The fatal flaw in distributing encrypted media

The new HD-DVD encryption scheme has been partially, but not completely, broken.

Studios’ DVDs Face a Crack in Security - New York Times

...If the person who identified himself as Muslix64 is able to create a complete version of a decryption program, or if others extend the software so that consumers without technical expertise can readily make copies of movies, that would create a crisis for the HD-DVD camp. That system contains a “revocation” mechanism for shutting down HD-DVD players whose encryption system has been compromised. But industry analysts say that taking such a step would give the HD-DVD system a tremendous black eye, angering consumers and shaking the confidence of Hollywood studios in the system.

Today’s DVDs are protected using an earlier encryption technique known as Content Scramble System, or C.S.S. That system was undermined in 1999 by a small group of programmers, and movie studios have said that the new A.A.C.S. would not fall victim to the same kind of technological attack...

Interesting story, but it's not the fatal flaw in DVD encryption. The fatal flaw is that the media is physical, and thus out of control of the rights holders. Sooner or later, sometime in the next 20 years, the "old" keys are released or broken, and shortly thereafter every movie on every physical DVD will become shareable.

The movie industry presumably knows this; they must truly hate the entire idea of HD-DVD and any form of persistent distribution of movies.