Netflix refuses copyright holder’s request to stream her film without DRM. Nina Paley (the filmmaker) owns the film outright. There are no rights issues whatsoever. I believe the issue here is related to this culture we have where we assume everyone is a criminal. It’s actually more work for Netflix to let people watch a movie without digitally encrypting it than it is to just encrypt everything. I doubt Netflix’s service was designed to even support sending a movie in the clear, without DRM. It’d probably cost them tens of thousands of dollars to modify it.
Either that, or Netflix thinks their job is protecting copyright holders from themselves. Must be hard, knowing what’s best for everyone.