Legal•Info

In Order to Keep Studios at Bay VidAngel Tries a Bankruptcy Strategy

Posted: Wednesday, October 18th, 2017 at 1:16 am

VidAngel, filed for chapter 11 bankruptcy protection, to protect its streaming service that filters out offensive film and television content. Disney, 20^th Century Fox and Warner Bros studios’ filed a lawsuit against VidAngel two months before they filed for bankruptcy, accusing the Utah-based company of copyright infringement and also for operating a pirate streaming service by permitting customers to enjoy more family-friendly versions of blockbuster films for a fraction of the cost.

The company’s decision according to VidAngel CEO Neal Harmon, to file chapter 11 was made as a way to “protect [the] company – as well as its creditors, investors, and customers—from the plaintiff’s efforts to deny families their legal right to watch unfiltered content on modern devices.” Furthermore, the company has declared that it needs time to nurture a recently launched streaming platform, which allows the user to filter out content on streaming services such as Netflix, Amazon Prime, and HBO. Usually, companies regularly implement the “bankruptcy strategy” to continue working on the R&D while pushing back plaintiffs.

When chapter 11 reorganization is filed by a corporation or individual that filing prompts an “automatic stay,” so any legal action or lawsuits against the debtor is effectively paused. VidAngel has three of the biggest studios in Hollywood breathing down its neck, and so it’s a good idea they decided to take a break.

“We have millions in the bank, and we’re already making millions on the new system,” Harmon claimed in his official statement. “Business will continue as usual for our customers and our employees and all our team.”

But the defensive bluster of the CEO could be just that – self-protective. The court upheld its preliminary injunction against VidAngel, during the restructuring VidAngel might be wanting to take advantage of the of this stalled period to continue business and capitalize on its profits from its new streaming service since it will continue to operate. VidAngel has already seen its share of legal defeats, and the Hollywood studios will do whatever they can to ensure they get their share of allotted compensations. VidAngel could find itself paying a heavy fine if this ever went to trial.

The full statement made by Harmon:

“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. 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.”

“It’s important for our fans to know that VidAngel will continue to offer our filtering service, and to add new content and new customers during the reorganization process. We are also actively hiring additional engineers to further accelerate the continued development of VidAngel. Our original series, Dry Bar Comedy, is exploding and has had over 16 million minutes viewed in the last 7 days. Our customers can filter movies on Amazon, Netflix, and HBO on Amazon, and we still have millions in the bank to fight this all the way.”

Time alone will tell if VidAngel’s “bankruptcy strategy” was a good delay approach.

 

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