Studios sue movie rental start-up

Associated Press / April 6, 2011

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NEW YORK — Hollywood movie studios are challenging a gutsy start-up that thought it had found a loophole to make the latest hit movies available for instant viewing online long before they are available on Netflix or Redbox.

Zediva tried to circumvent the fact that it didn’t have licenses to stream movies online. It lets customers rent a DVD and a player that are physically located in the Silicon Valley.

But the Motion Picture Association of America said Zediva’s approach is illegal. Six studios, including Warner Bros., Columbia Pictures, and Disney Enterprises, filed a federal lawsuit in Los Angeles on Monday against Zediva’s parent company, WTV Systems, and founder and chief executive Venkatesh Srinivasan.

Zediva had no immediate comment yesterday. The company launched its service to the public last month. It only lets one user rent a DVD at a time, so if it buys 20 copies of a DVD, only 20 accounts can watch it at the same time. It costs $1.99 to rent one movie or $10 to get 10 movies.

Yesterday, Zediva’s website said registration was temporarily closed to new users while it was building more capacity.