All posts by Neal Harmon

Letter From VidAngel CEO to Disney CEO

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Mr. Robert Iger

Chairman and CEO

The Walt Disney Company

500 South Buena Vista St.

Burbank, CA 91521-0001

June 21, 2019

 

Dear Mr. Iger,

 

During our court proceeding in Los Angeles, I made the point in my testimony that where I come from, people talk before they sue each other. We’ve tried to talk many times, and Disney has been unwilling to join in a conversation. So, on behalf of around 8,000 owners and tens of millions who want to skip a few things in Disney/Fox/Warner Bros. movies, I’ll continue this conversation publicly.

 

Let’s review a few quick facts…

1) VidAngel indisputably made your company and other Hollywood studios a profit. I think that’s why most of them did not join Disney in suing us.

2) You sued us for $125 million for it, and Federal District Court Judge Birotte commended both sides for an incredibly passionate fight. You won $62 million. We lost. At least for the moment.

3) Disney knows a trial and litigation (probably costing tens of millions to fight) in four courts could have been avoided by selling VidAngel a license.

 

The following is a proposal that could make everyone whole in this case if it were really about copyright protection and not about marginalizing the filtering market out of existence.

 

Mr. Iger, please take a close look at the raw data in this letter and ask yourself, “Does spending this kind of money to fight the filtering market make sense financially?”

 

VidAngel Made Money for Disney

Per an expert report at trial, unchallenged by alternative data or analysis, Disney et al would have been $229,752 poorer had VidAngel never offered their content on its service. These numbers are profits. VidAngel paid much more for the DVDs. I realize these numbers are nothing for Disney but we had barely tapped the market when Disney sued VidAngel.

(sources: Jeffrey Kinrich, MBA and CPA expert report, Dr. William Duckworth expert report and this survey data)

 

VidAngel Found a New Market for All Studios

A full 65% of the views for Disney et al content were views that would not have happened without VidAngel. Netflix, Amazon, Sony, Universal, Paramount and other studios who did not sue VidAngel also made profits from VidAngel’s success. 70% of the views for non-plaintiff content were views that would not have happened without VidAngel. There are so many reasons why people want to skip small bits of popular movies and TV shows.

An independent, peer-reviewed study conducted by UCLA Professor Doug Lichtman and Dr. Benjamin Nyblade found that there is a real and substantial market for filtered content, 98% of its customers used VidAngel to filter, and allowing families to select what they want to mute or skip does not decrease their enjoyment of the movies they watch. Remarkably, being able to choose to skip or mute a very small percentage of a movie makes all the difference to them. And NRG reports that 40 percent of Americans would want to use VidAngel.

(sources: Jeffrey Kinrich, MBA and CPA expert report, Dr. William Duckworth expert report and this survey data)

 

Disney Earned, VidAngel Lost and Damages Awarded

I don’t know if your legal team has communicated to you that building this new market for Disney came at great expense to VidAngel. We spent millions building technology and marketing to this new audience. You reaped profits, while we reaped losses. We happily invested to build a new market because we believe it will be very profitable when built.

(sources: Jeffrey Kinrich, MBA and CPA expert reportDr. William Duckworth expert report and this survey data)

 

Insults Don’t Change The Facts

While we made profits for Disney, you called us pirates as “your own strategy” according to the court transcript:

(Trial transcripts: June 11th AM and PM, June 12th AM and PM, June 13th AM and PM, June 14th AM and PM and June 17th)

 

Mr. Iger, Disney may call us what it wants, but the facts are:

1) Disney profited and VidAngel lost while building a brand new market for movies

2) VidAngel has always been open and honest about its purpose and actions

3) VidAngel asked for feedback, but none came

4) 9th Circuit called it a case of first impression (untested law  – Is VidAngel legal?)

5) VidAngel went to great expense to audit its movie purchases and systems to protect Disney’s interests

6) VidAngel asked you for a business solution to avoid the expense of the lawsuit

 

Although VidAngel’s service indisputably made it money, Disney litigated against us in 4 federal courts before getting a judgment of approximately $62.5 million.  At this point, VidAngel can keep going to the Supreme Court, hoping that the Court will protect Disney from itself. Or if this were not about filtering, we could say, “You won. We lost. How about a truce?”

 

Skip Foundation

It is more important to VidAngel that the option to skip exists than that VidAngel owns it.

 

Last week we filed a motion in the bankruptcy court to transfer our filtering assets to the Skip Foundation, Inc, a 501(c)(3) organization. This foundation will become the Wikipedia of skip technology as a free global resource. If the transaction is approved by the bankruptcy court, our patent and 10,000 titles with all skip data will be free for any company or any individual in the world to use as they see fit under copyleft and Wikipedia style licenses. And the entire world can contribute to the Skip Foundation’s library of content “skips” just like with Wikipedia. Those contributions could benefit VidAngel and Disney.

 

Disney, Netflix, Amazon and others could adopt the technology freely and implement the technology on top of their existing streaming contracts without an agreement of any kind with VidAngel.

 

Here’s What We Propose

We understand you want to protect your Intellectual Property.  You understand that VidAngel’s customers want to skip a few things in your movies in private. If the financial minds rather than the power minds within Disney prevail, this could be a solution.

 

We are prepared to consider giving Disney our Dry Bar Comedy series in satisfaction of the judgment. Dry Bar Comedy is the fastest growing comedy brand in the world with over 1.5 billion views to date. It is making millions. It is growing so fast because the creators are embracing the data behind the skips of families. You could publish its family friendly comedy on Disney+.

 

With the so called “debt” settled, VidAngel could freely transfer the “filtering” assets to the Skip Foundation and emerge from bankruptcy. “Filtering” would survive as “skipping”, regardless of VidAngel’s future fate. And Disney could profit from both the skip data and Dry Bar Comedy.

 

This proposal would settle the judgement, respect Disney’s IP, and grow Disney profit. VidAngel would be free to focus on The Chosen, VidAngel Studios, and generating profits for its own investors, while enjoying the benefits of the Skip Foundation.

 

I won’t hold my breath for your response and we are already preparing our appeal, but it doesn’t hurt to ask. The IMP and Sony Betamax cases changed the industry, but they dragged on for almost a decade. Change is coming. You can fight it or profit from it. What do you say? Are you open to meeting?

 

Best regards,

Neal Harmon

Co-founder & CEO

VidAngel

 

 

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Disney v VidAngel Trial – Verdict

The final verdict is:

Willfully infringed? Yes

Copyright Award: $75,000 per work

819 * $75,000 = $61,425,000

DMCA Award: $1,250

819 * $1,250 = $1,023,750

We find today’s ruling unfortunate, but it has not lessened our resolve to save filtering for families. VidAngel plans to appeal the District Court ruling, and explore options in the bankruptcy court. Our court system has checks and balances, and we are pursing options on that front as well.

 

Disney v VidAngel Trial – Jury Question

2:18 PM MST UPDATE: About 2pm LA Time – Jury sent a request for an exhibit that contains the Family Movie Act. Both sides argued as to the better exhibit to give to the Jury. The Judge decided to send two exhibits back to the Jury room. Both sides got to review the document before it was sent back to the bailiff, who then gives it to the Jury.

There is a very meticulous process for receiving and sending information to the Jury room.

Disney v VidAngel Trial – Day Five Midday Update

This morning the judge reviewed jury instructions and the verdict form with both sides. After hearing the parties’ motions for adjustments to the jury instructions, Judge Birotte welcomed the jury back to the trial. He read them the instructions, after which Ms. Blanca Young presented Disney’s closing argument and Mr. Mark Eisinhut presented VidAngel’s closing argument. Finally, Ms. Young offered a 10 minute rebuttal. Following the argument, the bailiff was sworn into office to ensure that no one interacts with the jury until their verdict has been reached.

 

We are now waiting for the jury to deliberate. Thanks to all for your support and prayers.

Disney v VidAngel Trial – Continued to Monday

Four witnesses testified yesterday, after which the parties “rested” and the judge asked us to return at 8:45am on Monday morning.  Here’s how Friday went:

Liz Ellis completed her testimony following a relatively brief cross-examination and short re-direct.

Called David Quinto to testify next.  He explained his history representing intellectual property owners and then described how he analyzed the Family Movie Act.  He also explained the events that led up to the enactment of the FMA and the various notifications VidAngel had sent to the studios.  Kelly Klaus attempted to impeach him by saying that he had a reputation for being “aggressive” and suggesting that the pre-litigation letters he sent to the studios asking them to advise VidAngel of any complaints they had concerning its service were “set-up” letters.  Quinto responded by testifying that it is a lot less expensive to avoid conflict than to engage in it.

Jeffrey Harmon testified next, describing his life growing up in a small town, his family’s desire to watch clean content, and the prohibition he and his siblings had on watching pg-13 content until they were 17.  He further testified concerning the harms that watching unfiltered content can cause, his personal interest in watching clean content, and the honesty of his brother Neal who spent 7 years re-paying investors in a failed venture even though he had no legal obligation to do so.  He also testified that Harmon Brothers provided marketing services to VidAngel at cost.

Finally, plaintiffs’ expert Robin Russell testified again, this time to rebut testimony given yesterday by VidAngel expert Jeff Kinrich.  Her criticism focused largely on Mr. Kinrich’s failure to account for black-out periods in his analysis of the studios’ lost profits.

Following her testimony, the parties rested.  The court then heard argument on proposed jury instructions before directing counsel to return at 8:45 a.m. Monday for further discussion of the jury instructions and verdict forms, to be followed by instructions to the jurors (ordered to report at 9:30) and closing arguments.  After that, the jurors will begin their deliberations.

 

 

Disney v VidAngel Trial – Day One Update and Day Two Schedule

We meant to publish this last night, apologies for the tardiness and thank you for the messages you’ve all sent supporting us. Also, thank you to those who came yesterday.

Day One Update

Here’s what I remember happening on day one:

 

  • – The judge wished our Chief Legal Officer, David Quinto, a happy birthday

 

  • – After hearing argument from both sides, Judge Birotte decided that Disney can seek DMCA damages as well as copyright damages, but that both will be decided by the jury

 

  • – Jury members were selected to create a fair and impartial jury – this was the most interesting part of the day.
    • – – Judge Birotte gave a stirring speech on the right to a trial by jury granted by the United States constitution, shared about his immigration from Haiti and thanked the jurors for being there. (I felt a lot of gratitude for our country during this part)
    • – – Twenty potential jurors came to the courtroom and sixteen of them were called at random to sit in the jury box and answer questions
    • – – Those he asked individual and group questions to allow the parties to learn about them
    • – – One juror asked to answer a question privately and the judge created a static sound and met with the judge off to the side (the court reporter still recorded what was being said)
    • – – After a fair amount of discussion with counsel from both sides (again with the static sound playing), the judge eliminated eight jury members
    • – – 8 jury members were then sworn in

 

  • – Judge presented the format, which is:
    • – – 20 minute opening statements from both sides
    • – – up to 6.5 hours of evidence and cross-examination from the Disney
    • – – up to 6.5 hours of evidence and cross-examination from VidAngel
    • – – rebuttal evidence from Disney if time permits
    • – – 40 minute closing statement from Disney
    • – – 40 minute closing statement from VidAngel
    • – – 10 minute rebuttal from Disney

 

  • – Two witnesses were called to the stand to testify for the studios:
    • – – Robert Schumann – expert on technology – about 1 hour for testimony and cross-examination
    • – – Tracy Myers – representative from Warner Bros. – about 30 minutes for testimony and cross-examination

 

The court issued an order excluding witnesses from the trial, which prevents them from having access to the testimony of other witnesses before they testify. Unfortunately for customers and fans, this means we can’t give you access to the daily transcripts yet. But the process is meant to achieve justice so we, of course, will respect it.

 

So that’s all the detail I can muster for now. Join us in the courtroom to experience the trial first hand.

 

Evidence Time Remaining:

Disney: about 5 hours 30 minutes

VidAngel: about 6 hours

Day Two Schedule

Time: 1:30pm-5pm

Location: United States Courthouse, Courtroom 7B, West 1st Street, Los Angeles, CA

Trial Begins June 11th, 2019

 

Thank you so much for your continued support for VidAngel!

For those in the Los Angeles area, we want to invite you to join us June 11th – 14th at the United States Courthouse in Los Angeles for the trial.

We believe in strength and numbers, and would love to have you there to support us! You are not required to stay the whole day – please feel free to come whenever your schedule allows.

Start times are subject to change based on the Judge’s schedule, so we will send you an update each night to let you know what time the trial will begin the next morning.

If you are unable to attend the trial, but would like updates, check back here daily for an overview of what is going on. We will be updating our blog daily during the week of the trial.

If you believe in a higher power, please send prayers! If not, please send all the positive vibes sent our way. We appreciate you all so much.

Neal Harmon

Co-founder & CEO

 

 

VidAngel CEO Neal Harmon: Copyright Infringement Ruling, and Where We Go from Here

Wednesday night, a Los Angeles Federal Judge ruled that VidAngel is liable for copyright infringement for having used a disc-based model during 2015-16. The court also refused to modify what we believe is an unconstitutionally broad injunction that is keeping VidAngel from streaming Disney (Fox) and Warner Bros. content using our new system, which means we still cannot filter many titles on modern devices.

 

We find the Court’s rulings, and the implications of those rulings troubling. Despite these setbacks, we plan to appeal. The trial is currently scheduled for June 11th, where a jury will decide damages (more detail in the questions listed below).

 

We pray that where a door has closed, a window will open. Meanwhile we offer all the great non-Disney content like Netflix, Amazon Prime, Sony, Universal, Paramount, Lionsgate and many more when you connect your VidAngel account to your Netflix or Amazon account.

 

Where We Go From Here

Despite the setback in the courts, VidAngel continues forward with its successful business.

 

We thank the millions who have and continue to use and support VidAngel, who have more recently enjoyed watching or listening to Dry Bar Comedy, and those who have now backed our original TV series called The Chosen. We will continue to improve the ways in which we try to help you make entertainment good for your home for decades to come.  

 

It’s your home. We are your guest. And we remain committed to earning your trust.

 

Sincerely,

Neal Harmon

Co-founder and CEO

VidAngel

 

 

OTHER QUESTIONS

Why Did We Create VidAngel?

We created VidAngel to help you make entertainment good for your home. As parents ourselves, we needed better home-friendly media options for our own families.

How Did We Get Here?

Since 2013, we have tried multiple methods to skip and mute content (Chromecast, YouTube, Google Play licensing, DVDs and Blu-rays, asking the studios and now by connecting to Netflix or Amazon Prime), and later making content ourselves based on what we learned from you (Dry Bar Comedy and The Chosen).

In July 2015, when we developed a new technology, we wrote the studios asking both for feedback and for them to partner with us; they said nothing. We launched our fourth attempt at a service (after the previous three hit insurmountable studio roadblocks) and over a million Americans signed up. According to UCLA professor Doug Litchman, VidAngel users skipped everything from the “f-word” (26,425,075 times) to the Lord’s name in vain (25,856,107 times) to violence (12,080,274 times) and nudity (5,009,513 times).  

Roughly a year after we had asked them to partner with us, Disney finally responded… by suing us in federal court, alongside Fox (whom Disney later acquired) and Warner Bros.

What Other Details Are There About The Case?

The Ninth circuit said ours is a case of “first impression,” which means this issue had never been reviewed or decided by a court.

We were grateful for the incredible outpouring of support when we were sued. Dozens of prominent faith leaders, Members of Congress, and tens of thousands of families families showed up to help. We even had tens of thousands donate to fund the litigation, letting the courts and our elected representatives know where they stand.

Late 2016, Disney succeeded in getting the fourth, disc-based VidAngel system shut down in court. So we built yet another system to connect to Netflix, Amazon Prime, and other streaming providers.

How Do Damages Get Decided?

A trial is scheduled for June 11th where a jury will decide whether VidAngel’s copyright infringement was innocent, ordinary, or willful, which could result in the following damages:

  • Innocent Infringement: Roughly $200 per title
  • Ordinary Infringement: Between $750 and $30k per title
  • Willful Infringement: Between $30k and $150k damages per title

 

Finally the jury will also decide the damages for DMCA violations, for which Disney may be awarded between $200 and $2,500 per title.

Disney and others are claiming infringement of approximately 800 titles. Inexplicably, Disney is also asking that we be found to have infringed willfully—which means they claim that we intentionally broke the law. We say we did so innocently, believing that the law protects our service. As has been the case since the lawsuit began, we disagree with Disney.

We are grateful that in the United States of America, we don’t handle disputes like these with fists or guns, but in courts of law, and before a jury of every day people who live and work just like us.

How Does Chapter 11 Fit In?

We filed for Chapter 11 protection in Utah to get a temporary reprieve from expensive litigation, allow us to develop our business, and ultimately make the studios whole if we ended up being wrong on the law. After the jury decides damages, a Utah judge will decide our schedule for paying it off. It is wonderful that our country offers Chapter 11 to give companies like Delta, Marvel, and VidAngel a second chance.

What Are You Doing In Congress?

Last year, former Representative Mia Love (UT-04) and the entire Utah delegation introduced H.R. 6816 in Congress to help American families watch filtered content on modern devices. Now that she is no longer serving in Congress, we hope to find someone like Mia Love to pick up the baton to get such a law passed in this Congress.  

Happy New Year from VidAngel! Overview of 2018

VidAngel Supporters,

As the fireworks subside celebrating the New Year, it’s time to reflect what we’ve accomplished together at VidAngel in 2018.

 

The Chosen – closing at midnight tonight – over $8 million* so far!

The Hollywood Reporter and CBN have both published great stories about breaking the all-time record for crowdfunding on any media project. 

Finally, today is the final day The Chosen will accept investment agreements.  It is conducting an unprecedented 6-hour live streamed marathon tonight beginning at 9pm EST. Join the live stream to ask the director anything you want and have your questions answered in real time.

*Amount raised is an estimate that includes subscriptions and founders’ contribution, however not all such amounts have been accepted or closed, and some subscriptions may not be accepted.

 

 

Dry Bar Comedy – Over 1 BILLION views

Our hit comedy series grew explosively in 2018, propelling VidAngel to cash flow positive and prompting a national tour for 2019.  It’s hard to describe what a live night at Dry Bar is like so make sure you experience it when it comes to your town.

 

Here are some of Dry Bar Comedy’s 2018 highlights:

 

  • 1) Top-10 Title on VidAngel. Four or five of the most popular titles on VidAngel are consistently Dry Bar Comedy specials (competing with Stranger Things, Jack Ryan and Game of Thrones). We don’t show them in the most popular category on the app anymore because they were dominating the section. But they are still the most popular.
  • 2) 4 Million Followers. More social media followers than Brian Regan, Jim Gaffigan, Jerry Seinfeld, and Dave Chapelle combined.
  • 3) Sirius XM Radio Deal. We partnered with SiriusXM radio to allow people to listen to Dry Bar Comedy on satellite radio. Listen to it on channel 98.
  • 4) Audio Apps. Do you have one of those home devices? Here are some commands to test the new Dry Bar Comedy audio apps on your home device or cell phone (these are in EARLY testing, so we look forward to your feedback):
    • “hey Google” followed by “Ask Dry Bar Comedy for jokes”
    • “Alexa” is currently reviewing our app. When it is approved, you can use the same phrase as Google.
    • “Siri” followed by “Play Dry Bar Comedy”
  • 5) Cash Flow Positive. We invested millions into Dry Bar Comedy and now, as we start Season 4 next week, it’s generating millions in revenue. And almost all of January tapings sold out weeks in advance.

 

VidAngel Studios

We are in the final stages of FINRA and the SEC regulatory approval for a crowd-funding portal that will allow everyone to support numerous crowd-funded media projects such as The Chosen.  There are a number of projects that we haven’t been able to announce yet. However, we plan to officially launch the crowd-funding platform for VidAngel Studios early this year.

Legal Battle  #SaveFiltering

The stay (that we were afforded thanks to Chapter 11) has been lifted on the Disney lawsuit and we’re back at it in the courts as a much healthier company. In 2017 we did about $2.7 million (and suffered decreasing cash reserves every month) but in 2018 we did over $7.5 million (and our cash reserves began increasing again).  What is most astounding is that we achieved that while filtering only half the content we previously offered on VidAngel!

 

We plan to fight for the right to filter all content on modern devices until we are confident that the future of filtering is secure.  Even without filtering for Disney/Fox/WB content, it is no longer all or nothing because the rest of VidAngel’s business is thriving. And we will continue to ask Congress to clarify the law as we grow.

 

Finally, we also hope to emerge from Chapter 11 soon, maybe even this year.

 

Happy New Year!

Thank you for all your support. Without your help, we wouldn’t be able to continue fighting to make entertainment good for your home. 2018 was a great year and we expect 2019 to be even better.

 

We hope to see you any time on The Chosen 6-hour live stream tonight at 6pm PST or 9pm EST

 

Onward and upward,


Neal Harmon, Co-founder and CEO