July 17, 2001 Tech Center Sony, Warner Agree on Standard Aimed at Protecting Digital Content By ANNA WILDE MATHEWS Staff Reporter of THE WALL STREET JOURNAL Two big Hollywood studios reached agreements to back technology that protects digital content as it moves between home devices such as set-top boxes, computers and televisions. The accords, expected to be announced Tuesday, represent an early step toward the future of digital home-entertainment networks, in which consumers could make digital copies of programs and view them on several different devices. The agreements involve Sony Corp.'s Sony Pictures Entertainment and AOL Time Warner Inc.'s Warner Bros. studio. They reached the licensing agreements with the Digital Transmission Licensing Administrator, an alliance of five big manufacturers that is widely referred to as the 5C group: Intel Corp., Matsushita Electric Industrial Co., Toshiba Corp., Sony and Hitachi Ltd. The new agreements will one day allow consumers to make digital recordings of some content produced by the Sony and Warner Bros. studios, using their computers or digital video recorders. But the agreements fall far short of an industry consensus, as major entertainment giants such as Walt Disney Co. and Vivendi Universal SA have yet to endorse the standard. The biggest stumbling block is the security of free broadcast programming that is received through TV antennas. Negotiations over the issue have gone on for years. Consumer-products makers want to sell digital devices that will connect with each other in home networks, including digital video recorders. For their part, entertainment companies are worried about consumers making perfect, unauthorized digital copies of their most valuable programs, and zapping them around the world free of charge. More than 50 companies have already licensed the security technology, including makers of set-top cable boxes and consumer-electronics products. But Sony and Warner are the first major Hollywood studios to sign on. Entertainment companies won't let their movies and shows be used in the new home digital networks until they are satisfied with how they will be protected. Under the deals reached between the two studios and the electronics giants, certain instructions and restrictions could be embedded in digital content such as movies. The agreements essentially set up several classes of protection, according to people familiar with them. The most protected class includes pay-per-view movies, which the entertainment companies would be able to prevent consumers from copying without permission. Consumers would be able to record portions of pay-per-view movies, however. The second category includes pay-TV cable programming such as that available on ESPN and HBO. For that, consumers would be able to make a limited number of "first generation" digital copies. But entertainment companies could prevent consumers from duplicating those copies. The question of how to protect content that comes from over-the-air broadcasters is tricky. If consumers receive such broadcasts via cable set-top boxes or satellite dishes, the security technology will allow them to make several digital copies of programs, though consumers could be blocked from retransmitting that content over the Internet. But the new security technology is essentially powerless to stop consumers from copying and retransmitting such broadcasts if they receive them via antenna. In congressional testimony earlier this year, a Warner official told lawmakers that "today's technology can do little that is meaningful to actually prevent signals received over the air from appearing on the Internet. But we do not want to delay the rollout of other types of protectable digital TV until an as-yet-undeveloped solution comes into being." Nonetheless, Disney and other studios -- some of which own broadcast networks -- are holding out for something that would better protect programming that is broadcast over the air. Write to Anna Wilde Mathews at anna.mathews@wsj.com1 Free, encrypted, secure Web-based email at www.hushmail.com