The result: Software that can copy DVD movies from an encrypted disc to a PC’s hard drive is now available on various newsgroups and Web sites.

“This opens a whole can of worms,” said Michelle Abraham, senior analyst with multimedia-market researcher Cahner’s In-stat Group. “The movie
studios will be hard-pressed to stop this.” Abraham said movie studios could pull movies off the shelf, stop releasing new ones or develop a new security format.

But with more than 6,000 titles due to hit the market by the end of the year and 7 million players sold worldwide in 1999, any of those choices could
devastate the consumer interest that has finally gelled around digital video discs.

No panic

So, the studios are watching — and waiting.

“At this stage, we are assessing the matter,” said Jerry Giaquinta, spokesperson for Sony Pictures, who emphasized that Sony intends “to fully protect our studios’ copyrighted content.”

The encryption-cracking program, known as DeCSS, is the result of a group of coders intent on reverse-engineering the software used to play DVD
movies on PCs. One of the groups published the source code on a mailing list dedicated to bringing video to the open-source Linux operating system, said Frank A. Stephenson, a research programmer for games Web site Funcom B.V., in Oslo, Norway.

“One part of the (CSS) algorithm is really weak,” said Stephenson, who analyzed the source code and found additional holes that the original program
has not exploited. “The slowest attack that I have to break the encryption takes less than 18 seconds on my PC … a Pentium III.”

Surprisingly, movie studios have been waiting for this, said Steve Gustafson, DVD producer with Dreamworks SKG.

I don’t think that it is anything anyone hasn’t expected,“ he said. ”The ability to make a video CD from a laser disc has been around for a while. This is no different.“ Dreamworks will have released 12 titles on the DVD format by the end of this year. Gustafson didn’t think that would change. ”No one here has thrown up their hands and said that we are not going to make DVDs anymore,“ he said. ”I know the music industry has had to deal with this problem, and no one there has stopped releasing music.“

Download times a savior

In fact, the music industry has a far worse problem with which to deal. A single song can be made into a high-quality digital music file, most commonly in the MP3 format, that weighs in at 5MB, or perhaps a 5- to 10-minute download. A DVD movie occupies a hefty 4.7GB file, which can take more than 80 hours to download using a 56Kbps modem. That doesn’t necessarily make for a quick-and-easy e-mail attachment.

That long download time gives the industry a modicum of protection, Jack Valenti, president and CEO of the Motion Picture Association of America,
said in testimony given to the House Subcommittee on Telecommunications, Trade and Consumer Protection late last month. Valenti added that another factor helping the industry was ”the lack of unprotected digital copies of our works.“

Destroying the gauntlet

But Valenti worried primarily about higher bandwidth greatly reducing download times. Now, the Norwegian programmers have destroyed the digital copyright gauntlet. While the MPAA and its member studios had no comment Thursday, researcher Stephenson thought that future DVDs could be made so they
eliminate the major danger — the PC.

”Standalone DVD players are thought to use a different method (of decryption) than PCs,“ he said. ”It could be possible to make them only work on
DVD players and not computers,“ he said. ”We’ll just have to see what aces the industry has up its sleeves.“

Consumers shouldn’t worry — yet, said In-stat’s Abraham. ”Nothing has happened yet that should make the consumers worry,“ she said. ”When Hollywood and the studios make their move, that will determine what the consumer will do.”