Irdeto Acquires BD+ Technology from Rovi

Irdeto announced that it has acquired the BD+ content protection technology for Blu-ray discs from Rovi Corp. (formerly Macrovision).  This includes the team and patents related to Cryptography Research Inc.’s Self Protecting Digital Content (SPDC), which Rovi acquired in 2007.

Given the string of recent acquisitions that Rovi has unwound (eMeta, InstallShield, FlexNet, TryMedia, and others), most of which have to do with content security or license management, this deal would seem to be yet another in the same vein; and in fact, BD+ was the last content security asset that Rovi owned, apart from its legacy serial copy management technology.  Rovi is apparently paring assets to focus on its metadata (acquired from All Media Guide and Muze) and Electronic Program Guide (Gemstar) businesses; Rovi has dominant market shares or IP positions in both areas.

But a conversation I had with Irdeto revealed an entirely different purpose for this deal: one of the major Hollywood studios brokered it in an attempt to fix Blu-ray security, which has been seriously hacked.  Irdeto did not name the studio, but those who follow the industry closely can probably guess which one it is.

BD+ is one of two sets of security technologies used in the Blu-ray disc format.  The other, AACS, has been hacked — but the impact of the hack is not as severe as that of other hacks, such as the hack to CSS for DVDs.  Nevertheless, the security of Blu-ray discs is apparently so poor that Hollywood is concerned enough to find a solution.

The idea in this deal is that Irdeto will bolster the security of Blu-ray by applying the Cloakware software-security technology that it acquired in 2007.  According to Irdeto, this is a nontrivial engineering challenge but one that it believes it can solve in a few months’ time.

When Blu-ray first hit the market, with its multiple layers of content security, I had thought it was a real breakthrough for Hollywood.  It looked as though Hollywood had not only learned its lesson about approving content security schemes that are too easy to hack (such as CSS for DVDs) but also had figured out a way to get downstream entities, such as consumer electronics makers, to pay for truly superior security.

Yet now we know that Hollywood has, once again, gotten what it paid for.  Now that the latest intelligence about the Blu-ray format says that rumors of its demise are exaggerated, Hollywood wants to shore up the format’s security and protect its release windows.  It wants to rely Irdeto’s Cloakware technology to plug the holes.

This is a great vote of confidence in Irdeto.  But relative to the bigger picture, one must ask: does it really change Hollywood’s behavior so that this kind of thing doesn’t happen again?  To put the question another way: what does Irdeto get out of this deal that would create incentives for it and other vendors to produce truly superior content protection — technology that is secure and affords a decent user experience?

Irdeto isn’t offering an answer.  The terms of the acquisition from Rovi are undisclosed.  It is unlikely that Blu-ray equipment and software makers will pay more for a license to Cloakware-enhanced BD+ technology than they pay now. Irdeto says that it will get “something” if it completes the Blu-ray fix successfully, but it won’t say what that something is.

I get the feeling that it will mostly be bragging rights.  Irdeto will get the cachet of having “fixed Blu-ray,” which will (so the logic goes) lead to other opportunities with future formats; such is the power of Hollywood studio endorsement of content protection technology.  And there is certainly some value in the elegant SPDC technology and the patents and engineering team that came with Irdeto’s acquisition.

But — putting aside the price of the acquisition vis-à-vis the value of the Blu-ray revenue stream that comes with it — the value of this deal strikes me as illusory.  It’s the analog of user advocates who say that Hollywood studios should give away their content online so that consumers can “engage with the brands.”  Both Hollywood studios and content protection vendors are in business to make money from their products.  The major studios generally operate on the proposition that more money makes for a better product.  Why can’t they apply the same principle to content protection?

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