The success of Megavideo was constantly shadowed by legal challenges. Because the platform allowed users to upload content without rigorous initial screening, it became a hotbed for copyrighted material. Hollywood studios and record labels viewed Megavideo not as a technological innovation, but as a massive engine for digital piracy.

Megavideo exposed the massive consumer demand for convenient, on-demand video. It forced Hollywood to innovate. When Netflix shifted from mailing DVDs to streaming, they were directly competing against the ease of use of sites like Megavideo.

Megavideo’s success was built on a foundation of legal ambiguity. It operated under the "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA)