
