Can I create a DVD from my Apple TV purchased movie library?

You cannot. You do not own the film, just a license to use it on your device/stream it.

Unfortunately, movies purchased from Apple TV or iTunes are protected by Apple’s Digital Rights Management (DRM) system. This means you cannot directly burn these movies to a DVD in a format that can be played on a standard DVD player. The DRM is designed to prevent unauthorized copying and distribution.

While you can watch your purchased movies on Apple-authorized devices (like an iPhone, iPad, Apple TV, or a Mac/PC signed into your Apple ID), creating a playable DVD for others is restricted due to copyright protections.

If your friends don't have computers but want to watch these movies, you might consider:

• Letting them watch via your Apple device, if possible.
• Using an HDMI cable to connect an Apple device to a TV.
• Purchasing the movie on physical DVD from a retailer (if available).

It's great that you want to share your collection, but due to copyright laws and DRM, burning Apple-purchased movies to a DVD for playback on a DVD player isn’t legally supported.

Another way of putting it is you bought ONE copy and ONE copy only, whether it be on a disk or downloaded off the internet. If you want to share a movie you bought with your friends then buy a DVD or Blueray and share it with them that way.

the whole point of hdcp High-bandwidth Digital Content Protection - Wikipedia

is to stop you from doing just that, also for dvds and bluerays hdcp was really invented to protect media on those