Disney, Fox Win Bid to Shut Sanitized Streaming Service

(Bloomberg) -- Walt Disney Co., 21st Century Fox Inc. and Time Warner Inc. units won a court order shutting down a Utah-based video-streaming business that lets subscribers pay $1 to watch Hollywood movies stripped of nudity, violence and profanity.

A federal judge on Monday granted the movie studios’ request to halt VidAngel Inc.’s services while a lawsuit continues over whether the company’s business model is, as the studios alleges, an “end run” around copyright protections.

U.S. District Judge Andre Birotte Jr. in Los Angeles said in his order granting a preliminary injunction that the studios, which also include Disney’s Lucasfilm unit, have shown they’re likely to win on the merits of their claims and that they will be irreparably harmed if VidAngel is allowed to continue infringing their rights while the lawsuit is being decided.

“Hollywood studios have followed a repeated pattern in their decades-long campaign to put movie filtering services out of business by seeking a shut-down decision in trial court,” VidAngel Chief Executive Officer Neal Harmon said in an e-mailed statement. “We will aggressively pursue an appeal and take this case to a higher level where we have always believed we will ultimately prevail.”

Kelly Klaus, a lawyer for the studios, had no comment on the ruling.

The studios claim VidAngel operates as an unlicensed video-on-demand service. The company buys DVD and Blue-ray disc copies of newly released titles which it purports to sell to its customers, the studios said. But instead of shipping the physical discs, VidAngel “rips” one disc to create a master-copy that can be filtered according to a customer’s preferences and streamed to their home, according to the studios. The customer can then “sell” the movie back after watching it.

Star Wars

This system allowed VidAngel to offer the latest Star Wars movie for $1 a day before it was available from licensed video-on-demand services, Disney Enterprises said in the complaint filed June 9 with Warner Bros Entertainment and Twentieth Century Fox Film that VidAngel subscribers can watch movies with only minimal filtering if they choose to, the studios claim.

“VidAngel flaunts its interference with exclusive windows as a competitive advantage over authorized services by expressly promoting titles that are available on VidAngel but ‘NOT on Netflix,’" the studios said. "VidAngel’s unrestrained conduct thus threatens the legitimate online distribution market."

VidAngel contends its business model is legal under the Family Movie Act, a 2005 law that authorizes for-profit companies to stream lawfully obtained movies for home viewing with objectionable content filtered out. Disney and the other major studios opposed this law that was directly intended to prevent studios from using litigation to block parental filtering they disliked, according to VidAngel.

The company was started by four Mormon brothers who made a name for themselves with their “Girls Don’t Poop” advertisement for a toilet spray, which has generated 38 million hits on YouTube, and “This Unicorn Changed the Way I Poop” ad for a toilet stool, which had 28 million YouTube hits.

The case is Disney Enterprises Inc. v. VidAngel Inc., 16-cv-04109, U.S. District Court, Central District of California (Los Angeles).