Streaming service VidAngel declares bankruptcy after losing legal battles with studios

VidAngel, a streaming service that altered copyrighted works to edit out adult language, nudity and violence, has declared Chapter 11 bankruptcy, the company announced on Wednesday. The Utah-based service had been sued by major studios, including Warner Bros., 20th Century Fox, Disney, and others, who said VidAngel was operating as an unlicensed streaming service, and was offering films to viewers outside the studios’ streaming windows.

The streaming service’s business model involved selling decrypted and edited DVDs for $20 to users who watched them online, then “sold” them back to VidAngel for $19. Effectively, VidAngel was offering $1 rentals to its customers.

But this model bumped up against the law in several ways. For one, the Digital Millennium Copyright Act (DMCA) says you can’t remove or circumvent the access-control protections on DVDs and Blu-rays, which VidAngel did. (It claimed the Family Home Movie Act of 2005, which allows the use of technology to censor DVDs, protected it.)

However, U.S. District Judge Andre Birotte Jr. told the company in December 2016 the Family Movie Act required the content come from an “authorized copy” of the movie, and VidAngel did not have that. He also suggested that VidAngel’s copies of copyrighted material was a public performance of sorts. And he noted that even if VidAngel’s service created any sort ownership in the DVD, it would have only applied to a physical disk – not a master copy saved in a digital format and streamed from its servers.

Despite the court order that ordered it to shut down, VidAngel continued streaming as it appealed the matter.

An August 2017 ruling upheld the injunction and ordered the service to shut down. But VidAngel had already launched a new variation on its business model that filtered content from Netflix, HBO, and Amazon instead of DVDs. This was not endorsed or approved by the streaming service providers, and may also be in violation of the law.

VidAngel claims that Chapter 11 will give it room to reorganize its business so it can focus on its new business. It also says it still has millions in the bank to fight its court battles and continue its investment in its own original content through VidAngel Studios.

“We have filed a petition for relief under Chapter 11. It’s an important step to protect our company—as well as its creditors, investors, and customers—from the plaintiffs’ efforts to deny families their legal right to watch filtered content on modern devices,” said VidAngel CEO Neal Harmon, in a statement. “It also gives us breathing room to reorganize our business around the new streaming platform, promote and perfect the new technology, and seek a legal determination that the new system is fully legal and not subject to the preliminary injunction entered in California.”