Studios' digital deal

Hollywood edged a little closer to cable operators' interactive video dreams as two studios last week agreed to encryption technology that protects their digital works from unauthorized copying.

Warner Bros. and Sony Pictures agreed to a licensing deal with a digital-equipment manufacturers consortium, referred to as the 5Cs, to protect digital transmission of their TV shows and movies.

Other major studios (Disney, Paramount, Fox, Universal and MGM) are "closer to an agreement than they have ever been" with the 5Cs, said Preston Padden, Disney's executive vice president of government relations.

He said the other studios will soon agree to the same pact, but "with the addition of watermark detection so that broadcast programming can be protected against unauthorized Internet redistribution."

Without a copyright deal, Hollywood was unwilling to create much digital content.

"The 5C technology acts as the protector," said Sony attorney Mitch Singer. "Content providers will be more apt to license content if they have security it will be protected."

The techies and show biz giants have had trouble seeing eye to eye, said Dick Green, president and CEO of cable research group Cablelabs.

"Cable is in the middle," he explained. "We want to protect content providers and also serve customers with the best content and allow them to make legal copies."

Fifty electronics manufacturers have signed with the 5Cs, and more are now expected. The technology will eventually be put into digital home-network devices, including televisions, recording devices and set-top boxes.

The agreement protects digital transmissions only, falling short of protecting "in-the-clear" broadcast signals. The other studios want to protect both types of content.

The studios want to prevent illegal copying and retransmission on the Internet. Unlike copies made from analog transmission, which degrade each time, every digital copy is flawless. Hitachi, Intel, Matsushita, Sony and Toshiba—the 5Cs—have developed technology that encodes digital programming with copyright protections.

When first released on pay-per-view or video-on-demand, a TV show/movie can be programmed as "copy-never." Later, when it moves to basic or pay cable, copy restrictions would be eased to "copy once." The final window could be "copy control not asserted," which would allow viewers to make an unlimited number of copies.

"If Fox is licensing The Simpsons to Europe but it won't get there for six months, someone can put it on the Internet and send it to Europe," Sony's Singer explained. "That diminishes the quality and the value of the program."

5C technology can read only encoding that passes through a digital device, said Michael Ayers, president of the 5Cs body that has worked on the standard. "Up to 85% of the country is receiving entertainment though an access service like cable or satellite, and [Digital Transmission Content Protection] can cover that territory," he said. "The concern is over the remaining 15%."

—Additional reporting by Paige Albiniak