Many people feel that Digital Rights Management (DRM) has been the bane of the movie download market. One of the most outspoken critics of DRM and the way the Hollywood studios have abused it is Jim Flynn, CEO of EZTakes. Flynn feels that the DRM used by many movie download sites (such as iTunes and Amazon, for example) is so inherently restrictive that it creates a “consumer-hostile” marketplace. According to Flynn, some of these services are virtually saying, "Hey, we can reach into your PC and delete content that you paid for any time we want." This kind of attitude doesn’t lead to good public relations with potential customers, he says. And it motivates otherwise law-abiding movie lovers to resort to piracy. Ironically, the very mechanism that was set up to prevent piracy is instead promoting it.

“DRM is not meant to stop piracy; it’s meant to lock in content providers and consumers,” says Flynn. “DRM makes illegal options more appealing to the average consumer because pirate sites come with no such restrictions. Consumers don’t want restrictions. Nobody wakes up in the morning, and says, ‘Gee, I wonder what I can’t do with the content I paid for today.’ And DRM ignores the rule of the digital worldbits can be copied.” The studios should accept that fact, says Flynn, and they should stop treating the consumers as criminals and start giving them good value.

EZTakes does not use DRM. Instead, it attempts to protect the intellectual property rights of content owners by using a proprietary fingerprinting technology. Each movie download is digitally tagged with a number that is invisible to any viewer. This allows law enforcement to trace back to see who is responsible for piracy and arrest him. Instead of penalizing the entire movie buying pubic, only the guilty should suffer, says Flynn.

“I think what we are doing is a more realistic approach to distribution,” says Flynn. “We are giving people who want to download a movie something that is portable [a DVD]. They don’t have to huddle the family around a PC monitor to watch a 2-hour movie. They can actually buy it and burn it and watch in their living room with their family.”

“We are pointing the way to the future in terms of providing value to consumers, rather than trying to control the consumers,” he says. “You have to start with the consumer—what does the consumer want? When we started out, we said to ourselves, ‘We can build a download site that executives at the big media companies will like, or we can build a site that consumers like.” And we went with the latter. “You want to have as much value as you can for the consumer, or else it doesn’t do anybody any good.”

“We are trying to do a favor for both content providers and consumers by providing movies at a reasonable price in formats they can use,” says Flynn. “It’s not that we don’t respect DRM, but we think the most important thing for movie distribution is distribution.” This is particularly important to the independent film producers from whom EZTakes draws most of its content. “The second worst thing for a movie maker is to have his movie pirated; the first worst thing for a movie maker is obscurity,” he says.

OTHER DRM MAVERICKS

HungryFlix & Streamburst
Among the other movie download sites that have been experimenting with alternatives to DRM (most are using some sort of fingerprinting technology) are HungryFlix and Streamburst. HungryFlix bills itself as “the Internet’s first distributor of premium independent video content specifically formatted for portable devices.” Among the portable media players it supports are Apple’s iPod and iPhone and the Sony PSP. It also supports home media servers such as AppleTV and slingmedia’s slingbox. Content is delivered as DRM-free MPEG-4 files. The business model is download-to-own, not rental.

HungryFlix positions itself as a sort of distribution service for independent producers, offering them hosting, storage, and bandwidth. It allows content owners to set their own prices for their downloads. HungryFlix gives 60 percent of the each download transaction to the content owner, while retaining 40 percent to cover overhead. Prices on the site start as low as $0.99.

Recently HungryFlix increased the quality the site can provide by changing storage limits. It now allows content providers to upload movies up to 1GB in size (the previous limit had been 500MB), so the site’s visitors can now get HD content.

Like HungryFlix and EZTakes, UK-based Streamburst, is also a purveyor of mostly independent content. It offers downloadable movies as unencrypted MPEG4 files already formatted for various portable devices. Streamburst aims to prevent piracy without placing Draconian restrictions on consumers who simply wish to exercise their fair-use rights. The company employs a combination of watermarking and personalization technologies. Streamburst adds an opening screen at the head of each movie that lists the name of the person who has downloaded the film, while also inserting a sort of invisible watermark. Both of these measures allow any piracy to be traced back to the pirate. Ironically, the company also uses the BitTorrent P2P filesharing technology that is used by so many pirate sites.

Jaman
Another independent-oriented site that has foregone Windows DRM is San Mateo-based Jaman. The site has gained a reputation for artsy foreign films (some call this “world cinema”) including Bollywood movies and nature documentaries delivered at high quality. It also features its own player which employs P2P technology, but files are progressively downloaded rather than streamed. The company has forged distribution deals with TiVo and SanDisk.

According to Jaman CEO Gaurav Dhillon, the company has invested over $1 million in its own proprietary DRM, which he says “functions similarly to FairPlay [the DRM used by Apple] but is a clean room implementation.”

“We set out to from the beginning to support multiple platforms,” Dhillon says. “We were dealing with producers who were using Macs, so that was sort of natural. But since there wasn’t a good cross-platform DRM--in fact, outside of Fairplay there really isn’t any at all-0-we decided the right thing to do was to build one, because we wanted to provide convenience and ease-of-use to our customers.”

Jaman could have used Windows Media DRM (like most providers in this market), but Dhillon quickly dismissed the idea. “It’s a very mixed experience, to put it politely; so many incompatibilities. It has not been a good thing for people who try to use it. It obviously works better on the PC than the Mac, but we think being cross platform is so important; there’s so much change going on as this becomes the primary way for people to get entertainment in their home that we thought that for us to not be cross-platform would be folly.”

Dhillon says his company’s proprietary DRM is modeled on Open Mobile Alliance (OMA) version 2, a security format used primarily in the mobile devices market. OMA has the backing of some major companies, such as Warner Bros., Samsung, and Panasonic. When Dhillon approaches studios to try to make movie distribution deals, “They like the fact that we have DRM,” he says. “They look at it and like it, and they also understand that Windows DRM has challenges, particularly in the entertainment world where many of them are Mac users themselves.”

CinemaNow
One of the largest and most successful companies in the movie download market--CinemaNow--has also experimented with DRM alternatives. Several years ago CinemaNow wanted to be able to offer download-to-burn DVD movies to its customers, so they licensed from the German company ACE GmbH, an internet-based DVD distribution, rights management, and copy protection technology called fluxDVD. This is the protection technology currently used by CinemaNow on the special subcategory of its site that is devoted to DVD movies that customers can download and burn to a DVD-R. Unfortunately, the supply here is limited to about 100 movies, none of which are first-run blockbusters. FluxDVD has enabled CinemaNow to convince studios to let them offer some of their films, but not their premium content, says CEO Curt Marvis. He says that the studios will not be satisfied with anything less than CSS encryption. Recently, CinemaNow licensed the Sonic Solutions Qflix CSS protection technology, and is now banking its DVD download-to-burn future of the future market success of Qflix.

[There will be much more about the DVD-to-burn option in Part 4 of this 5-article series.]

COMPETING WITH FREE
Of course, if you want the ultimate in portability, if you want the freedom to burn a DVD movie to a DVD-R disc and take it wherever you want to view it, you can easily to that and you can do it for free or almost free. All you have to do is go to one of the hundreds of BitTorrent-powered P2P pirate sites. All you have to do is break the law. But if given an attractive alternative, most people will not break the law, says Jim Flynn, CEO of EZTakes. The problem is that no one is giving consumers attractive alternatives.

Flynn believes that the studios are foolish to try to use DRM to stop piracy. In doing so they are wasting their time and money and holding back a market that could instead be profiting them.

“It isn’t the guy who gives you his credit card and buys a movie download who is doing the pirating,” says Flynn. Most pirating is done by professionals with connections inside the entertainment industry, he argues. Studios that pick on ordinary consumers are going after the wrong people.

Ultimately, the quest for a completely pirate-free world is unattainable. Studios would be wise to stop striving for a perfect protection, settle for good enough protection, and get on with business. The piracy war can’t be won. As Flynn puts it: “The inescapable conclusion is that, short of a complete government-enforced lock-down of the internet, entertainment businesses will increasingly have to face the challenge of competing with free.”

How do you compete with free? By giving consumers flexibility, portability, and good-quality premium content at a good price.

Flynn points to iTunes as an example of a service so compelling that people will pay to download a song, even though they could get the same song for free from one of the pirate P2P music download sites.

“Apple has shown that you can successfully compete with free and get consumers to open their wallets, if you offer them something better,” says Flynn. “The entertainment industry should take heed from the real iTunes example: create something that provides convenience and value, not costly complexity, and you just might take away the incentive to acquire works illegally. That would make digital piracy obsolete.”

The DVD Download Business, Part 2: Potholes of a Bumpy Road
The DVD Download Business, Part 1: A Young Market Struggles to Take Off

Mark Fritz (markfritz at intergrafix.net) is a contributing editing to EMedialive and Streaming Media.

The Authoritative Blu-ray Disc (BD) FAQ Has Moved!

Hugh Bennett’s The Authoritative Blu-ray Disc (BD) FAQ has moved to its new home at Hugh’s News (www.hughsnews.ca).

It can now be found at: www.hughsnews.ca/faqs/authoritative-blu-ray-disc-bd-faq

The Daily Yomiuri--the online version of Japan's leading daily newspaper, the Yomiuri Shimbun--reported today that Toshiba plans to release a DVD player capable of playing HD-quality images by the end of 2008, citing Toshiba sources. "The planned release of a model compatible with the current DVD format signifies an effort by the major electronic manufacturer to recover from a humiliating setback suffered in March after announcing its decision to withdraw from its HD DVD business," the news source reported.

This release is intended as direct competition with Blu-ray, according to the report; "Toshiba President Atsutoshi Nishida said his company will not market DVD players that are compatible with Blu-ray. Instead, Toshiba intends to compete with the Blu-ray camp by selling DVD players fitted with LSIs at lower prices than those of Blu-ray models," the Daily Yomiuri said. "To achieve this goal, Toshiba will advertise its new player as a device with which consumers can enjoy a broader array of content than is available in the Blu-ray format, the sources said."

To read the full article, click here.

Disc Makers Forte is an easy-to-use standalone unit that does not require a computer. Priced at $499 MSRP, the Forte is the only automated duplicator in the world available for under $500. The Forte's 20x DVD±R/40x CD-R drive features an ample 25 disc input/output capacity, perfect for those small to medium sized duplication jobs. The machine boasts a 160 GB hard drive that stores up to 31 full size DVD images.

Throughput is blazingly fast, with duplication rates of 7 DVDs, or 14 CDs per hour. Its small footprint and quiet operation makes the machine suitable for any workspace size. Beneath the compact, space saving design, the Forte houses a rugged built-in fan for long lasting cool operation and professional grade robotics. Advanced control features offer users the option to duplicate CDs/DVDs in both single and multi master modes.

Available now at www.discmakers.com, the Forte has an MSRP of $499.

LaCie announced today that is has doubled burn speeds to 4x for it d2 Blu-ray Drive and has updated the aluminum alloy case and software suite. The drive records, rewrites and reads 25 gigabytes (GB) or 50GB BD-R (recordable) and BD-RE (rewritable), as well as DVD±RW DL and CD±RW. The LaCie d2 Blu-ray Drive come fully equipped with Roxio burning software and dual FireWire 400 and USB 2.0 interfaces.

"In early 2007, LaCie was the first vendor to ship worldwide an external solution for professional Hi-Def video recording for both Mac and Windows. Since that time, Blu-ray technology has proven to be the dominant source for video recording and playback," said Patrick Salin, LaCie Business Development Manager. "Burning up to 50GB of data can take a reasonable amount of time, so doubling burn speeds not only increases work performance, but provides a cost-effective, long-term archival process for storing data to sturdy scratch-resistant media.

LaCie d2 Blu-ray Drives come with full-featured Roxio software including Easy Media Creator® for Windows, and Toast® Titanium for Mac. Easy Media Creator and Toast Titanium products are easy-to-use burning applications that provide a timesaving solution for regularly backing up important files at an impressive data transfer rate.

Blu-ray 50GB discs offer 10x more capacity than a single layer DVD. This increased capacity gives professionals the freedom to choose much higher bit rate codecs when mastering content, ultimately improving picture quality. For increased audio quality, Blu-ray technology allows for up to eight channels of 192kHz/32 audio streams.

Availability
LaCie d2 Blu-ray Drives are available now and widely available via LaCie's specialized dealer network at the suggested retail price of $649.99. For more product information, visit www.lacie.com.

CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently released its article on China's DVD industrial role changes.

February 19, 2008 has historical significance to the global DVD industry. After years of competition between blue-ray DVD and HD DVD, with Toshiba giving up its support to HD DVD, HD DVD has lost its market. Will Blu-ray benefit from the absolute advantage? As a big manufacturing nation, China is only a stander-by in this competition among foreign giants. Facing fierce competition, patent fee's compression, industrial profits' great slide, China's DVD industry faces the challenge of four roles changes.

The First Role: Transforming "Made in China" to "Innovate in China"
China's DVD manufacturing position has further strengthened in 2007. CCID Consulting's data shows that 94% of global DVD players are made in China. DVD content providers centralize in U.S and Japan; chip providers centralize in U.S., Japan and China Taiwan; disk sheets' and whole machines' manufacturings centralize in China mainland. The export volume of DVD players shrinked in 2007, with 143 million sets, down 6.4% over 2006, which the export volume was 153 million sets. High patent fee becomes the major factor of restricting export. The technical bottleneck is the urgent issue to be solved in China's DVD industry. At present, competitive pattern is not only the product competition, but also technical and service competitions. At such a critical point, China's DVD industry needs to establish an independent core technical industrial chain and devote to new products' development. Only by breakthoughs in core technology and innovations in technical standard, can China enhanced itself from a producer to a creator.

The Second Role: Transforming Specialization to Diversification
sales volume of DVD players in China was a slide in 2007. CCID Consulting's data shows that the growth of sales volume of China's DVD player slowed down from 2003 to 2006. In 2007, the sales volume was 18.6 million sets, down 3.9% over 2006. This shows that after many years of rapid development, China's SD DVD market's saturation further increased, valid demands gradually decrease. Meanwhile, unfair competition result in the vicious competition in pricing of DVD players. Pressure in profits have forced some enterprises to give up DVD player manufacturing. In 2006, the number of enterprises engage in DVD manufacturing and trades was 830, but in 2007, the number went down to 460. Brand concentration further improves. The enterprises originally in the DVD player field is transferring their focus. BBK, Wanlida, Shinco and Amoi now pay more attention to LCD TV and mobile phone fields. China's DVD manufacturers transform from specialization to diversification.

The Third Role: Transforming SD to HD
The demand for China's SD DVD player market have a slow growth in 2007. Competitors centralize, SD DVD players have become a popular product and industrial profit shrinks. Industrial period has entered a ripe latter stage. New substitutes are cultivating. The market development law cannot be changed. The close relation between DVD players and TVs drives the transformation from SD to HD. Flat panel HDTV becomes a gradual trend instead of CRT TV. The sales volume of China's flat panel TV reaches 7.888 million sets. The sales volume of China's HDTV accounts for 33.8% of the total color TV market. Consumers' demands for HD increase year by year. Therefore, China's DVD industry will welcome in HD era.

The Fourth Role: Replace and Coexist
Sony Blu-ray comes into market in China's 60 cities in 2008, but expensive price and disks' shortage are still the bottleneck of restricting blue-ray DVD's development. China's independent developing red-ray HD DVD has great progress on the aspects of resolution and capacity; compared with blue- ray, it has price advantage, but it needs content providers' support. Whether China's HD red-ray could build up industrial chain which includes optical head, chip, whole machine, disc and content is the biggest test. With the market's development, red-ray and blue-ray are the two major camps in China's HD DVD market.

About CCID Consulting
CCID Consulting Co., Ltd (hereafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235), is a direct affiliate to China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on the major competitiveness of the powerful the industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrade, development strategy and planning, marketing strategy and research, HR management, IT programming and management. Her customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits herself to become the No.1 advisor for enterprise management, the No.1 consultancy for government decision and the No.1 brand for informatization consulting.

Four leading consumer electronics companies including Sony Corp. and Sanyo Electric Co. Ltd., Exceed and Lucky Light, have agreed to license patents owned by a Columbia University Professor Emerita that cover basic semiconductor technology used in Blu-ray video players as well as mobile phones, digital cameras and other devices, Dreier LLP announced today.

The agreements with Sony, Sanyo, Exceed Perseverance Electronic Ind. Co., Ltd. and Lucky Light Electronics Co. Ltd., are the latest settlements reached in an LED and LD patent case against 31 companies that was brought before the U.S. International Trade Commission (ITC) by Columbia University Professor Emerita Gertrude Neumark Rothschild.

Earlier this year, Seoul Semiconductor Co. Ltd, a South Korea-based maker of LEDs, and Taiwan's Everlight Electronics Co. Ltd. signed agreements with Professor Neumark Rothschild, who conducted groundbreaking research in the 1980s and 1990s into the light-emitting diodes (LEDs) and laser diodes crucial to a host of today's consumer electronics products.

Dreier LLP Intellectual Property partners Albert L. Jacobs, Jr. and Daniel Ladow are representing Professor Rothschild in her complaint to the ITC, which seeks to block the imports of infringing products, including video players using Blu-ray format, Motorola Razr phones and Hitachi camcorders, as well as products containing blue, green, violet, ultraviolet, and white light emitting diodes and laser diodes

"These latest licensing agreements are important milestones in this case. Professor Rothschild is very pleased that both Sony and Sanyo, and other major electronics makers have recognized her major scientific contributions to LED and LD technology," stated Mr. Jacobs.

"Professor Rothschild made a seminal breakthrough in understanding the doping requirements necessary for the production of the blue, green, violet and ultraviolet LEDs and LDs on a commercial and efficient scale that are essential to today's consumer electronics, and highly deserves this recognition for her work," Mr. Jacobs stated.

Details of the agreements were not released.

The ITC agreed in March to hear Professor Rothschild's complaint. Of the 31 companies named in the action, Sony, Sanyo, Exceed, Lucky Light and Everlight have since agreed to license her patents for light emitting diodes and laser diodes.

Other companies named in the suit include Hitachi Ltd., Matsushita Electric Industrial Co., LG Electronics Inc., Nokia Corp., Samsung Group, Sharp Corp. Sony Ericsson Mobile and Toshiba Corp.

Professor Rothschild, who is the sole owner of the patent, conducted landmark research in the 1980s and 1990s into the electrical and optical properties of so-called wide band-gap semiconductors that has proven pivotal in the development of short-wavelength light emitting diodes (blue, green, violet and ultraviolet) and laser diodes that are now widely used in consumer electronics.

She was issued a U.S. patent in 1993 that covers a method of producing wide band-gap semiconductors for LEDs and LDs in the blue, green, violet and ultraviolet end of the spectrum. Such LEDs and LDs have become increasingly popular in a variety of devices as a superior efficient lighting source because of their reduced power consumption, greater reliability and longevity.

While her patent is not limited to gallium nitride-based semiconductor material in LEDs and laser diodes, the total market for all types of gallium nitride devices alone has been forecast at $7.2 billion for 2009.

Earlier this year, Professor Rothschild was honored by Philips Electronics, which endowed the new Philips Electronics Chair in the Department of Applied Physics at the Fu Foundation School of Engineering and Applied Science at Columbia University. Recognized by the American Physical Society as a Notable Woman Physicist in 1998, Professor Rothschild was elected as a Fellow of the American Physical Society in 1982.