VidAngel Files Plan to Pay $62 Million Judgment and Emerge From Bankruptcy

Gene Maddaus
·3 min read

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VidAngel, the streaming service that filters objectionable content, filed a plan on Thursday to pay off a $62.4 million copyright judgment and emerge from bankruptcy.

The trustee’s reorganization plan envisions paying off the massive judgment over the course of 14 years. After a trial in federal court last June, a jury found that the company had willfully violated copyright law by streaming hundreds of major studio movies to its customers for as little as $1 apiece.

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VidAngel, based in Provo, Utah, pitched its service to faith audiences who wanted to watch Hollywood movies without seeing offensive material, such as foul language, violence and sexual content. The company bought up DVD copies of films, and used software to defeat copy-protection measures. VidAngel argued that its service was legal under the federal Family Movie Act, but a federal judge disagreed, finding that the company was effectively operating a pirate site.

VidAngel declared bankruptcy in October 2017, but has continued to operate under an altered “streaming model,” in which customers can filter content from services like Netflix and Amazon. Last fall, the bankruptcy trustee sought permission from the court to upgrade to a so-called “DVR model,” in which the customers themselves would tag the offensive content. The trustee said the proposal would allow VidAngel to save money and minimize further legal risk.

The studios — Disney, Lucasfilm, Warner Bros., and Twentieth Century Fox — objected to that idea, saying that any expenditure would only further deplete the funds available for creditors. The studios also argued that the “DVR model,” like earlier iterations of the service, is premised on copyright infringement, and will thus expose the company to further litigation risk.

“With a $62.4 million judgment, VidAngel cannot possibly propose a confirmable reorganization plan and both VidAngel and the Trustee know that,” the studios’ attorney wrote. “The inevitable result of this case will be liquidation.”

As of the last report, on Jan. 31, VidAngel had about $2.3 million in the bank.

The trustee, George Hofmann, argued that liquidation is not inevitable, and that upgrading the service would provide a greater recovery for creditors.

In the reorganization plan filed on Thursday, Hofmann argued that VidAngel has a viable and growing business, and that allowing it to emerge from bankruptcy — rather than liquidate — would spare 40 jobs. The plan calls for quarterly payments to the studios to pay off the judgment.

Meanwhile, VidAngel is still appealing the judgment in hopes of having it reduced. In a filing in October, the company’s lawyers argued that the judgment was “preposterously large,” and that it amounted to a “corporate death sentence.”

VidAngel has avoided streaming content from any of the plaintiff studios, so as not to violate an injunction in the copyright case. However, the trustee has said in court papers that the company “reserves the right” to stream the studios’ works under the newest iteration of the service.

In a statement, VidAngel CEO Neal Harmon said the reorganization plan will help the company “turn a page.”

“We’ve gone from avoiding threats of a shutdown to being able to say, ‘just send us the bill,'” he said.

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