Score another win for big content against online innovation.

Last Friday, the Motion Picture Association of America announced that the spunky streaming movie startup Zediva agreed to close down permanently and to pay the studios $1.8 million and end its court battle with Hollywood.

Zediva’s service, which debuted to the public in March, let users watch recently released DVDs over the internet for $2, by renting out a DVD and a DVD player (installed in Zediva’s server room) controlled by a customer’s computer. The service had its public debut in March, and was sued by the studios in April.

Zediva struck no content deals with Hollywood, arguing it was more like a traditional video rental store like Blockbuster, which needs no licensing agreement to rent movies, than a video-on-demand service like Netflix, which must sign deals to stream movies to subscribers. Zediva can only rent out DVDs to one customer at a time, and makes no copies of the DVDs.

But in August, Zediva shut off its service, thanks to a preliminary injunction issued by U..S. District Court Judge John Walter who made it clear which side of the "Is Zediva Legal?" battle he was on. Walter wrote, “As the copyright holders, Plaintiffs have the exclusive right to decide when, where, to whom, and for how much they will authorize transmission of their Copyrighted Works to the public.”

Zediva argued that it’s more like a traditional video rental store like Blockbuster, which needs no licensing agreement to rent movies, than a video-on-demand service like Netflix, which must sign deals to stream movies to subscribers. Zediva can only rent out DVDs to one customer at a time, and makes no copies of the DVDs.

The MPAA, by contrast, argued that any streaming of a DVD or movie was illegal without their permission, and called the final shutdown a win for the movie industry.

"This result sends a strong message to those who would exploit the studios’ works in violation of copyright law, on the Internet or elsewhere, and it is an important victory for the more than two million American men and women whose livelihoods depend on a thriving film and television industry," said MPAA Senior Vice President and Associate General Counsel Dan Robbins in a release (.pdf).

Zediva, a start-up, likely faced a bleak, long legal battle, without the benefit of any revenue coming in due to the injunction. Given the tone of Judge's Walter's tone in early rulings, Zediva's best chance of resuming operations would have been to get the U.S. 9th Circuit Court of Appeals to take their case after losing the initial case, and then, if the 9th indeed reinstated their operation, hoping to survive a probable visit to the Supreme Court. All while trying to run a start-up.

The MPAA made no statement about whether it would refund money to Zediva customers who pre-paid to watch movies, but I'm not banking on getting my 8 dollars back from Hollywood anytime soon.