Zediva’s Movie Rentals Are 50% Cheaper Than iTunes

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This article has been cross-posted from our partner site, Technologizer.

Movie studios are skittish about giving their new releases to bargain rental services like Netflix and Redbox, but that’s not a concern for streaming video startup Zediva.

The service, which moves out of beta today, streams new movie releases for $2 a piece — half the price of new releases from iTunes, Amazon, Vudu and Blockbuster On Demand. You can also purchase a 10-pack of rentals for $10 total.

Zediva shaves down its pricing by cutting movie studios out of the equation. Instead of negotiating streaming rights, the company buys up DVDs at retail and uses place-shifting technology to stream the video out of a Silicon Valley data center. Think Slingbox on a massive scale, but with DVD players instead of cable boxes. (I got a mental image of some guy running around, swapping out all the discs, but Zediva assures me that it uses a carousel mechanism to change movies.)

There are advantages to this approach beyond pricing. Because Zediva uses retail DVD copies, all special features are intact even as studios pull bonus content from rental DVDs in hopes of drumming up sales. And unlike other streaming services, Zediva is free to set its own rental time frame, so users get a two-week rental period with a maximum four hours of playback time.

On the downside, Zediva’s rental capacity is limited to the number of DVDs and DVD players it owns. If the movie you’re trying to watch is at capacity, you’ll have to wait. This could be Zediva’s dealbreaker; even before Wednesday’s launch, I noticed a fair number of movies that were rented out, and as it stands, there aren’t a lot of movies to choose from because Zediva is limiting itself to new and popular releases. At launch, roughly 110 titles will be available for streaming.

Also, although Zediva insists that it’s legally entitled to stream DVDs, the whole concept runs the risk of enraging movie studios. We’ve seen this play out before with Redbox. When studios stopped selling DVDs directly to the kiosk operator, it worked around the issue buy purchasing DVDs at retail, just like Zediva.

That presents a scaling problem because some retailers, such as Walmart, now limit new-release DVD sales to five per customer. In the end, Redbox filed anti-trust lawsuits against several studios, resulting in agreements to delay new releases by 28 days in exchange for lower-cost access to DVDs. When I asked Zediva Chief Executive Venky Srinivasan whether he’s heard complaints or spoken with movie studios, he would only say that he’s had confidential discussions on matters he couldn’t disclose.

As for the quality of the service, it’s standard definition like any DVD player, but Zediva is good enough if you’re not a videophile. Movies play in letterbox format, which is either a pro or con based on your personal preference. There’s no support for set-top boxes with the exception of Google TV, which can run Flash content from the web, but any Flash-equipped Android phone should work. Fast-forwarding and rewinding is minor nuisance, because you’ve got to wait for DVD seeking, then buffering. The service accepts major credit cards and Paypal.

I can see the lack of set-top box support being a dealbreaker for a lot of people, but if you watch movies on a laptop or home theater PC, Zediva’s worth considering simply because of its prices. Still, I’m worried about the availability of popular titles and hope Zediva is willing to invest in expanding capacity. Otherwise, it’s just another workaround that doesn’t quite work.

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