Hollywood movie studios are challenging a gutsy startup 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 CEO Venkatesh Srinivasan.
Zediva had no immediate comment Tuesday. The company launched its service to the public last month, after spending two years developing its technology. 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.
The MPAA said Zediva's claim that its service is just like any brick-and-mortar DVD rental store is a sham.
"Zediva's mischaracterization of itself is a gimmick it hopes will enable it to evade the law and stream movies in violation of the studios' exclusive rights," said Dan Robbins, senior vice president and associate general counsel for the MPAA, in a statement.
On Tuesday, Zediva's website said registration was temporarily closed to new users while it was building more capacity.