A new video on-demand service called Zediva was introduced this week. It’s kind of like if Netflix and Redbox got together and turned Slingbox inside out. The key feature of the new service is that you can rent new movie releases without ever leaving home. They are employing a delivery method that appears completely legal, but is sure to get the movie studio executives running hair-on-fire to their legal departments looking to find some means to stifle them using copyright law..

The consumer advantage is access to a movie selection similar to Redbox or Blockbuster, including the latest DVD releases. That’s something neither cable or satellite video on-demand services, nor streaming services like Netflix are able to offer. You see, Hollywood studios impose a release window around new DVDs such that streaming services are not allowed to play them for a period of time. The theory being that this allows the studios to get people to buy DVDs, on which they make a tidy sum. Studios correctly assume that if you could watch the movie without getting off of the couch, you would opt for that instead. Meaning, if you’re in a rush to watch a new release, you either buy or rent a physical disc, or (heaven forbid) download a pirated torrent.

Zediva gets around that release window by actually buying DVDs and renting them to you. However, rather than having to wait by the mailbox or run to the store for the disc, Zediva helpfully pops the disc in one of their networked DVD drives and streams it to your house over the Internet. The key being that during the playing of the movie, that DVD and player are only playing to you, the renter.

Thanks to legal precedents established when Slingboxes were introduced years ago, place-shifting is perfectly legal. In the case of Slingbox, it was ruled that copyrights couldn’t prevent you from sending video content to your phone or remote computer from a box located in your house. You were paying for the content, and studios couldn’t restrict you to watching it locally, as long as you weren’t sharing or reselling it. It’s hard to see how this is different. Zediva is a DVD rental store, nothing more. They just provide Slingbox-like capability (also legal) to allow you to watch the movie remotely.

The initial popularity of Zediva is huge. They have already cut off new registrations as the demand for the service has far exceeded their capacity. Thus it seems enormously likely we’ll soon hear the screams and howls from the studios of how they will go bankrupt if this sort of thing is allowed to continue. (For reference, they screamed that when writable DVDs were introduced… and VHS tapes… and color television… Hollywood? Still solvent.)

Yet, there is a larger message here that should not be lost. The Zediva model is clever, but technologically stupid and inefficient. It exists only to do an end-around to existing copyright rules put in place to prop up dying business models. These are business models designed to create artificial scarcity and inflate prices. Zediva also illustrates a pent up market demand for access to this sort of content. People want the convenience and are willing to pay for it.

The theory of capitalism is that some new business will come along and leverage the consumer demand, thereby driving the dinosaurs to extinction. But Hollywood studios are an effective monopoly. The barrier to entrance in that business is huge. So the reality is that as long as they stick together, they can continue to abuse consumers in defiance of capitalist principles.

Kudos to Zediva for finding a way to give consumers what they want, but they may want to open up that legal defense fund now, just to get a head start.