Anyone else surprised that it took this long?
The folks at Zediva had an interesting idea. Instead of buying the streaming rights to a movie and then letting customers select from a range of options, they would simply stream the DVD. This method of streaming gave them some options not available to Netflix - like the ability to watch special features.
Of course, as soon as the studios caught wind of this they had a strong reaction, and a very negative one at that. Streaming movies without paying licensing fees isn't exactly something that made them happy.
The courts sided with the studios, saying that Zediva was not a virtual video store as it claimed to be. Instead it was ruled that their service was along the lines of Netflix and Hulu and therefore Zediva would have to shut down.
There's no word on when this will occur, since at the time of this writing, the site is still up.
Source: Hacking Netflix