In PogueWorld, Apple TV Is the Future October 7, 2010
Posted by Bill Rosenblatt in Business models, Services, United States, Video.2 comments
David Pogue’s review in today’s New York Times of new internet TV gadgets from Apple and Roku was right about one thing: it’s early days for Internet TV. Otherwise, this was a particularly egregious example of PogueWorld.
In PogueWorld, closed proprietary systems are evil, unless they are Apple’s. Movie studios are evil because (among other reasons) they don’t give Apple everything it wants in negotiations, they have things like release windows, and they insist on “stupid” rules such as time limits within which to watch rented content. No one but Apple is capable of producing a well-designed piece of consumer electronics.
Enough is enough already. Yes, Apple makes beautiful products that are well-designed and easy to use. But “$1 on-demand TV” is not “a brilliant idea in search of studio executives with a clue.” On the contrary, it’s a dumb idea that has found technology executives with no clue. That’s why TV networks other than ABC — which marches in lock-step with Apple owing to its common control by Steve Jobs — and Fox are shunning it. TV networks (other than ABC) also happen not to want to risk giving Apple the same degree of control over content economics as it has achieved in the music industry.
Why is Apple even doing this? That’s the question inquiring minds like Pogue’s should really be asking. Here’s my view: the first edition of the Apple TV was a bust (mine functions very well as a decorative paperweight); Apple now knows very well that people aren’t interested in owning TV shows. But Apple doesn’t have the infrastructure (including flexible rights management technology, among other things) to provide something that would interest consumers more. So as a transitional move, they have introduced a lower-priced box that does rentals. It strikes me as a stopgap effort by a smart company that ought to have a better longer-term vision.
Educating consumers on new content business models is expensive and difficult. Someone from Apple told me that the company spent half a billion dollars in educating consumers on buying individual tracks instead of albums. Yet even that’s an exaggeration: single-buying is not a new behavior, as anyone old enough to have bought 45s will know.
In contrast, there is no precedent whatsoever for paying piecemeal for TV shows, whether to rent or to buy. Some might buy entire seasons of important TV series (mostly non-broadcast, such as The Sopranos (HBO) and Mad Men (AMC)) on DVD, but that’s about it. Otherwise, this idea flies in the face of every precedent. Consumers rebelled against per-call charges for their telephones, and more recently, their mobile phones. Cable TV sells packages of programming.
Moreover, a recent article in the Financial Times suggests that the dollar-per-song business model is coming to an end as well: MP3 music sales are now flat compared to last year, suggesting that the market is saturated. Various business models that offer “access” to content on a subscription basis instead of “ownership” — such as Spotify and Catch Media for music — are touted as the future.
If you want an analog to these “access” models for video, it’s Hulu, not Apple TV. We watch Hulu on our Sony HDTV at home through a PC via VGA and audio cable connections. It requires a little finagling, and the resolution is not exactly HD, but it works tolerably. Hulu is to TV as Spotify is to music… except that the $10/month Hulu Plus is not ad-free… but then again, broadcast network television is generally not ad-free either.
Roku is working on a Hulu-capable version of its Internet TV device. Pogue reviewed Roku’s latest devices (“uglier” than the Apple TV) but did not mention this. Apple TV’s buck-a-show model will not, as Pogue claims, induce people to give up their cable service. But if Hulu offered more content and made it available through a $60 Roku box, we’d buy it in a heartbeat and dump Time Warner Cable in the next heartbeat. We’d pay the $10 per month. We’d pay double, or even triple, for no ads. That would be a bargain. So much for PogueWorld.
UltraViolet to Offer White Label Service September 29, 2010
Posted by Bill Rosenblatt in Standards, Uncategorized, Video.add a comment
I recently sat down with Mitch Singer, the Sony Pictures executive who runs the UltraViolet consortium (a/k/a DECE). He showed me something that I hadn’t seen from this type of organization before: a demo.
What I saw resembled a preview of a new media format more than it did the output of a standards initiative. It had the Hollywood-style bombast of, say, the Blu-ray previews several years ago. But beyond that, I saw a mockup of a website that Singer said would be delivered as part of some future release of UltraViolet – not the first release. The demo showed a user interface for a family rights locker, where all of the family’s purchased digital video can be searched, browsed, and called up for viewing. The content is segregated by family member, with the example that kids can’t watch the R-rated material.
Singer explained that UltraViolet will be offering this type of website on a “white label” basis for retailers, which can then simply put their branding on it and sell content. Neustar Inc. will provide back-end services such as identity management and device registration and authentication. In other words, this demo resembles what OverDrive provides for e-book retail sites, what Omnifone provides for mobile music retailers, and what the Associated Press provides for local newspapers’ websites.
This is a huge step forward from what we have seen from similar initiatives in the past, such as Coral, where the standards initiative would hand prospective implementers… a spec. (At least the Digital Media Project offered a reference implementation called Chillout.) It also represents a vast improvement in what we industry folks call marcomm.
It’s too bad that the UltraViolet demo is only viewable from a few laptops (including Mitch Singer’s) and not publicly. And indeed, specs serve a purpose even from the marcomm standpoint: they give everyone something substantive to evaluate. UltraViolet’s “brand launch” a couple of months ago was a failure from a marketing standpoint: because it came with neither a spec nor a technical whitepaper, it was easy for the techblogocracy to dismiss as yet another Hollywood cabal and to misrepresent through not-very-educated guesses about how the system will actually work.
White label services are usually of more interest to smaller retailers than to large ones. The number of major retailers actually participating in UltraViolet is small: among US retailers, Amazon, Wal-Mart, and Target are missing (as is Apple, of course); Best Buy and Netflix are involved but also doing their own things. The major entity that hopes to benefit from UltraViolet is Neustar, which stands to make revenue from every authentication that happens in the UltraViolet scheme.
We’ll have to wait until next year to see the first UltraViolet based services. But in the meantime, I have to wonder: will UltraViolet be dependent on small video stores to succeed?
Assessing the HDCP Hack September 19, 2010
Posted by Bill Rosenblatt in DRM, Standards, Technologies, Video.7 comments
Intel confirmed last Thursday that a hack to its High Definition Content Protection (HDCP) link protection scheme for high-def video had been discovered and published online. HDCP is used in Blu-ray players, DVD players, set-top boxes, and other devices to protect high-definition content when it is transferred to other devices, such as TV monitors. After several days of conjecture and dubiously informed blog posts, some facts have become clear that enable us to assess both the nature and impact of this hack.
First, given that Intel designed HDCP in the first place, we can take its word as authoritative. Second, someone either leaked or discovered the master key* that is used within the “root of trust” for the HDCP system, which is the Intel subsidiary Digital Content Protection LLC (DCP). They also figured out a way to use that master key to generate the unique private keys that DCP normally generates per device, which enable HDCP-compliant devices to encrypt and decrypt content.
There are two big differences between the nature of this hack and that of the CSS encryption scheme for DVDs, to which DRM hacks are often compared. First, CSS was so weakly designed that all the hackers had to do was discover a single set of keys which are present on all DVD players; in contrast, HDCP does not actually store its master key on user devices. Hollywood has at least learned that lesson about key management. In contrast, the HDCP hack depends on computing device private keys on a per-device basis.
Second, not only is computing device keys harder to do, but it can’t be done in software; it has to be done in silicon. We’ll talk more about this shortly when we discuss the impact of the hack.
HDCP is designed to be able to revoke devices with compromised keys. The hack, once someone actually implements it, makes this task essentially useless. An HDCP ripper would keep generating new device private keys, which the overall HDCP scheme would have to revoke by constantly updating lists of revoked devices that are embedded into HDCP-encrypted content, such as Blu-ray discs. It would be both inordinately expensive and ultimately futile to do this.
Worse, it’s only possible to revoke HDCP device keys, not renew them, as is possible in DRM schemes that take advantage of device connectivity, such as Marlin. This design decision results from the fact that many current HDCP-compliant devices are unconnected devices such as Blu-ray players, and it’s only practical to renew keys over a network (just ask makers of SmartCard-based conditional access systems for cable TV, which have to physically ship new SmartCards if old ones are compromised).
The master key for HDCP, like that of other DRMs, was only supposed to be known to a “root of trust” (central security authority) — in this case DCP. Either the key was leaked or it was discovered.
Researchers in 2001 had found a hack for discovery of the HDCP master key that involves collecting 40 different HDCP-compliant devices and working backwards from their private keys to calculate the master key. The number 40 is a function of the configuration of the cryptographic algorithm that HDCP uses: Blom’s scheme, invented in the early 1980s. It determines a data matrix that would have to be kept in memory, the size of which increases geometrically with the size of the number. So, the choice of 40 was a compromise — inevitable in all DRMs — between security and implementation cost.
The eminent cryptographer Paul Kocher — one of the brains behind the BD+ protection scheme for Blu-ray discs — says that the hack resulted from poor design. But it’s also possible that a DCP insider leaked the key. Even if the latter was the case, the system was designed with the weakness that knowing the master key makes it possible to use it outside of the root of trust environment to create device private keys. This was another choice made in the interest of low implementation cost rather than security.
Now let’s talk about the practical impact of the hack. It is just as wrong to suggest, as some have, that the HDCP hack has the same impact on high-definition video as the CSS hack has had on DVDs. Part of the assessment of the strength of the security of a DRM system is that of the fallout when the system is inevitably cracked.
First of all, the impact of the HDCP hack is such that it would be necessary to create chips that implement it. As some have pointed out, a fabrication facility somewhere in China may well be working on just such a chip as I write this, and soon Blu-ray players and other devices with the chip, or standalone HDCP ripper devices, could appear on the black market or outside the United States.
This is a “hardware speed bump” in the sense that someone has to manufacture the devices and sell them, presumably at a profit. Such devices would be illegal in the US and various other countries under anticircumvention law. People would have to find, buy, and use the devices; and the devices would require real-time playback of the video to make the decrypted content available.
In contrast, the CSS hack led to software DVD rippers that anyone could download over the Internet, and the odds of detecting such (also illegal) activity are virtually nil. Furthermore, so-called DeCSS rippers work almost instantaneously and do not require real-time playback. With movies, this is a big difference.
Intel’s stance on the HDCP hack is that it won’t affect their business. You’d expect Intel to say that, but in this case it’s basically true. Unencrypted, uncompressed movies appear on BitTorrent sites now; this process will become somewhat easier for dedicated rippers to do once HDCP rippers become available, but the average BitTorrent user won’t experience much difference.
Let me say this one more time: just because there’s a hack to a DRM scheme does not necessarily mean that every piece of content encrypted with that DRM scheme is suddenly in the clear.
Here is the analogy I like to use to explain this; it is not terribly accurate but illustrative anyway. Let’s say I develop a technique for picking a certain popular brand of combination locks and publish it on a web page. That does not mean that every school locker using that lock is suddenly open and millions of backpacks, sweatshirts and textbooks are stolen. Even leaving aside the fact that a lock-picker has to physically go to each lock and operate on it, taking advantage of the hack may require special skills, special tools, and time to work.
I have not in recent years met anyone in the media industry who believes that any DRM is hackproof. Furthermore, studios treat HDCP and other DRMs as just a few of many tools for keeping consumers buying their content and not infringing their copyrights. Thus, this hack is unlikely to affect the attitudes that Hollywood studios have towards DRM.
*I made a comment on a popular tech blog that there wasn’t a single master key. My comment was incorrect. At the time, I did not properly understand the nature of the hack, and I did not make the distinction between master keys that are actually present on client devices by design (a la DVDs and CSS) versus those that are designed to exist only within the confines of the root-of-trust facility (DCP in the cast of HDCP). However, the author of this blog piece also failed to make that distinction and generally under-researched and mischaracterized the hack, in his usual fashion. For that reason, I won’t name the blog or author.
Video Fingerprinting Gains Momentum for Contextual Advertising September 3, 2010
Posted by Bill Rosenblatt in Devices, Fingerprinting, Services, Video.add a comment
The New York Times reported yesterday that YouTube’s Content ID video fingerprinting technology is being increasingly used to support ad revenue sharing deals with content owners instead of for blocking of unauthorized uploads. Google reports that about a third of all the videos that carry advertising are user uploads of copyrighted material. This amounts to over 600 million views per year and constitutes about 5% of total YouTube volume.
It also contributes to YouTube’s 50% increase over last year of videos with associated display ads — growth that Google is counting on as its next wave of major revenue, as opposed to the text ads that make up the vast majority of its current revenue. In fact, the revenue from the increasing volume of display ads is apparently on track to be enough to make YouTube — finally — profitable.
Let’s remember that content owners get compensated for these user uploads of their material through ad revenue sharing — and moreover, that they are choosing this model instead of using YouTube’s fingerprinting system simply to block unauthorized uploads.
I am firmly not in the camp of people who believe that online advertising is going to be the sole savior of the content industries. I believe that direct consumer revenue remains vitally important. However, YouTube’s experience is admittedly a quintessential example of the “freemium” model, whereby a technology is widely used for free but can be profitable through revenue from a modest proportion of users. Another exemplar of this model is Skype, which makes its money through SkypeOut calls to regular telephones and other services.
Yet the more applicable message from YouTube’s results with fingerprinting-triggered contextual advertising is that rights technologies are ultimately about enabling choices of business models. Content owners and service providers can use them to make money in ways that either satisfy or annoy users, or in ways that make sense for their content or don’t.
This leads us to the newly-released version of the Apple TV Internet video device. It’s much smaller and cheaper than the original Apple TV (one of which is highly functional as a heat-generating, power-sucking paperweight in our living room), and it only supports rentals of movies and TV shows, not downloads-to-own. As far as TV shows go, only ABC (tied to Apple via Disney and Steve Jobs) and Fox are participating, the latter stressing that it’s doing so on an experimental basis. NBC and CBS are sitting out, claiming that episodic TV is not intended for pay-per-view distribution.
Like I said, it’s about choice.
DECE Is Now “UltraViolet” July 21, 2010
Posted by Bill Rosenblatt in Standards, Video.2 comments
The Digital Entertainment Content Ecosystem (DECE) consortium has announced its consumer brand name: UltraViolet. This is the name that will be used for all DECE-compliant products and services. The company’s press release from Tuesday says that technology specs and licensing agreements are to be available by the end of this year.
The basic idea of DECE/UltraViolet is to offer consumers a way to buy media products — download or streaming — that can be accessed from or stored in a variety of formats and devices. A rights locker tracks users’ purchases and makes their content available in additional formats when users need them, presumably at no extra cost. The rights locker is a central resource to be run by Neustar Inc.; online content retailers will integrate with Neustar’s rights locker. DECE-compliant media files will need to protect content in one of several (currently five) approved DRMs.
The slow pace of DECE progress over the past couple of years has not done wonders for its image in the press, which has been almost entirely skeptical. This week, the launch of the consumer brand without any further technical information has resulted in another wave of press coverage, most of which has been ridden with misinformation, dismissive of “yet another DRM from Hollywood,” or both. Further, the development of DECE has taken place amid a backdrop of major companies launching their own “rights locker” type initiatives, including Best Buy (partnering with Sonic Solutions) and Amazon — as well as Disney offering a putative competing standard called KeyChest whose reality as more than a FUD generator against DECE many are beginning to question.
Standards and consortia are hardly ideal vehicles in which to get things done. They are sometimes necessary because of antitrust constraints placed on entities such as media companies and technology vendors, and they are fundamentally challenged by having to operating in a fast-changing industry landscape. Obviously many companies are attracted to the value proposition for content owners and technology vendors: over 50 such companies are now signed up as DECE members, although only three retailers are on board. But as we say here in America, that’s a lot of cats to herd.
The lack of solid public information about DECE — not even a technical white paper — has not helped matters. The group has released very little substantive information about the technology since I last reported on it back in January. The new UltraViolet website at least attempts to show the consumer value proposition and roadmap for the technology. That’s a step in the right direction. But as UltraViolet’s own roadmap web page shows, it’s a step on a long journey.
(By the way, I have to admit that UltraViolet is a rather clever name: it connotes both “beyond Blu-ray” and “invisible,” both positive associations; although some wags have also mentioned “skin cancer.” I suppose that’s no worse than the biological connotations that some have suggested about the Apple iPad.)
Selectable Output Control: What’s the Big Deal? June 27, 2010
Posted by Niels Thorwirth in Standards, Technologies, Video.8 comments
[Editor's note: I had been intending to write a piece on Selectable Output Control for some time, but I just haven't had the time to do the proper research. Niels Thorwirth of Verimatrix wrote this very informative piece about SOC for Verimatrix's corporate blog, which is reproduced here minus the Verimatrix commercial part.]
The FCC has recently granted a waiver filed by the MPAA to allow selectable output control for set-top box (STB) devices in the USA. The requirements for selectable output control are for a limited time and under certain conditions, but still a significant development in the evolving world of movie distribution windows.
It means that cable, satellite and IPTV operators are allowed to offer content that can only be displayed on screens with HDMI connections protected via high-bandwidth digital content protection (HDCP). Any analog or unprotected outputs from the STB device would be disabled during the viewing of that content.
The contention is that, by eliminating the “easy” piracy option of recording the signal from analog outputs of the STB, studios can now consider a new release window for their movie assets. As proposed by Time Warner Cable, it’s called “home theater on demand,” and enables operators to offer a movie for domestic consumption just 30 days after its theatrical release.
While most articles deal with the business dynamics of selling video-on-demand (VOD) movies closer to the theaters and before DVD or BluRay, let’s take a look at the security implications.
The mandatory digital watermark for digital cinema provides some forensic traceability of illegitimate recordings by identifying the theater location and screening time. This helps deter repeat offenders and inside jobs. Nonetheless, some movies are still pirated with a camcorder in cinemas. Apparently, the commercial benefits of selling that movie on illegal DVDs still outweigh the risks for professional pirates. The quality of these recordings is poor and the financial loss to studios is arguably limited in that many who accept that quality would not otherwise buy theater tickets.
It’s also unfortunate that, right after the release of any noteworthy movie on DVD or BluRay, high-quality digital movies can typically be downloaded from Internet file sharing sites in several versions and sizes. The source is of course untraceable in this situation.
This new concept of a home theater on demand window enables the delivery of movies to end user devices. Despite the restriction to HDCP protected outputs, there is no doubt that content released in this high value period will be subject to piracy of commercial and non-commercial flavor. While HDCP provides much better security then that unprotected analog output, it has vulnerabilities.
If these vulnerabilities are too difficult to exploit, pirates will be able to resort to copying content from their HD TV with an HD camcorder in the comfort of their own home – the quality of readily available equipment makes this a relatively easy option. This is where digital watermarking can be used to trace and identify piracy of either approach.
This new home theater on demand requirement takes watermarking into additional networks with specific infrastructure and legacy architecture, with new and interesting integration tasks. It also adds possibilities to make watermarking a standard solution to secure content revenues on this distribution channel.
The recent discussions we’ve had with content owners and distributors certainly indicate that the studios understand the potential of digital watermarking to plug the crucial security vulnerability that is opened by home theater on demand and is only closed in part by selectable output control.
The home theater on demand release window, after all, adds a consumer option, and I believe that the combination of selectable output control and traceability is a sufficient deterrent against piracy to keep this option valid and profitable for content owners.
Sonic Solutions to Acquire DivX June 3, 2010
Posted by Bill Rosenblatt in Devices, DRM, Technologies, Video.2 comments
Sonic Solutions, owners of CinemaNow and various software tools for producing digital media, announced yesterday that it will acquire DivX in a cash and stock deal valued at about US $300 Million. The deal is expected to close by September.
DivX makes a video format that includes proprietary compression and DRM technology and is suitable for delivery on physical media (such as DVDs) as well as through digital downloads. The format is supported on a wide range of consumer electronics, including DVD players, Blu-ray players, set-top boxes, Internet TVs, various portables, and the Sony PS3 gaming console.
Sonic’s relationship with DivX is not new: CinemaNow has been offering a selection of downloadable movies in DivX format since last December (a few other download sites also offer the format). Still, this move represents Sonic’s latest attempt to make the big move from a provider of professional media tools to a serious competitor in the home media marketplace — which is still relatively nascent and fragmented.
DivX has had a tortuous history. It started out in 2000 as a “rebel” format, positioning itself as an outsider to the Hollywood/DVD establishment. The company went public in September 2006, and its fortunes started to turn upward several months later following the departure of controversial founder and CEO Jordan Greenhall.
About half of the major Hollywood studios have licensed DivX. One reason that has been cited is to fill a need for a competitor to Apple, in fear that Apple will dominate digital movie economics the way it has dominated digital music downloads. Whatever the reasons, the virtuous cycle of network effects has benefited DivX, which is now supported on thousands of consumer electronics devices from all of the major manufacturers.
The combination of CinemaNow and DivX should give Sonic a better route into the digital home, which is potentially far more lucrative than Sonic’s original software tool business. Sonic’s strategy also includes its partnership with Best Buy, now the leading standalone retailer of consumer electronics in the US market. But that leads us to a kink in the story: DRM. The CinemaNow/Best Buy partnership has been developing around content protection (and other technologies) from Widevine. It’s possible that Sonic could retain both DRMs, e.g. DivX’s for downloaded content and Widevine’s for streaming. But the two technologies overlap, which could lead to some confusion and some hard decisions.
In the end, Sonic Solutions is gambling that its combination of tools (Roxio), online distribution (CinemaNow), format and CE tie-ins (DivX), and retail (Best Buy partnership) will be synergistic enough to add up to a full digital video ecosystem to challenge Apple and other contenders, including Wal-mart/Vudu, Amazon/Adobe, Blockbuster/Microsoft, and the emerging DECE consortium. In other words, Sonic is betting $300 Million that DivX will not end up among HD-DVD, SACD, DVD-A, ATRAC, and other formats that form the scrapheap of digital media history.
It’s a big gamble, given that six “ecosystems” is about three or four too many for the market to ultimately sustain. But the Internet video industry is far from mature and there’s plenty of room for competitors to establish themselves.
Video Content Monetization Panel at C&T 2010 Conference May 18, 2010
Posted by Bill Rosenblatt in Events, Video.add a comment
We will be offering an exciting panel on Best Practices for Monetizing Video Content at the upcoming Copyright and Technology 2010 Conference, which is now a month away: June 17 at the Hotel Roger Smith in NYC. Yet another reason to register today.
The panel will feature Joe Inzerillo, SVP of Technology at MLB.com (that’s Major League Baseball); Emil Rensing, Chief Digital Officer of EpixHD, a premium streaming video site; and others discussing their strategies for monetizing and protecting premium brand-name video content. Also on hand will be Jan Steenkamp from Irdeto and Florian Pestoni from Adobe, the Conference Sponsor.
We’re also happy to announce that Verance, a leading vendor of digital watermarking technology, is joining the conference as a Platinum Sponsor. Verance’s CTO, Joe Winograd, will be participating in the panel on Content Identification, which will be moderated by noted rights technologies expert Rajan Samtani.
Join us in New York on June 17 for Copyright and Technology 2010 – register today!
Widevine Reveals Netflix and Blockbuster as Customers April 22, 2010
Posted by Bill Rosenblatt in DRM, Video.19 comments
Widevine, in conjunction with a new release of its cross-platform DRM technology, has identified a number of high-profile customers as well as a list of supported consumer electronics devices. The company revealed that Netflix and Blockbuster.com are using its technology for their on-demand video services. We have known for a while, as well, that Widevine has been the DRM of choice for the emerging Sonic/CinemaNow/Best Buy ecosystem of networked home media.
Just as interesting as the names of these high-profile customers is the list of consumer devices that Widevine has been ported to — information which has been closely held until now. The list includes all Apple devices (Macs, iPhones/iPod Touches, and now iPads); connected Blu-ray players from several makers including Haier, LG, Philips, Samsung, and Toshiba; Internet TVs from LG and Samsung; and Nintendo Wiis. These are in addition to Windows PCs and dozens of set-top boxes.
Widevine is clearly moving beyond the cable/telco/pay-TV services that constitute its core market to home networked entertainment — an area that has been slow to develop, giving the company time to hone its product and partnerships.
Widevine particularly faces competition from its bigger Seattle neighbor Microsoft, which has been moving its PlayReady DRM from mobile devices into the home by making it part of the MediaRoom ecosystem, and Marlin, which has been making its way into a range of Sony products (among others). Those three, plus OMA DRM and Adobe’s Flash Media Rights Manager, are all approved DRMs for the Digital Entertainment Content Ecosystem (DECE) consortium — which was somewhat conspicuous in its silence at the recent NAB trade show.
It seems as though Widevine has been itching to publicize big customers like Netflix, and major device makers like Samsung and LG, and has finally been given the chance. (I suppose it’s not easy being one of the last of the independent DRM vendors.) Now it’s clear that Widevine is a major player in the emerging world of the networked digital home.
MPAA Wins Settlement in RealDVD Case March 4, 2010
Posted by Bill Rosenblatt in DRM, Law, United States, Video.4 comments
Earlier this week, RealNetworks settled its litigation with the movie industry over its RealDVD software, which allowed users to make copies of DVD video content onto PCs. The copies were encrypted with RealNetworks’ DRM, which limited playback to five PCs. Under the settlement, Real agreed to keep the product off the market, thereby making permanent the injunction that Distict Judge Marilyn Hall Patel issued in October 2008. Real also agreed to pay the MPAA and the DVD Copy Control Association their litigation costs of US $4.5 Million.
This case had echoes of a previous DVD CCA case against Kaleidescape, a Silicon Valley company that made a hardware device that ingested video from DVDs and stored it on hard disks. That case turned on the terms of the DVD Copy Control Association’s licensing agreement, and in 2007, Kaleidescape prevailed. (RealNetworks had a similar hardware device in the works as well.)
This time the movie studios sued on the basis of the Digital Millennium Copyright Act as well as on DVD CCA licensing grounds. They claimed that Real broke the law by circumventing the CSS encryption used on DVDs. Real argued that users should have the right to keep backup copies and that its DRM was at least as protective of the content as CSS and therefore should not be considered to be circumventing it.
The case settled, so the judge wasn’t able to decide whether to rely on a strict interpretation of the anticircumvention law or to focus on RealDVD users’ rights under copyright law. Judge Patel’s only meaningful output was her statement that RealDVD was “likely” to be found to violate the DMCA and the DVD CCA license, which she made to justify her preliminary injunction. Thus this case offers little further clarification of users’ rights to make backups of their legally obtained video content.
DVD players do decrypt the content, under license from the DVD CCA, but that same license restricts what they can do with the content once it’s in the clear. Real claimed that it observed the DVD CCA license terms — just as Kaleidescape did in the earlier case.
It’s possible that Real might have prevailed if it had kept fighting the case beyond the three years it has gone so far. The decision to settle most likely reflects the strategy of Real’s new management, now that Rob Glaser — who decided to provoke the MPAA in the first place by introducing the RealDVD product — was forced out of the CEO’s job by Real’s board.
Glaser’s real loss as RealNetworks’ CEO was the battle of video formats, which the company lost to Microsoft and Apple years ago. He learned subsequently that it’s very difficult to make money with a digital media platform if you don’t control the format, and owning the DRM is a great way of controlling a media format.
Having lost this battle, Glaser decided to fight to salvage his media platform by creating products that taunted the established order. Back in 2004, Real released Harmony, a service that sold music in Microsoft’s and Apple’s DRM formats as well as its own — in other words, encrypted music that could play on iPods. Apple couldn’t find a reason to sue, but it took steps to restrict playback of those files on iPods. Few consumers cared, and Real discontinued the service. eMusic, and then Amazon, emerged as the alternatives to iTunes for iPod-playable music… in DRM-less MP3 format.
RealDVD was a bolder gamble, and Real thought it could rely on the Kaleidescape decision to back it up. But now apparently Real’s new management wants to jettison Glaser’s “rebel outsider” stance toward the media industry and focus on its remaining grab-bag of content services and infrastructure, such as the mobile music service provider WiderThan and the digital gaming service TryMedia, plus content sites like film.com and RollingStone.com.
The historically important RealAudio and RealVideo formats have been reduced to marginalia, and Real is spinning off the Rhapsody subscription music service that it co-owns with Viacom’s MTV networks. It will be interesting to see how — or if — RealNetworks can recapture the public’s attention again.
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
