Remember that viral advertisement from a few years ago with the unicorn that pooped frozen yogurt and the fancy British man pitching the magic of the Squatty Potty? Here’s a funny twist: The guys who made it are building an empire devoted to clean entertainment, fit for both mainstream family rooms and churches.
Viral ad-makers Neal, Daniel, and Jeff Harmon founded Vidangel in 2013 as a way to make it easier for conservative families to enjoy movies, minus the risqué elements. The brothers, who are Mormon, quickly raised $3 million for the Utah-based service, which filtered objectionable content out of movies that users stream at home; in just a few short years, upwards of a million people were using VidAngel. Then four major Hollywood studios sued the company last June, alleging that the service engaged in copyright infringement by streaming movies without a license. In December, a District Court judge hit VidAngel with an injunction, leading to a temporary shutdown.
The case is now in the hands of the Ninth Circuit court, which has thus far declined to knock down the injunction. But the Harmon boys aren’t done chasing their clean Hollywood dreams just yet. A court order can only stall true believers, especially well-financed ones. At the moment, VidAngel is a potentially giant streaming service that just needs to figure out what, exactly, it is permitted to stream.
“We are aggressively defending ourselves on the Ninth Circuit level, seeking a legislative clarification in Congress, and launching VidAngel Studios content as well,” Neal Harmon says. “All three of these efforts are helping us achieve our end goal. We believe VidAngel has a future in any of those three scenarios.”
The lawsuit from the studios focuses on VidAngel’s unconventional blend of proprietary technology and, strangely enough, support of an increasingly outdated medium. VidAngel editors decrypted DVDs of Hollywood films, cut them up into little pieces, and then tagged the various offensive elements, including coarse language and nudity, so that concerned customers could skip over them.
VidAngel wanted a license to stream movies from the studios, but they were uniformly denied, so executives came up with a novel workaround: VidAngel bought millions of dollars worth of these DVDs — it was one disc for every movie its customers wanted to rent. When thousands of people wanted to rent Guardians of the Galaxy, they bought thousands of DVDs of the film, at retail.
The company stuck the DVDs in a gigantic off-site vault, then sold a stream of the movie to the viewer for $20. Customers could then choose which naughty bits they wanted omitted. Based on those requests, small snippets — or whole scenes — would be removed from the streamed movie. “One of the most popular things to filter out was nudity,” Harmon says, “and second was a couple of harder swear words: the f-word and c-word.’”
After watching the movie, customers were invited to “sell” the movie back to VidAngel for a $19 credit, making the rental cost just $1. This way, the company avoided labeling the transaction a “rental.” This did present some problems, though. Because VidAngel could only buy so many DVDs, some were resold to new viewers. The tens of thousands of other remain in company storage.
But that workaround may not ultimately matter, because studios never struck a licensing deal with VidAngel; that’s why the studios can allege that the uploading and disseminating of their movies represented a copyright violation.
“The company is taking a DVD and uploading it to their own server, so [at a dollar per rental] it is a Red Box competitor, but you don’t have to go to the store to get the DVD,” Larry Zerner, a lawyer in Hollywood who focuses on copyright and IP law, explained to Inverse. “There is typically a one month delay after DVD release before it gets to Red Box, and here you can rent a brand new movie for a dollar, instead of spending $5.99 on pay-per-view or iTunes.”
VidAngel banked on its activities being protected by the 2005 Family Home Movie Act, which was meant to protect specialized DVD players that sanitized movies. The company insists that thus far, courts have not correctly interpreted that Bush-era legislation, leading to what it says is an unjust suspension of streaming operations. VidAngel has since counter-sued in federal court, citing the FHMA, which it believes protects not just physical copies of movies, but streaming as well.
“We think the district court opinion fundamentally makes no sense,” David Quinto, the longtime lawyer for the Academy of Motion Picture Arts and Sciences — and now the attorney for VidAngel — told Inverse. “The district court wanted to interpret the Family Home Movie Act without considering the key question: What did it accomplish? When Congress passes a statute, it’s for a purpose. The studios have made a claim that VidAngel violates the DMCA prescription against decrypting movies. All DVDs and Blu-ray discs are encrypted, and to filter and then stream the content [at home], it’s necessary to decrypt them. Even to watch them, it’s necessary to decrypt them.”
Zerner doesn’t see it, suggesting that streaming the movie in its entirety without a license is against the law. “If I rip a whole movie to my computer for the purpose of taking out a brief segment, that brief segment would be fair use,” he says. “But if I take the whole movie, that is not a fair use.”
Quinto points to several cases connected to the Computer Fraud Abuse Act that concern decryption, but so far, pleas to have the injunction lifted have been ignored by the Ninth Circuit Court. A group of judges from that court will hear the full case later this year, at which point Zerner thinks VidAngel will lose once again.
“The Ninth Circuit is known for being extremely studio-friendly,” Zerner said. “They rarely rule against the studios on matters of copyright infringement.”
VidAngel has promised to take the fight all the way to the Supreme Court, and has the money to follow through that pledge. Along with initial seed money and around $3 million in venture capital, the company raised $10 million from fans and customers this fall to continue the battle against the studios. Harmon also suggested that VidAngel has some fans in Washington, which could help change the rules of the battle they’re fighting via new legislation.
“We’ve had lots of members of Congress reach out to us in support because they have constituents complaining about the injunction,” he said.
First and foremost are Republicans Ken Buck of Colorado and Mia Love of Utah, who have promised to introduce legislation shortly. The idea would be to update the FHMA, to make it clear that streaming is also protected, and not just dependent on favorable interpretation.
“Congressman Buck is in the process of talking with all the impacted parties: studios, distributors, and VidAngel, to try to come to a solution,” Rep. Buck’s spokesman told Inverse. “It’s a process, and Congressman Buck is just looking for the best way to solve the issue, whether it be legislative or some sort of consensus over the reading of the Family Home Movie Act.”
While a conservative-controlled government might seem receptive to tweaking laws, there would be an army of corporate media lobbyists working to scuttle any change from passing. That makes any “legislative clarification” at least a long-term fight. This is why the company has a new and even more ambitious plan.
The Harmons’ next step is making VidAngel a content producer with no filter necessary.
“The primary purpose of raising the money was to defend ourselves in the lawsuit, but also to grow more quickly and improve the product,” Harmon says. “Ultimately, what donors want is better content, better options so they can sit down together as a family and enjoy a night of entertainment.”
The CEO said he commissioned one study that found 40 percent of Americans want more family-friendly video options. While that makes the theoretical target audience potentially large, VidAngel is more likely to find its initial customer base in the religious community. And that’s not a bad place to be: The company identifies 52 million people, age 18-59, as members of the “values” audience. Over the last few years, there have been a number of Christian films that have become surprise box office hits, including God’s Not Dead and Heaven Is For Real. The sector is booming.
Netflix has a family-friendly option, which cuts out its more graphic original and licensing programming. When reached for comment, Netflix declined to identify how many of its titles fall under “family-friendly,” but parental controls and a “Just for Kids” option make it an obvious choice for mainstream audiences. Still, there is room for competition.
Right now, Pure Flix is the leader in streaming Christian and family-friendly entertainment, but VidAngel has an ace up its sleeve: the data that Harmon and his employees collected as its members filtered movies. The company knows exactly what its audiences likes and dislikes, down to the curse word and kind of graphic images.
“We have more granular data than any distributor does, and that can become our competitive edge, so we can respond better than other distributors,” the CEO said.
The service, when online, breaks objectionable content down into five different categories, most of which have more nuanced subcategories. Everyone has their quirks: Some viewers might be OK with kissing and non-sexual nudity, but draw the line at intercourse; others could be cool with profanity, but not blasphemy. Families may be chill with watching fist fighting, but want to avoid graphic bloodshed. All those customizations were possible on VidAngel, and as the company starts developing its own originals, executives will have a strong idea of what its viewers tolerate, and what they do not.
VidAngel’s first big foray into original content mirrors a strategy taken by Netflix: producing relatively low-cost stand-up specials. For the last month, VidAngel has been flying in performers they call “the best family-friendly comedians” to perform in Provo at a new alcohol-free bar named, quite appropriately, DryBar.
New patent-pending technology allows audiences streaming the performance to tip the comedians throughout the show, giving them incentive to both be funny and stay clean. It will be a stark contrast from the competition: Netflix has stand-up specials coming from Louis C.K., Chris Rock, and Tracy Morgan later this year. Their jokes would likely not make it through VidAngel’s language filters.
VidAngel has also licensed several previously produced movies to stream to its hungry customers, as well as started to wade into the original feature market. Earlier this year, VidAngel bought the rights to Tim Timmerman: Hope of America, an autobiographical indie set in the ‘90s about a high school student council president in Utah; the company fast-tracked its release for March 3 after the injunction, to get movies back on the service.
It’s an ultra-competitive market, and the studio has plans to play in the big leagues, transcending the niche it has lived in thus far.
Minus the lawsuit, the arc VidAngel is plotting is much like some of the bigger streaming services: Start by streaming outside work and then transition to original offerings. All of the major outlets have gone this route, from Netflix and Hulu to more niche services like comedy streamer Seeso and network-sponsored channels like CBS All-Access (where the new Star Trek series will live). It’s a daunting jump — just ask Crackle — but Harmon is confident the company can land on its feet.
“Our comedy shows, when they launch you’ll find that the production value of each stand-up show is second to none,” Harmon said. “In order to create really great content, you pull from all different resources and sources. We’ll be collaborating with people in L.A. and New York, the Sundance Film Festival is right here, and we love creators.”
After allowing viewers to self-censor content for several years, embracing the exact intent of each filmmaker will be quite a pivot — though no different, in a way, than what every other service is doing. Fractured audiences are now courted according to their specific tastes, and the winners of the next generation of distributors will be those that give viewers exactly what they want.