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VidAngel, company that pirated films, files plan to exit bankruptcy

(Image: Lord Jim/Flickr Creative Commons, Graphic: Descrier)

A company forced into bankruptcy after pirating films from blockbuster movie studios has filed reorganization plans with a federal court that charts the next course for the service.

VidAngel said it has a path toward paying down a $60 million judgment entered by a court after the company was found liable for copyright infringement over its editing of movies produced by the Walt Disney Company, 21st Century Fox and Warner Bros.

VidAngel’s business model worked like this: The company purchased blockbuster titles on DVD from those three studios and others; ripped the movies; edited out all instances of profanity, violence and nudity; then allowed paying customers to stream the videos online.

The problem: VidAngel never sought permission from the studios before doing this, and apparently didn’t cut them in on the revenue and profits.

VidAngel said it believed it was operating legally thanks to an obscure federal law passed in 2005 called the Family Movie Act. The law allowed companies to make a limited portion of a copyrighted motion picture available for private home viewing, and allowed startups to create technology that made that type of activity possible.

The company also said it attempted to work with legitimate players in the motion picture industry — it sought partnerships with Google twice and the studios once — before settling on piracy.

While the case was unfolding, VidAngel shifted its strategy away from copying and editing DVD movies. In 2017, VidAngel launched a new service that is used in conjunction with Netflix and Amazon Prime Video, identifying scenes in movies that contains violent or profane content and automatically skipping over them when a customer streams a title. The service is still available today for $10 a month on top of a regular subscription to a video stream service like Netflix.

The company also filed for Chapter 11 bankruptcy protection in late 2017 as a way to avoid having their business interrupted by an impending judgment.

A jury ultimately sided against VidAngel, finding it was not protected by the Family Movie Act and was culpable of violating copyright protections hundreds of times. It imposed a $62 million civil judgment in favor of the studios.

VidAngel has appealed the outcome of the case. Their appeal is still being considered.

This week, the company — which has since launched its own studio and started producing original programming — said its reorganization plan would allow it to “emerge from bankruptcy, pay its debts and focus on growing a great business.”

Neal Harmon, the company’s chief executive officer, said the company had made a remarkable pivot from possibly shutting down to telling debtors to “just send us the bill.”

“We would not be in this position today were it not for the support and loyalty of our customers, investors, and the resilient VidAngel team,” Harmon said.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).