So it’s time for me to eat crow, or depending on your taste, humble pie. Not so long ago I was confidently predicting a drawn out battle between two high definition disk formats; HD-DVD and Blu-ray. HD-DVD, backed by Toshiba and the DVD standards body offered cheaper players but only a limited range of titles; Sony’s Blu-ray was more expensive but had a larger library of movies. It seemed likely that the two formats would continue to co-exist, confusing purchasers who would continue to vote with their feet and carry on buying DVDs. Suddenly everything changed; HD-DVD is dead. On February 19th, Toshiba announced that it would immediately stop manufacturing HD-DVD players and recorders. In little over a month, HD-DVD had gone from a viable format for the future of movies to a technological cul-de-sac. What had gone wrong?

Two factors conspired to kill HD-DVD. The first was Sony’s technological wonder, the Playstation 3, which comes with a built-in Blu-ray player. After a troubled launch, the PS3 has begun to notch up impressive sales with more than 10 million sold to date (more than a million in the UK alone) – ten times the number of HD-DVD players that were sold during its lifetime. People may not have bought PS3 for movies, but they have certainly been experimenting with Blu-ray disks whose sales have been steadily climbing. The second nail in the coffin of HD-DVD was the decision by Warner Brothers to cease issuing new movies on the format. This left only Universal Studios and Dreamworks as committed to HD-DVD exclusivity for their movies. Within days of the Warner announcement; Woolworths in the UK and the colossal American chain WalMart said they were abandoning HD-DVD; the writing was on the wall for the format.

In the US and Japan, many retailers are compensating purchasers of HD-DVD players, either with cold, hard cash or with credits against the purchase of a Blu-ray player. On the software front, things are grim for HD-DVDs with most studios cancelling future releases; but HD-DVD users are enjoying a fire sale of existing titles as retailers dump their stocks, at the moment disks can be had for as little as £6 apiece – cheaper than DVDs! Existing HD-DVD players will continue to play regular DVDs, and in the event of one failing, Toshiba has stockpiled at least 8 years worth of spare parts. If, like me, you bought into HD-DVD, you will be able to enjoy it for many years to come.

The backers of Blu-ray, most notably Sony and the movie studios, are the victors. Toshiba might have lost this war, but it can easily afford to write off the costs of HD-DVD. The real losers in this war may well be consumers, and that is because we’re going to have fewer ways of enjoying our entertainment.

Region coding is part of a trend in media and computer software known as digital rights management (DRM) that aims to control how media can be used. DRM allows the publisher of a title to say where it can be played, on what machines, if it can be copied to another device, even whether the recording will evaporate after being played. You’ve almost certainly encountered DRM every time you play a DVD. When you first put a DVD into a player you will see a number of warnings about where the disk can be used and the consequences for pirating its contents. You may have noticed you cannot skip past these and get on with the movie – the DRM on the disk temporarily disables the functions that allow you to fast forward and go to the next track. The DRM on the disk also prevents you from copying its contents and from playing disks bought in one part of the world from working inside the UK. You can find a map of these ‘region codes’ on Wikipedia.

The DRM on DVDs was introduced as a reaction to the threat of piracy. Older, analogue technologies – such as audio and videotape can be easily copied, but the process is slow and the number of copies that can be created is very small. Crucially, as tape is repeatedly duplicated, the quality of the copies decreases – effectively limiting the number of pirated copies that could be circulated. However, when information is stored in digital form – such as on a DVD – it can be perfectly replicated an infinite number of times. These perfect copies can then either be written on to a blank disk, or distributed across the World over the Internet.

DVD’s DRM is a fairly elderly technology known as the Content Scrambling System (CSS). It was broken long ago and pirated versions of DVDs, stripped of all their DRM (often without the infuriating anti-piracy adverts found on genuine disks), can be found in most towns and cities and circulating on the Internet. When movie studios began to plan the move to high definition disks, they chose more powerful forms of DRM. Blu-ray’s protection is called BD+ and is generally thought to be superior to the AACS system found on HD-DVD as it allows manufacturers to continually upgrade their DRM against attacks. Unlike HD-DVD, Blu-ray also uses region coding to stop users playing and importing disks from other parts of the world. It is widely believed that the movie studios put their weight behind Blu-ray because of its stronger DRM, both because it offered better protection from piracy, and because it served to block the traffic in cheap disks from places such as the United States and Hong Kong.

DRM is not only found on DVDs, it is used by games companies to protect their products, in satellite and cable set-top boxes, on most music bought from online stores, even in the expensive HDMI cables needed to connect to high-definition television sets. Although there are a huge number of DRM technologies being used by various companies, most of them share a common technological root known as encryption; a field of mathematics concerned with scrambling information to shield it from prying eyes. Crucially, encryption is always reversible – that is the scrambled material can be restored to its original state by performing a decryption. Media documents controlled by DRM are distributed in an encrypted form and can only be decrypted by a user if they own both a decryption program and a second piece of information known as the key. The decryption is performed by dedicated microprocessors in the player using decryption keys stored in the player’s memory. If you use a software application such as Apple’s iTunes to play media files, your computer’s processor performs the decryption and the keys are stored in hidden files on your computer’s hard disk.

Some DRM schemes such as Apple’s FairPlay and Microsoft’s PlaysForSure tie media files to particular authorised computers. When you authorise a computer, the player software extracts information from that machine which might include information including your name, your registered email address, the unique serial number of machine’s CPU, the serial number of the operating system and so on. This information is used to generate the key needed to decrypt the media file. For both FairPlay and PlaysForSure users are restricted to playing a file on no more than five computers; if you try to play a file on an unauthorised computer or to authorise a sixth computer you will be unable to do so.

In Microsoft’s PlaysForSure scheme, machines need to be reauthorized when users upgrade from one version of Windows to another. Information about the machine is gathered, sent across the Internet to the PlaysForSure servers and a new key issued. And this process is now causing a problem because Microsoft is abandoning PlaysForSure in favour of its own Zune music player.

PlaysForSure was an attempt by Microsoft to eat into Apple’s dominance of the music player market. Rather than build a single device to compete against the iPod, Microsoft produced the PlaysForSure standard. Any manufacturer could then build devices PlaysForSure compliant devices with Microsoft collecting a small fee for each machine sold. Music, wrapped in DRM, could then be bought from a number of online stores that supplied music in Microsoft’s Windows Media Format. The idea was that competition between manufactures would quickly drive the price of their players below that of the iPod and users would gradually switch to the more affordable product, allowing Microsoft to steal Apple’s crown.

For any number of reasons, PlaysForSure was a failure and have Microsoft switched to copying Apple’s business model. They designed their own music player, the Zune (so far only available in America) that plays music bought through the dedicated Zune Marketplace online store. Rather than have Zune compete against iPod and PlaysForSure, Microsoft has chosen to kill PlaysForSure by simply switching off the authorisation servers. As soon as the servers are switched off it will no longer be possible to get new PlaysForSure keys from Microsoft. Anyone buying a new machine or upgrading their version of Windows after that date will find they can’t play music purchased from Microsoft’s old MSN Music store. Microsoft originally intended to switch the servers off on August 31st 2008, but after a furious customer reaction, have since extended the scheme, now excitingly branded 'Certified for Windows Vista', until 2011. Hot on Microsoft’s heels, the troubled Yahoo! corporation announced that it would be shutting down the DRM servers that authenticated its Unlimited Music Store from September 2008. This time, following angry complaints from customers, Yahoo! agreed to refund the purchase cost of any music bought through Unlimited.

DRM is turning into a public-relations disaster for media companies. Customers are increasingly chaffing against the artificial restraints placed on their use of products, and more and more of them are realising that DRM only affects law-abiding customers. Pay for a DVD or Blu-ray and you can’t make a copy for your laptop or your iPod, you’re forced to sit through adverts, you can’t even buy a cheaper version of the disk from another country. Pirate copies of TV programmes, music, movies and video games are available on the Internet; they look identical but have none of the restrictions. Piracy exists because it serves consumers’ desires and until the movie studios make their official disks every bit as attractive as the illegal copies, piracy will continue to thrive.

But it is possible that DRM is nothing more than a passing phase in the media industry. Amazon in the US and iTunes now allow people to purchase MP3 versions of music which can be freely copied between devices. As a testament to its popularity, it took just a few months for Amazon to become the second-largest retailer of music in the United States after the iTunes Music Store and it is growing at a much faster rate than the Apple Store. Despite fears from the industry, there has been no explosion in piracy; just many more satisfied customers and an expanding marketplace. Perhaps it’s time for Hollywood to wake up and begin treating the people who pay its wages like responsible adults.

About the author

Mike Richards joined the Open University in 1996 to help trial teaching over the Internet. Since then he has taught courses ranging from an introduction to robots to the engineering works of Leonardo da Vinci; but has spent most of his time writing about security - everything from the Enigma machines to e-shopping. He is currently working on a new course exploring the world of ubiquitous computers; imagine a world where computers so small and cheap they can be put in everyday objects - smartphones today, smartclothes tomorrow.

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William Henry Gates, known to his friends and the rest of us as Bill, is probably the world’s most prominent entrepreneur. From a teenager’s interest in computer programming, he founded and built Microsoft to its position of global dominance of the vast personal computer market. He is certainly one of the world’s richest individuals. Entrepreneurs, entrepreneurship and enterprise are today very fashionable topics. The self-made, intelligent and visionary individual, who sets up a business that eventually arrives on everyone’s ‘must have’ list and sees off all rivals, is now the focus of press, film and TV. Entrepreneurs are now role models. Yet, in 1955, when Bill was born in Seattle, very few people ever mentioned the word ‘entrepreneur’. Even as recently as 1975, when Bill Gates and Paul Allen founded Microsoft, calling a business person an entrepreneur was often a term of abuse in Britain, if not in the US.

Bill Gates.
[image © copyright BBC]

However, merely being extremely rich is not the same thing as being an entrepreneur. There are plenty of people with inherited wealth who did not have to lift a finger or take a risk. The term was first used to refer to merchants and traders who were prepared to bear the risk of buying goods and services at certain (fixed) prices, to be sold elsewhere or at another time for uncertain future prices. They were people who had the skills and energy to spot opportunities in trade and to act on their judgement. In the 1920s, Joseph Schumpeter, an Austrian economist, took the view that entrepreneurs are not opportunists but are energetic and competitive people who seek to gain an edge over their rivals by creating and adopting innovations. By this, he meant not only new goods and services but also novel processes, marketing, distribution, financing and ways of doing business. Thus, ‘modern’ entrepreneurs, in contrast to ‘classic’ entrepreneurs, create their own luck and opportunities. Furthermore, they are controlled rather than unbridled risk-takers. Schumpeter, however, was also interested in the motivation of the entrepreneur, which he ascribed to three main drives – a desire for social status, the joy of creativity or a desire to conquer, win and beat rivals (what is now often called need for achievement). So, what sort of entrepreneur is Bill Gates – classic or modern?

"merely being extremely rich is not the same thing as being an entrepreneur"

Bill Gates was born in Seattle to a father who was a leading lawyer there and a mother who was part of a prominent banking family. So, young Bill had no problem with social status and the family was not short of money. However, there is evidence that Bill was driven by a joy of creativity. As a boy, he was fascinated by computers and programming. He even managed to convince his teachers to let him drop maths so that he could pursue programming. At the age of 14, Bill and his school friend, (and future Microsoft partner) Paul Allen, converted an Intel processor into a traffic counter and earned $20,000 each for themselves. Six years later, in 1975, Paul talked Bill into dropping out of Harvard and travelling halfway across the country to New Mexico, in order to develop an interpreter of the BASIC programming language for the new Altai microcomputer. This opportunity gave birth to Microsoft but was clearly driven not by a desire to beat competitors but more by a love of doing something new, with new technologies, in a new industry.

Within ten years, however, Microsoft was creating its own opportunities and was on the path to becoming the $50 billion, 80,000 employee, multinational, dominant force that it is today in computing. The big opportunity came in 1981, when IBM turned to Microsoft to produce the operating systems for its new personal computers. To meet the IBM deadline, Microsoft bought the rights to an existing system for $50,000 and adapted it into the PC-DOS. Each IBM PC sold included the Microsoft system yet Microsoft retained the rights to sell to other customers. As clones of the IBM PC began to flood the market, they too were mostly using the Microsoft disk operating system (MS-DOS). As the money poured in, Microsoft stepped up its R&D so that it soon began to lead, rather than follow, market developments. So, Bill moved from being something in between an enthusiastic hobbyist, and a classical opportunity spotting entrepreneur, into a thoroughly modern entrepreneur who savours the creating of new opportunities. Bill now clearly enjoys being a winner.

Weblinks

• Join the discussion
• What makes an entrepreneur?
• Are you an entrepreneur?
• Just Do It
•  
• Watch the trailer
• Video extras: Bill and Paul's excellent adventure
• Is Microsoft finally breaking the mould?
• Bill Gates: The skills you need to succeed
• Profile: Bill Gates

Courses

• Professional certificate in management
• Investigating entrepreneurial opportunities

About the author

Colin Gray is Professor of Enterprise Development at the OU Business School, where he is responsible for research and teaching in small business and entrepreneurship.

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One afternoon in the late 1990s, I was sitting in traffic on the mile-long floating Lake Washington Bridge, driving back home to Seattle from my office in suburban Redmond. My flatmate and I, who shared the 12-mile commute, were talking about our respective days at the office. “Do you think,” he asked me suddenly, “that one day, we’ll be telling our kids about how we were a tiny part of one of the most revolutionary movements in American history? That one day we’ll look back and say, ‘You know, I worked at Microsoft in the late 90s’?”

There’s no doubt that it was a heady and exciting time. The Seattle area, where we lived, was home to some of the most impressive names in technology. There was Aldus (later Adobe), who revolutionized desktop publishing; Real Technologies, who created one of the first platforms for streaming audio content; Amazon, who turned the relatively new Web into a marketplace; and hundreds of others.

Bill Gates.
[image © copyright BBC]

As a young university graduate in the mid 1990s, I began to hear rumblings about how the Internet, which at that time was still very limited in scope, was changing everything. And the west coast was the place to be. Fortunately, I had family in the Seattle area, so I packed my bags and, like generations of Americans before me, headed west.

Within days I had a job with a large software company at twice what I was making on the east coast, and within a few months I realized the reality of high-tech work in Seattle: sooner or later, almost everyone ends up working for Bill Gates. The company couldn’t grow fast enough and soaked up every talented body that came to town – from computer programmers and math geeks just out of university; to English graduates like me and many of my technical writer and editor colleagues; to people like my flatmate, who had dropped out of seminary on a summer field trip to Seattle and parlayed his technical abilities into a well-paying job formatting and producing technical manuals at Microsoft.

"known by his email alias (as was almost everyone at Microsoft), billg was always present and active in the company"

The culture of the company was exciting and new at the time, even if it has now become something of a cliché. We worked hard and it was an exciting intellectual challenge, and late nights and weekend work were common. Holidays – just two weeks per year – had to be taken around the cycle of product releases, and when things went into “ship mode,” usually about four to six months prior to releasing a product, everything in your personal life went on hold. But at the end of the cycle, once the product was released, the company always sponsored a massive party. Sometimes lasting over a few days, they consisted of everything from bouncy castles and a barbecue in the car park to weekend ski trips to Canada.

Known by his email alias (as was almost everyone at Microsoft), billg was always present and active in the company, even as it grew to upwards of 20,000 employees, and it was common to see him around campus. Occasionally, I saw him doing that same cross-lake commute, just like many of his employees. Tough and demanding, he was passionate about the company he created, and he wanted nothing less from all of us who worked for him.

In return, the perks of working for the company were second to none. The health insurance, which is a must in the US, was gold plated; the stock option grants made millionaires of thousands of early employees. Set carefully in stands of evergreens, almost every office in the campus looks out onto the beautiful scenery. And every building featured the necessities: a coffee stand and a café open from early in the morning until late in the evening, so you never need leave the campus (or your work).

When I started working at Microsoft, I was just 25 years old and the Internet revolution was just getting underway. I remember thinking, naive though it was, that it might just be the pinnacle of my working career – it may be the last place I worked. But as I sat with colleagues in the Redwest café one sunny summer afternoon, eating lunch under a section of the Berlin wall (part of the company’s permanent collection of art and historical artifacts), looking out over the evergreens to the stunning snow-capped Cascade mountains, and discussing a new feature for one of the world’s most popular software products…well, maybe I could be forgiven for getting caught up in the moment.

Weblinks

• Join the discussion
• What makes an entrepreneur?
• Are you an entrepreneur?
• Just Do It
• Watch the trailer
• Video extras: Bill and Paul's excellent adventure
• Is Microsoft finally breaking the mould?
• Bill Gates: The skills you need to succeed
• Profile: Bill Gates

Courses

• Professional certificate in management
• Investigating entrepreneurial opportunities

About the author

Gabriel Reedy is a lecturer in learning and teaching innovation in The Open University Business School. His research focuses on the social and cultural impacts of teaching and learning technologies, and he studies how technology can support professional learning.

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