Why Is It Legal For Netflix To Rent Movies

It's legal for Netflix to rent videos because of the copyright law first-sale doctrine. The first- sale doctrine allows legally purchased movies to be resold, rented or given away without the copyright owner's permission. It does not permit the owner to make a copy of the video. Netflix charges a monthly fee to rent movies. The rental order is placed online and is shipped to the customer if it's available.

References:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=463620

http://en.wikipedia.org/wiki/First-sale_doctrine