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AACS (Advanced Access Content System) is the HD disc version of ACS copy protection. With HD DVD AACS was optional but with Blu-ray things are different. “With Blu-ray AACS is mandatory and the licensing fees are ridiculous,” says Bruce Nazarian, president of the DVD Association (DVDA). “An independent producer who wants to put out a title on Blu-ray is going to spend close to $4300 just to buy in, just to get in the gate in order to pay license fees, before they’ve even managed to replicate a single disc,” he says. “If you want to make a Blu-ray disc of any kind and replicate it, you have got to buy into this AACS licensing fee which is currently a deal breaker for most of the second-tier producers.” At the DVD/BD production house Scope Seven, company president Duncan Wain works mostly on projects for the big Hollywood studios, to whom these licensing fees are chicken feed. So he doesn’t worry about these fees personally, but he’s seen the impact the fees have had on smaller independent producers, developers, publishers and distributors. “If you are going to press a Blu-ray disc, you have to have an AACS key which requires an upfront fee of about $3,000 as sort of a starting fee, and then pay $1,300 per key, plus a per-disc royalty on top of that. So when you add all that up, for a first-time independent producer to put out his first BD title, it cuts really deep into his potential profit,” says Wain. “This is detrimental to a publisher whose margins are thin. They put numbers into spread sheet and look at the bottom line to see if there’s any black ink and depending on how much black ink they see they may change their minds about releasing that title.” Larry Applegate, president and owner of Rivergate Software, the publisher of a popular development tool called DVDAfterEdit, has also seen the effects of AACS licensing fees on the smaller shops. The big studios can easily justify these fees for the commercial release of a blockbuster movie, but for independents interested in releasing special-interest discs, these fees are problematic. “That doesn’t work for a fly-tying video,” says Applegate. But what’s wrong with copy protection? Isn’t copy protection a good thing? Well, sure, to a point. But the DVDA and many other people in this industry feel that the AACS Licensing Administrator, LCC (AACS LA) is charging excessive fees that are inhibiting industry growth. “The Blu-ray Disc Association added AACS to the format for content protection, for piracy protection,” says Nazarian. “And in a way it makes a lot of sense. If the guardians of AACS are rigidly riding herd, that’s one way of dealing pirates out of the game. But unfortunately, if you are riding herd in such a way that people who would love to embrace it can’t afford it, you’re throwing the baby out with the bath water.” Other industry insiders point out that AACS encryption has failed at riding herd on pirates. As Wikipedia notes, “Since appearing in devices in 2006, several AACS decryption keys have been extracted from weakly protected software players and published on the Internet.” This raises the question: Why is an industry being strangled in order to support a copy protection method that isn’t even effective? FEARS FOR TIERS
For the big Hollywood studios (and there are only six or seven of them), AACS fees are not a big problem. But the Hollywood studios are only the tip of the iceberg that is the DVD/BD disc industry, explains Chris Brown, vice president of the DVDA. The bulk of the industry is made up of small and medium-sized companies that drive format acceptance in the marketplace, and drive technical innovation. And these are the people who are being hurt by AACS fees. Brown explains that for analytical purposes, the DVDA divides the industry into three “tiers.” The big Hollywood studios are in tier one. In tier three are the really small guys, the “prosumers,” says Brown--“people who don’t replicate but use the technology, the one off shops, people who do wedding videos and want to use DVD to distribute.” Tier 2 is everyone else, the medium-sized guys. This huge group represents about two-thirds of the DVD market, says Brown. These are the “independents,” he says, the people who do “non-Hollywood replicated DVDs, the specialty titles, the direct to DVD non-Hollywood feature films, the corporate training videos where you have to do a replication run to get it out there.” These Tier 2 people are really feeling the pinch, because AACS fees can “double the budget,” says Brown. “This makes the economics less feasible. A 10,000 disc run use to be viable but no longer.” AACS fees “create an artificial barrier,” says Brown. “The unfortunate thing is the independents are not going to be able to play very hard in the Blu-ray space.” This is bad news for the entire industry, including the big Hollywood studios, says Duncan Wain, because the big guys need the little guys to make the BD market grow. “It is the independent producers who really launched the SD format,” he says, “who pushed it along with large amounts of content getting into the marketplace. Right now all we can rely on to get HD content out there is the big seven studios. And ultimately, that’s probably not going to be enough to get the Blu-ray industry really going.” Nazarian agrees with Wain and believes the big studios and the AACS Licensing Administrator (www.aacsla.com) should be encouraging the little guys rather than discouraging them. “It’s not the most efficient way to promote a new format,” he says. “With one hand you’re motioning: come on in, the water’s fine; and then you slap them in the face.” SIMPLE SOLUTION
The solution to this AACS fees situation is not a technological problem but a political one. Unfortunately, political problems are often the most insoluble kind. Larry Applegate sees the solution as being rather straightforward: “If Blu-ray is to survive, they [the AACS LA group] have got to either reduce the price of AACS or make it optional.” Nazarian doesn’t think the Blu-ray Association is going to lift the AACS mandatory requirement anytime soon, but he’s hoping for fee reductions. “Second-tier people who are looking at Blu-ray, and looking at what it costs to get in, can’t afford to replicate because there is the AACS brick wall in their way,” says Nazarian. “The only way to get around that is to figure out a way to make the AACS licensing less of an impediment, and than means reducing the cost and reducing the complexity.” It’s a simple solution, says Nazarian; just as there is a tiered market, there should also be a tiered fee structure for AACS. The licensing group should switch to a graduated fee/royalty system based on volume of discs sold. But as the cynics note, the AACS LA consortium seems to be dominated by its big studio members: Disney, Sony, and Warner Bros. The big studios seem to have little motivation to change the rules. Nazarian and others, however, believe the studios should revise their attitude, because resolving this problem is in their self interest. “Someone has got to beat the AACS licensing authority over the head diplomatically and somehow get them to understand that these extreme restrictions are impinging on the second tier producers’ ability to embrace the Blu-ray format the way the BDA would like people to,” says Nazarian. THE FUTURE IS BLEAK
Will Blu-ray ultimately be a hugely successful media format like its predecessor DVD? Or is it a flash-in-the-pan media that is too little too late? Well, lots of people at the DVDA feel the answer to that question will depend on whether or not the “AACS brick wall” is removed or not. The format needs to grow quickly before it’s too late. The Tier 1 big guys need the Tier 2 little guys, whether they realize it or not. At this point the ultimate success of Blu-ray is far from guaranteed. The consolidation from two competing formats to a single standard will help the market, but just because Blu-ray no longer faces competition from HD DVD doesn’t mean it is without competition. Larry Applegate looks at all the flash drives on the market and wonders if any disc media can long compete in the marketplace. “Optical discs are becoming less favorable, because you can get a flash drive now that holds 8 gigabytes. It won’t be much longer until you can get one that holds as much as a Blu-ray disc.” He also sees movie downloading getting easier and more popular. “Blu-ray could fall flat on its face as consumers go after internet downloads instead. I don’t know how long BD is going to last; it may be destined for failure.” Chris Brown is more optimistic about Blu-ray’s fate: “I see opportunity, because I think Blu-ray is going to be the first real interactive living room application. The interactivity and web connection will lead to some actual killer apps, George Jetson stuff. So I believe a fixed medium product will remain competitive with the whole online interactive stuff. Why go to an extra step to put something on disc? Well, because it will be appealing. And the studios are going to have to work to make them appealing.” PIPE DREAMS?
But Brown also admits that his optimism is predicated on the assumption that the AACS problem will be resolved in a timely manner. Unfortunately, that’s an even bigger leap of faith than Brown’s intrinsic faith in the medium. His colleague Nazarian is perhaps a bit more fearful. He feels certain the AACS issue, in time, will be resolved, but he fears it may be resolved too late for the wellbeing of the industry. He’s watching the wheels of bureaucracy slowly grind and is praying for some lubrication. While some people might compare the rate of the resolution process to the flow of molasses in January, Navarian has a more colorful and appropriate comparison. “This problem will be resolved via a process similar to sludge moving through a narrow pipe,” he says. Mark Fritz (markfritz at intergrafix.net) is a contributing editor to EMedialive and Streaming Media and a freelance writer based in Bloomsburg, Pa.
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