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Macrovision (sort of) bets on Blu-ray - November 21, 2007

Having just agreed to spend $45 million to buy the technology behind BD+, the added layer of copy-protection so far used exclusively on Blu-ray Discs, you'd expect Macrovision to be bullish on the format's prospects against its rival, HD DVD. And so Macrovision officials are.

"We're confident Blu-ray will be around, even if it's not the only format that's around," Macrovision exec VP of marketing and solutions Corey Ferengul told Media Wonk.

On the other hand, having just agreed to spend $45 million in cash to buy something, taking a hit to Q4 and full-year earnings, you'd expect the company to soft-pedal the risk of putting all of those eggs into a single, uncertain basket. And so Macrovision officials are as well.

"What we really put a bet on is something we think is the best, most dynamic anti-piracy technology out there," GM of Macrovision's Entertainment Business unit Eric Rodli said. "It's one that works very well on optical discs but that is potentially extensible to other types of delivery, like streaming or downloading."

Pressed, Rodli added, "If Blu-way went away tomorrow we would face some short term challenges, but the technology would still be usable in other applications."

Hmm.

The technology in question is known as self-protecting digital content (SPDC) and was developed by Cryptography Research Inc., from which Macrovision bought it. The first, and so far only, implementation of SPDC is BD+, but it may not stay that way for long.

On a conference call with analysts earlier this week, Macrovision CEO Fred Amoroso mentioned, almost in passing, that Macrovision had had a conversation last week with a studio about extending SPDC to HD DVD.

"We were surprised at their interest ourselves, given all the legacy issues you would have to deal with," Ferengul said. "That's why we took the meeting."

Ferengul wouldn't identify the studio but said, "I think you'll see a lot of conversations from us about SPDC technology. The studios are all wrestling with what is the right level of protection in the digital world."

The heart of SPDC is a virtual machine that can be used to run programs piggy-backed onto the content to check the receiving device for security breaches, update security codes, even disable the device.

According to Rodli, the VM itself is a relatively small application and could be carried along with streamed or downloaded content. It could also be embedded into the middleware Macrovision sells that sits inside a variety of consumer devices.

One thing that won't change, at least for now, is the policy of keeping BD+ a closed spec, despite criticism that the lack of transparency makes it impossible to be certain what is really happening to SPDC-protected content in the marketplace.

"We have no current plans" to change the policy, Ferengul said. "Right now the studios are comfortable with the information they have and feel they understand the technology well enough. Our intent is not to change that, however, we’re still in a learning mode."
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