Matsushita, JVC Delay DVD-Audio Rollout

Audiophiles eager to try DVD-Audio will have to wait just a bit longer. Matsushita Industrial Electric Co. and Japan Victor Company have decided to hold back their new DVD-A players, in the wake of the widely publicized decryption of the format's copy-protection scheme by a Norwegian computer hacker. The hacker published his workaround of the encryption on the Internet late in November.

Matsushita will delay its new players for about six months while it attempts to come up with a more robust encryption technology. JVC did not specify how long it would wait to bring its new players to market. Pioneer Corp. is also questioning the wisdom of releasing new players when DVD copy-prevention can be so easily defeated.

Electronics manufacturers are responding to an alarm raised by the music industry, which has always been sensitive to copyright issues. Matsushita spokesman Bill Pritchard said his company's decision was in deference to the music industry, which expressed a "need for a more robust encryption system than had originally been proposed." The Consumer Electronics Association recently named the DVD-Video player the most successful new product in history, by far outselling both the CD player and the VHS videocassette recorder in its first two years on the market. Pritchard mentioned that manufacturers were hoping "to ride the coattails of that interest in improved video and enhanced sound." Reaching early adopters—or "trendsetters," as Pritchard called them—is important in establishing a new category of product.

The change in plans was particularly abrupt for Matsushita, whose Panasonic division had announced in early August the impending debut of a line of DVD-A players. Matsushita had planned to launch two new types of DVD-Audio/Video players in December, one of which was a DVD car-audio machine, the other a DVD-A/V player to be bundled with widescreen TVs. The players being held back are in the $1000-and-up category—many of them pre-ordered by customers, according to the Associated Press.

Pioneer had planned to release two high-end DVD-Audio players late in December, one at about $5000 retail and the other at about $2000. Plans for the release of a new DVD recorder will probably not be affected by the hacking incident, said a Pioneer spokesman.

Following months of glowing reports from journalists auditioning DVD-A players privately and at press events, the audiophile community has been eagerly awaiting the new machines. Retail dealers hope DVD-A's high-resolution multichannel capability will rekindle the market for audiophile equipment. There is already a large installed base of multichannel audio systems in home theaters and in automobiles.

The Norwegian hacker claimed to have found an exposed "key" in software enabling computers to read files from DVD players. The software was made by Xing Technology Corporation, a company whose DVD license has since been suspended.

The DVD-Audio delay will scarcely be noticed by ordinary music-lovers—there are almost no discs to play on the new machines. Many observers of the copy-protection issue have noted that no matter how robust a DVD's encryption, the unprotected datastream must be exposed at some point in order for the format to play back. Unprotected data can then be picked off and saved as a file, which can in turn be transmitted to another computer anywhere in the world.

The copy-protection issue is the entertainment industry's worst nightmare, involving complex engineering problems and hard-to-enforce legal regulations. Most of all, it's a tough marketing problem: How do you price recorded music so as to generate decent profits while minimizing incentives for pirates? A clue to the solution may be forthcoming next year.