The VideoLAN Forums

Cache the content on hard drive, and then stream it via multi-cast (application level). You may need 2 instances of VLC, one for caching, other for streaming, but it will work.
If you are streaming it across the Internet, don't forget to transcode it at the desired bit rate.

How about authentication via keys, ie. before receiving the specific stream, the client sends his ID to the server, and only on a match the server starts streaming it to the client. This can be done over http/s (as firewalls normally don't block it). I don't think it will take anything more than a f...