I am having the same problem and recently tried to find out if it was being addressed. Here are some of the highlights from the chat session with apple support:
<support>: How can I help you?
Me: I've had my 16GB iPad Mini 2 for nearly one years now and one feature still has not been resolved. When attempting to stream one of my iTunes videos withinin a Wifi- Zone it will not play and displays this message... "Connect to Wi-Fi to play video"
<support>: Just to confirm, we’re talking about an iPad mini 2 color space gray 16GB and you are contacting us because you get an error message when trying to stream iTunes videos within a WiFi-Zone, right?
Me: This message is not correct as The Wi-Fi is connected. The real problem is that I have less available space than the full downloadable size of the video.
Which means that the built in "Video" app does not perform real streaming... it is a well documented issue in the forums.
My question is whether or not Apple will be fixing this problem with the Video app?
<support>: If is a documented issue as you are stating, I am sure that our engineering team is already working to fix that with the new software update.
Me: This is not a problem with competing video streaming applications provided by Flixter and Disney. I say well documented in the forums, but I have found no way to send a ticket or know whether this is acknowledged by Apple?
<support>: That sounds like a good idea to do, if you want to give us some feedback or comments regarding our devices, you can do so through the following link www.apple.com/feedback
Me: ...I cannot play the majority of my videos on the iPad mini and the "Video" app is specific to the iTunes owned videos.
Are there third party apps that will stream Apple/iTunes videos instead? It is a shame that this issue is allowed to exist for this long. Especially given the nature of the app.
<support>: The videos you are trying to play, are they already downloaded to your iPhone or do you want to play them from the internet?
Me: They are downloaded on PC via iTunes. They are supposed to be, and show up as, stream-able (via cloud) on the iPad Mini. As the iPad mini is only 16GB, there is usually less that 3 GB available with minimum number of apps installed. So, no they are not downloaded onto the iPad Mini.
Is it possible to find out if this issue is currently being addressed?
<support>: So which method do you usually use to stream? And please confirm if your iTunes in the PC has the latest version too.
Me: Open Videos app, select movie (e.g. DeadPool), Press play, video starts then after a period stops and displays the message.
It should be noted that the "Deadpool" movie file size is 4.03 GB, I have 3.2 GB available local storge The movie stops at 1:35 in (~13:16 remaining).
The problem is also described here: <this thread>
...Is there a way to ensure that this issue has been forward to, or is being addressed by apple tech?
<support>: I have found here that the reason why you get that message is because of the device’s storage. If you free some space enough for the video to play, it will otherwise it will stop with that error message.
Me: Yes, but I should not have to. This means deleting an app, and I am at the minimum of useful apps.
<support>: You can also free some space from photos or other kind of data.
Me: The whole point of streaming is not to have to require downloadeable space.
<support>: One of the requirements for this feature to work is the available storage space you have on your device for each video to be streamed.
Me: Note also that this is not a problem with streaming movies from the competitor apps (like Flixter and Disney). The cache or buffer space should be a fraction of the movie size. If we analyze the data, we might conclude that the problem with the app is that it is not streaming (i.e. clearing buffer space and cache periodically) .
<support>: The situation here, is that one of the requirements for the app and the feature to stream is that it needs the space available in your iPhone as if it was going to download it, although you are only streaming
Me: 3.2 GB should be more than enough space as it represents ~80% of the total file size.
<support>: I understand that but you need as much space in your iPad as the video is. You need the 100% of it.
Me: Requiring 100% is no different than downloading requirements--that is not true streaming.
I am able to stream Batman v Superman Ultimate Edition via Flixter with no problems whatsoever and that is a much bigger file. I don't have this problem with the "Disney Movie" app either.
<support>: Those are third party apps developed by other companies completely aside from iTunes or other Apple apps. I am more concerned about the usage of this app in your iPad since it is the one we support, but so fat that is the way it works and those are the requirements.
Me: Then what this tells me is that I need to abandon iTune for future digital movie purchases due to inferior streaming capabilities to mobile counterparts.
<support>: If you want me I can consult a Senior Advisor to find further information or options.
Me: I have no more time for discussion. I just wanted a way to alert technicians to the problem.
<support>: Sure we are working on it. I, personally, will inform them or check if they are aware of it. Besides, you can give us some feedback or comments regarding our devices and services, through the following link www.apple.com/feedback... I am so sorry that you had to get to this conclusion about the app you are continue on using, of course we want our customers to be happy with the services we provide, and we will, surely, make sure this gets better for you to enjoy.