AFAIK, they had a legal copy for each and every cleaned-up copy they sold. The whole process is simply rearranging the order of events. What's the difference if the customer bought the movie at Wal-Mart then brought it to a business that edited that copy for content?
I just don't buy the whole legal reasoning of this decision. These companies have not affected the actual content of the videos distributed by the studios, but only edited individual, legal copies of the movies for some customers. It seems to be a shoot-yourself-in-the-foot-just-to-prove-a-point situation. These studios will now sell fewer copies of their movies. It's just nuts.
The difference is then it's the owner of the movie editing it (via a third party) as opposed to someone illegally selling an edited copy.
No, what these companies did was distribute edited copies of DVD without the copyright holder's permission. They DID effect the actual of the video distributed through them, that's illegal. How are they shooting themselves in the foot? They prevented somebody else from profiting on an edited version of their movies, if they want to sell a cleaned up version they will, they're the copyright holder that's their choice.