Zediva: Streaming New Movies for Cheap Through a Sneaky Workaround

By  |  Wednesday, March 16, 2011 at 3:00 am

Movie studios are skittish about giving their new releases to bargain rental services like Netflix and Redbox, but that’s not a concern for streaming video startup Zediva.

The service, which moves out of beta today, streams new movie releases for $2 a piece — half the price of new releases from iTunes, Amazon, Vudu and Blockbuster On Demand. You can also purchase a 10-pack of rentals for $10 total.

Zediva shaves down its pricing by cutting movie studios out of the equation. Instead of negotiating streaming rights, the company buys up DVDs at retail and uses place-shifting technology to stream the video out of a Silicon Valley data center. Think Slingbox on a massive scale, but with DVD players instead of cable boxes. (I got a mental image of some guy running around, swapping out all the discs, but Zediva assures me that it uses a carousel mechanism to change movies.)

There are advantages to this approach beyond pricing. Because Zediva uses retail DVD copies, all special features are intact even as studios pull bonus content from rental DVDs in hopes of drumming up sales. And unlike other streaming services, Zediva is free to set its own rental time frame, so users get a two-week rental period with a maximum four hours of playback time.

On the downside, Zediva’s rental capacity is limited to the number of DVDs and DVD players it owns. If the movie you’re trying to watch is at capacity, you’ll have to wait. This could be Zediva’s dealbreaker; even before Wednesday’s launch, I noticed a fair number of movies that were rented out, and as it stands, there aren’t a lot of movies to choose from because Zediva is limiting itself to new and popular releases. At launch, roughly 110 titles will be available for streaming.

Also, although Zediva insists that it’s legally entitled to stream DVDs, the whole concept runs the risk of enraging movie studios. We’ve seen this play out before with Redbox. When studios stopped selling DVDs directly to the kiosk operator, it worked around the issue buy purchasing DVDs at retail, just like Zediva.

That presents a scaling problem because some retailers, such as Walmart, now limit new-release DVD sales to five per customer. In the end, Redbox filed anti-trust lawsuits against several studios, resulting in agreements to delay new releases by 28 days in exchange for lower-cost access to DVDs. When I asked Zediva Chief Executive Venky Srinivasan whether he’s heard complaints or spoken with movie studios, he would only say that he’s had confidential discussions on matters he couldn’t disclose.

As for the quality of the service, it’s standard definition like any DVD player, but Zediva is good enough if you’re not a videophile. Movies play in letterbox format, which is either a pro or con based on your personal preference. There’s no support for set-top boxes with the exception of Google TV, which can run Flash content from the web, but any Flash-equipped Android phone should work. Fast-forwarding and rewinding is minor nuisance, because you’ve got to wait for DVD seeking, then buffering. The service accepts major credit cards and Paypal.

I can see the lack of set-top box support being a dealbreaker for a lot of people, but if you watch movies on a laptop or home theater PC, Zediva’s worth considering simply because of its prices. Still, I’m worried about the availability of popular titles and hope Zediva is willing to invest in expanding capacity. Otherwise, it’s just another workaround that doesn’t quite work.



12 Comments For This Post

  1. lungbung Says:

    Sounds to me like they might jsut be onto something there.


  2. Tricky Says:

    Any company that dares to reign in the movie studios is a company I will consider doing business with.

  3. The_Heraclitus Says:

    Interesting. However, how do they think they will get around the fact that the DVD's they purchase are licensed ONLY for non-commercial use in a home environment?

  4. Steve Says:

    The same way that DVD rental outlets "get around that."

    Consider this:
    In a traditional DVD rental store, they buy up physical copies of said disk and allow you to borrow them for a specified time-frame. This is the same thing that Zediva does.

    Zediva buys the copies and allows you to play them during their specified timeframe. If they have no more disks, then they can't let you borrow them. Rather then you placing it into your DVD player to watch, Zediva does the heavy lifting and creates a "virtual link" between your screen and the DVD player.

    I love how this company gets around Hollywood! It's a very different approach, and (IMO) it seems airtight. I'll be watching them for sure…

  5. GadgetGav Says:

    Are you sure? I don't think places like Blockbuster go out and buy retail copies to rent. (OK, bad example because Blockbuster isn't buying anything these days, but you get the point.) There are 'Rental' releases of movies that are licensed differently and that's what commercial DVD renters (should) buy.
    I think the place-shifting model is on very thin ice in this instance. It's only grudgingly that content owners let us record and place shift for our own use on stuff we actually pay to own. I'm sure they will be going after this service if it's planning to use retail DVDs.

    Good luck to them, but I don't see it lasting long in its current form. The studios will sue, and they'll settle for revised terms and conditions, much like Redbox.

  6. The_Heraclitus Says:

    I see what you are saying. However, they are broadcasting them, which is different than what the case law is for renting someone a physical disc that you own. They'll get nailed on the rebroadcast clause.

  7. JaredNewman Says:

    Well, Zediva argues that you're renting both the DVD player and the DVD itself, and that you're place-shifting, like Slingbox. I guess it's a little different because Zediva owns the servers that stream the data, but I definitely don't have the legal chops to tell you how that would play out in court.

  8. Max Says:

    The_Heraclitus: Broadcasting is by definition a one to many transmission.

    Zediva is offering a one to one DVD-owned to active-viewer ratio, so are transmitting the decoded video signal but not broadcasting it.

    The studios’ ability to write ‘licences’ restricting fair use then have them enforced as law sadly isn’t in doubt however, so anything goes in terms of lawsuits.

  9. The_Heraclitus Says:

    If that is the legal definition then it should work until/if the license is changed by the IP owners.

  10. dholyer Says:

    A interesting concept, I can see it now, the IRS helth care insurance inspectors can get a side job keeping track of how many DVD's the parent company has vers the count of people watching the video. This way the Feds could tax you for privite entertainment pleasures. And this way they can make up for the money they lose providing healthcare.

    Whats next meters on your HDMI cables. And if you can afford Blue Ray you can afford the extra dataflow tax rates.

    Now how long until some Washington guy creates a government income law from my off the wall idea. The only thing is if bets are made on it that only means the IRS will find the idea that much faster.

    And here is another idea, how about individual personal homes doing this and renting out their dvd collection or even porno collection 10 or 20 years from now. But in 25 years we may have virtual holo-sex-decks inspired by Quarks Holo Suites he rents on Star Trek Deep Space Nine. And also there may be the rent a Sex-bot service for the night, putting all hookers out of service. And the Pimps will then open up the Dial up the bot you desire service. This may convert that black market service into a taxable business that the IRS loves.

    It's all a were the bits flow and the government taxes problem.

  11. New Zediva member Says:

    I'm a member of Zediva…and loving it!!!

  12. Anna Says:

    Zediva is a cool site with good interface. Alternatively, check this site: http://www.wiibeez.com/movies.htm
    It's a free movies streaming search engine.