VidAngel, the film and television streaming service that filters out objectionable content, filed for chapter 11 bankruptcy protection on Wednesday. The filing comes less than two months after the Ninth Circuit ruled in favor of Disney, 20th Century Fox and Warner Bros. in the studios’ lawsuit against VidAngel, which accused the Utah-based company of copyright infringement and running a pirate streaming service by allowing customers to enjoy more family-friendly versions of blockbuster films for a mere fraction of the cost.
According to VidAngel CEO Neal Harmon, the company’s decision to enter chapter 11 was made in order 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.” Additionally, the company has claimed that it needs time to cultivate a newly launched streaming platform, which filters out content on streaming services such as Netflix, Amazon Prime, and HBO. Companies often adopt the “bankruptcy strategy” to continue R&D while pushing back litigants.
When a corporation or individual files for chapter 11 reorganization, that filing triggers an “automatic stay,” which means that any lawsuits or other legal action against the debtor is effectively halted. With three of the biggest studios in Hollywood breathing down its neck, VidAngel has good reason to want a time-out.
“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 posturing of the CEO could be just that - defensive. With the court having upheld its preliminary injunction against VidAngel, the company might be attempting to stall legal action and capitalize on its profits from the new streaming service while continuing business operations during the restructuring. VidAngel has suffered a string of legal defeats so far, and the studios will do everything they can to ensure they get their share of entitled damages. And if the case were to go to trial, VidAngel could find itself paying a hefty fine.
Here is Harmon’s full statement:
“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.”
Only time will tell if VidAngel’s “bankruptcy strategy” is a stall tactic.
