With Google’s decision to abandon paid-for video downloads — announced last Friday — the company also inadvertently delivered a “Sesame Street-style” lesson in why DRM is evil (notice the irony?). In an email sent out to Google Video customers, the company revealed that, as of August 15th, purchased videos will no longer playback, and instead users are being a given refund in the form of a Google Checkout “bonus”.

One of the inherit problems with DRM is that if a company goes bust or, presumably in Google’s case, decides to shut down the servers it uses to verify a legitimate purchase, then any DRM’d media is rendered useless.

You might be wondering how Google can get away with it, and I’ve been asking myself the same question. Two answers spring to mind. Firstly, the customer-base of Google Video paid-for downloads must be so small that the company doesn’t expect much of a backlash, which in-turn it hopes to have tempered through its offer of Google Checkout vouchers. Secondly, and more worryingly, it’s likely that the terms and conditions of Google Video already protected the company against such a scenario — where customers don’t actually “own” the media they pay for but instead license it in some way that allows for any future changes in service — including a DRM server blackout.

Whether or not this is legal — and I’m no lawyer — it’s a blatant abuse of trust, for which Google deserves to be held account.

(Also see Cory Doctorow’s take).

Reuters reports that the U.S. movie rental chain Blockbuster has acquired the film download service, Movielink. While the terms of the deal are undisclosed, it’s thought that the purchase price is significantly less than the 50 million price tag that was banded about when negotiations began last March.

The U.S.-only movie download store was launched in 2002 as a joint venture between Paramount, Sony, Universal, Warner Bros. and MGM — giving it access to major Hollywood content. With the acquisition, Blockbuster is inheriting those licensing agreements and a back catalog of more than 3,300 downloads. According to the report, Blockbuster will continue to operate Movielink as a separate brand, but will eventually make elements of the service available through Blockbuster.com.

Movielink is a standard Windows DRM affair, with movie downloads offered for both rental and to-own. Rentals can be stored for up to 30 days and expire 24 hours after the first viewing. In some cases, downloads can be played back on up to three PCs — depending on the original content-owners’ wishes — while others are limited to one PC.

Earlier in the week NewTeeVee published a short post referencing a story being carried in a Spanish newspaper, which suggested that a number of local broadcasters were considering taking legal action against the Internet TV startup, Zattoo.

Zattoo, is a peer-to-peer application that provides live streaming of traditional TV channels (see our review). The service is ad-supported, where an advertisement is displayed for 5 seconds every time a user switches channel, and this appears to be the potential cause of dispute, with some of Spain’s television stations unhappy that Zattoo is profiting from their content.