e.Digital Corporation (fka EDIG)

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Copy Control for Digital Video Gaining Momentum, But Studios Remain Divided
by Mark Lewis
http://news.webnoize.com/item.rs?ID=13653

Two major movie studios and a group of electronics companies have agreed to use encryption technology to control digital video copying in the coming world of networked personal video recorders, digital TVs and cable set-top boxes.

After reaching an agreement in principle six months ago, Sony Corp.'s Sony Pictures Entertainment and AOL Time Warner's Warner Bros. said they have formally licensed 56-bit encryption technology that will encrypt video signals on home networks. In the future, those networks will link digital set-top boxes or digital televisions with digital video cassette recorders, hard-drive video recorders and personal computers [see 02.16.01 Sony and Warner Agree in Principle with 5C Copy-Control Rules].

The technology was developed by Hitachi, Intel, Matsushita Electric Industrial, Sony Corp. and Toshiba (known collectively as the 5C companies), which plan to make devices and computer chips in the next year that use their encryption and device authentication process. The system is supposed to ensure that all digital video data on a home network remains scrambled and can't be tapped and redistributed over the Internet.

But the entire movie and electronics industries aren't behind the 5C project, and it remains to be seen whether Sony and Warner will release more digital programs to broadcasters and cable operators once the new security system is in consumer devices.

The 5C technology will be used alongside a separate technology called High-Bandwidth Digital Content Protection (HDCP) that encrypts the digital connection to video displays. 5C will also be used with a controversial key-based encryption system for DVD recorders, IBM microdrives and flash memory, called Content Protection for Recordable Media (CPRM). CPRM is developed by the "4C," which includes the 5C's Matsushita, Toshiba and Intel along with IBM [see 02.13.01 IBM's Recordable Media Copy-Control Claims In Dispute].

"An ecosystem is coming together," said Seth Greenstein, a McDermott, Will & Emery attorney who serves as the 5C's policy chairman. By using the technologies together, "you have a complete home environment to protect [video] displays and recording, and transfer a copy back and forth among different digital devices."

"For content providers, the creation of secure entertainment networks is key to the delivery of high-value, high-resolution motion picture content into the home," said Warner Bros.' Executive Vice President Chris Cookson in a statement. "The adoption of the [5C] technology is an important part of this process."

However, five studios -- Walt Disney Co.'s Walt Disney Pictures, News Corp.'s Twentieth Century Fox, Metro-Goldwyn-Mayer, Viacom's Paramount Pictures and Vivendi Universal's Universal Studios -- haven't licensed 5C partly because they want to use copy control more aggressively than the 5C will allow.

But Sony, which wants to sell video recorders, and AOL Time Warner, which wants to offer video on-demand services on its vast cable network, have broken ranks with their cohorts in accepting the 5C's copy-control rules.

Those rules state that consumers must be able to record free, unscrambled digital television, regardless of whether it's transmitted over the air or through cable and satellite networks. Digital programs and movies on paid channels and cable-only networks can be recorded once, without serial copying. However, studios can scramble pay-per-view, video on-demand and subscription on-demand movies so they cannot be recorded.

The Consumer Electronics Association, an industry trade group, has endorsed 5C technology for digital TV. But Thomson Multimedia, the largest television maker in the U.S., hasn't licensed the technology or made plans to include it in its digital TVs or DirecTV satellite receivers, including a model that has a hard-drive video recorder. Thomson is promoting its own encryption technology, which uses "smart cards" [see 06.07.01 Thomson Pushing "Smart Cards" for TVs, PVRs and PCs to Prevent Piracy].

"It's good news that some technology is getting the approval stamp of the studios," said Dave Arland, Thomson's director of governmental and public relations. But "this is only two of the seven [studios], and we'd have to see more progress before making product plans."

Some in the computer industry think Sony and Warner's decision could make consumers less wary of digital TV. The studios' adopting 5C technology "allows consumers to transparently time-shift free over-the-air TV, and the rules appear to be reasonable for even premium channels," said James Burger, a computer industry attorney with Dow, Lohnes & Albertson.

Yet there are other roadblocks facing digital TV, including expensive TV sets, broadcaster delays and other studios' hard-core approach to copy control.

Several studios whose parent conglomerates own broadcast networks want to limit consumer recording of free, high-definition broadcast TV and set up systems that will erase material cached to a hard drive after a certain length of time, Arland said.

"I'm not saying rights owners don't have a right to protect content," he said. "But that doesn't mean you rewrite the rules for time shifting or building a home library. We're not talking about my mother turning her library of soap operas into a profit-making venture on EBay," an auction web site.

The Motion Picture Association of America, the studios' trade group, declined comment on Warner and Sony's decision to sign 5C licenses.

Greenstein said he is negotiating collectively with the remaining five studios and is "optimistic that there is a deal to be done with them."

One prior sticking point was that 5C encryption couldn't be used for broadcast TV because the U.S. Bureau of Exports only allows encryption to be used on conditional access systems such as cable and satellite. But since some media conglomerates want to use encryption over broadcast systems, U.S. authorities would have to lift encryption restrictions.

The 5C told Sony and Warner it will ask the government to suspend those restrictions, Greenstein said. But it remains to be seen if that will be enough to win over the other five studios.

Major studios and consumer electronics companies have been working since 1993 to establish a copy-control framework for digital video. The framework includes the now-hacked Content Scrambling System for DVDs, encryption for home networks and video watermarking technology.