A few months back, the ABC recommended VidAngel as the only reasonably priced way to rent streaming movies and TV shows. Since then, VidAngel has found itself in a lot of legal trouble and is looking for investors to help fund it’s legal fight. To fund this legal fight VidAngel has emailed it’s customers looking for investors. Because a lot of ABC readers signed up for this company based on my recommendation, I want to make sure you understand what the risks are before investing.
First the disclaimers. This is a not an investment recommendation one way or another. I am just encouraging everyone to have as much information as possible before making a decision. Secondly, I am not a lawyer and I don’t have enough legal knowledge to fully understand all the legal arguments being made. It seems to me that understanding the legal arguments is critical to to being able to judge whether this is a good investment or not.
What is VidAngel?
You can see the ABC’s full review of VidAngel here. The quick summary is it is a great way to rent streaming movies for a dollar, but you have to put up with some nonsense.
For one thing, you don’t just rent the movies for a dollar, you buy the movie for $21 and then sell it back for $20. Not that big of a deal. They do this for legal reasons and those legal reasons are what has gotten them into court.
The other problem is what they call filtering and I call censoring. They give you the option of editing out the dirty parts of a movie. That sounds fine, but it really isn’t optional. They make you edit out at least one dirty part of a movie. What if you are watching a kids movie that doesn’t have any dirty parts? Unbelievably, they still make you edit out at least one part of the movie. So that is why I watched a censored version of The Peanuts Movie with my kid. Stupid, stupid, stupid, but the upshot is it only cost me $1.
Movie studios don’t want VidAngel to rent you censored movies at reasonable prices so they have filed a lawsuit to get them to stop. Now you are all caught up, so let’s get to the investment.
VidAngel’s point of view
To pay all the legal fees this is going to involve VidAngel is offering stock ownership to it’s customers to raise a bunch of money. VidAngel has published this video on their website explaining the investment. To VidAngel’s credit, the video is honest and upfront about the possibility of losing the case and the probability that VidAngel losing the case will mean you losing all the money you invested.
To VidAngel, this case is all about filtering. The video leads us to believe that the studios are suing because they hate filtering. The video goes on to give some legal arguments that make it sound like filtering is legal, and that VidAngel believes they can win the case. I can’t comment on the validity of these arguments because they aren’t my area of expertise and I don’t understand them.
Another point of view
The article “Hollywood vs VidAngel: Fifty Shades of Filters” which appeared in Forbes (which was written by a real lawyer named Larry Iser) makes it sound like the case isn’t really about filtering at all, but is about VidAngel not paying the streaming rights to the studios. VidAngel claims that because it’s customers actually bought the movie for $21 that it has the right to stream the movie at no cost to it’s customers until the customer sells the movie back to VidAngel for $20.
Mr. Iser questions the legality of this practice stating “So it certainly appears that the studios are right about the streaming.” and “…we can expect that VidAngel will have a tough time convincing a judge that it is the business of “reselling” the physical discs under the First Sale Doctrine.” Sounds like Mr. Iser is not nearly as confident of VidAngel winning this lawsuit as VidAngel is.
What does this all mean?
What is this case even about, filtering or streaming rights? If it is about filtering then VidAngel feels they have a strong case. If it is about not paying for streaming rights then Larry Iser feels they have an uphill battle. If you were a Hollywood executive which would you be more concerned about, people choosing to filter their movies or losing out on millions of dollars in streaming rights? Yeah, me too.
Based on the opinion of Larry Iser I would look at this investment to be very risky. On the other hand, as VidAngel points out in their investment video, sometimes very risky investments can payoff big.
I am just disappointed that my $1 movie rentals might be going away. I’m going to try to watch as many as I can before my $1 rentals disappear. To see how you can watch VidAngel movies for $1, see the full review here.
I have not invested any money in any company mentioned above. All the money I saved by only spending $1 for a movie doesn’t count as investing.
By the way my original review generated more emails than any other article I have ever written, including emails trying to convert me to one religion or another. That really doesn’t have anything to do with investing decisions, I just thought it was interesting.