After several months of silence, the Digital Entertainment Content Ecosystem (DECE) consortium is coming forth with a group of announcements timed to this week’s Consumer Electronics Show in Las Vegas.

The public press release provides high-level details of the latest developments, but it captures neither the change in strategy that DECE has undergone over the past year nor the potential shift in digital media supply-chain dynamics that it enables.  I was able to get a sense of these through a conversation with Mitch Singer, the Sony Pictures executive who leads DECE.

DECE started, roughly two years ago, as a so-called rights locker scheme, in which an online content retailer stored information about content that each user has purchased.  The user then had the right to download the content in the format of his choice, as long as the format included a DECE-compliant DRM.  This scheme would have required retailers and content delivery networks to maintain multiple versions of each content item (such as a digital movie) as well as detailed information about customers and their purchases.

Amazon.com currently maintains a scheme not unlike this, for e-books as well as (to some extent) video content.  Kindle users can view their e-books on other devices, such as iPhones (and soon BlackBerrys), and pick up where they left off from another device.  Purchasers of certain DVDs and Blu-ray discs on Amazon can also view them on demand through the site through Amazon’s Disc+ On Demand.

Yet the original DECE rights locker concept was problematic for service providers on a couple of levels.  I worked with a large network service provider on strategy for a rights locker-based content retail scheme back when DECE — then called Open Market — was just getting under way.  The network service provider was intrigued by Open Market but chose not to go forward.  One of the reasons: it would have cost a huge amount of money just to get started.  In addition to building expensive technical infrastructure virtually from scratch, the company would have had to pay for multiple licenses for each content item, one for each supported format.

The new DECE architecture ameliorates the cost and complexity issue in a major way.  Instead of enabling or requiring retailers to store multiple versions of each piece of content, it standardizes on a single file format, thereby requiring them to only store one file (actually, one file for each resolution of content, such as portable, standard def, and high def).  And it offloads the rights locker and customer authentication tasks to an external service provider.  That provider is Neustar, an established identity management service provider in the telco space that DECE selected for the task.

With the new DECE architecture, retailers need only store tokens for each purchase and need not adopt any identity management or authentication infrastructure.  That’s a significant savings in startup and operating cost and complexity.

However, this architecture has a twist: all of the basic information about purchases and users’ registered devices is stored at Neustar and technically owned by DECE.  (Users’ own rights to that information are as yet undefined.)  Retailers will be able to access all of each customer’s purchase information: they will be able to see what a given customer purchased from other retailers as well as themselves, although they won’t be able to find out from which other retailers a given user purchased content.

That’s a new type of scheme, and it’s unclear how retailers will react to it.  Retailers expect to be able to own customer information as a way to build long-term customer relationships and as a source of competitive advantage.  With DECE, each retailer can still hold the usual detailed information about customers and their purchases, but the basic information about which users own which devices and what content is now shared among all retailers.

The new scheme effectively preserves the original DECE’s goal of rights locker portability, so that users could take their rights lockers to other service providers in the same way that GSM wireless subscribers can take their SIM cards from one handset to another.   Now there will be just one rights locker, making user rights portability a non-issue.

Yet retailers will still need to compete more on value-added services rather than on ownership of customer information.  For example, a retailer could have a better recommendation engine or social network that induces customers to come back to its site for future purchases.  Or, a consumer electronics retailer could offer to pre-install all of a customer’s existing movies onto a new laptop or home media server on purchase.

The movie studios’ objective with DECE is an entirely understandable one: they want a level playing field among retailers so that no single one of them is able to dominate the economics, as Apple has done for music — and as some studios fear it will do again for video.  (Disney appears to have no such fears, given its close relationship with Apple.  Not only is it conspicuous by its absence from DECE but it has also announced a competing initiative called KeyChest.)

All online content retailers are clearly looking for ways to compete with Apple.  But it remains to be seen whether they will find enough value in DECE to adopt it, even with the reduced startup and operational complexities that the new model offers.  An encouraging sign is that some major service providers and retailers have joined the consortium: service providers include Comcast, Cox, and Liberty Global, all cable operators with ISPs; retailers include Best Buy, Tesco (the major UK retail chain), and Netflix.

But the likes of Wal-mart, Target, and their equivalents outside the US aren’t on board; nor are any major telcos.  Furthermore, Best Buy is also pursuing what appears to be an overlapping effort with CinemaNow.

The other significant new piece of the DECE architecture is the definition of a new file format, whereas the original DECE was based on interoperability among several formats.  The DECE file format, which will use the H.264 video codec, will be compatible with a number of DRMs; this means that it can be deployed on whatever operating platforms those DRMs support.

There are five DRM technologies on the initial compliant list: Microsoft PlayReady, Marlin, Widevine, OMA DRM v.2, and Adobe Flash Access.  All of these can handle H.264.  All of them can also use the US government standard AES-128 encryption algorithm; this will enable the DECE-formatted files to use encryption keys that can be used with any of the compliant DRMs.

With the standard file format, DECE has given up on its previous feature of interoperability among existing file formats and players.  Instead, it will be necessary to get device makers to create DECE-compliant devices and bring them to market.  It will also be possible to retrofit existing devices to handle the DECE format, by installing software (in the case of PCs) or upgrading firmware (for certain portable devices), just as would be the case for any new file format.

DECE intends to release specs in the coming months.  The timetable for actual compliant devices to hit the market is to be determined, but it’s worth noting that several top-tier device makers are DECE members, including HP, Motorola, Nokia, Panasonic, Philips, Samsung, Sony, and Toshiba.

DECE represents a truly new direction for digital media supply chains, one that includes both innovations and risks.  Assuming that DECE succeeds in launching with high-profile device makers and retailers, it will represent an interesting alternative for consumers that focuses on content portability and choice of retailers.  It will thus be competing against Apple’s seamless user experience as well as against Amazon’s massive customer database.   DECE’s chosen architecture illustrates how difficult it would be to have all of these attributes in a single content ecosystem.  Consumers will have to live with each of them and choose for themselves.