Intel's new movie service, Intel Insider, is a lot more interesting for what it signifies than for what it actually is. The service, which takes advantage of a new hardware module inside Sandy Bridge's GPU to enable the secure delivery of downloadable HD content to PCs, has been blasted as "DRM." But of course it's only a DRM-enabler—a hardware block that can store predistributed keys that the Sandy Bridge GPU uses to decrypt movies a frame at a time before they go out over the HDMI port.

This hardware-based encryption scheme is also just the latest chapter in a long, sorry story of electronics industry capitulation to the much smaller, but incredibly powerful Hollywood studios. There was a time when Intel and the rest of the consumer electronics industry could have chosen to stand up and fight, but that window has now closed. The fix is in, and Hollywood is likely to get everything it wants from here on out.

Time for your own set of keys, son

Despite the fact that everything at Intel's press conference yesterday had already been announced, the event was nonetheless revealing. One moment in particular stood out as emblematic of the new state of play in the consumer electronics market: when the president of Warner Brothers Home Entertainment Group, Kevin Tsujihara, took the stage with Intel's Mooley Eden, every aspect of their interaction made it clear that Tsujihara was holding all the cards, and that Eden and Co. were just aiming to please their cool new friends from Hollywood.

Eden made several explicit references to the fact that Intel had built the HDCP-enabling part of Sandy Bridge solely to please the studios, and Tsujihara followed up by explaining that, before Intel Insider, the PC could only be "trusted" with lower-value, non-1080p content. "Your platform is going to enable us to release our highest value content on the PC," Tsujihara told Eden.

In other words, "you done good, son... your little platform is all grown up now, and it's time for you to have your own set of keys to the family station wagon"—I half expected Tsujihara to fondly pat Eden on the head.

Hollywood to devicemakers: cripple your product, or else

The moment that played out at Intel's press conference was a long time coming. Intel's own prior history of failed attempts at pleasing the studios aside, the consumer electronics industry once actively resisted the advent of DRM, and it's not hard to see why. The burden of supporting Hollywood's parade of failed DRM schemes has fallen exclusively on the technology makers, who must add costly hardware and software to their products to restrict their functionality in ways that consumers detest. Think about that: Hollywood demands that the CE industry pay to develop and support a set of features that actively degrades the user experience and decreases the attractiveness of its products.

It didn't necessarily have to be this way. Back in 2006, we half-jokingly suggested that for the price of a single 65nm fab, Intel could buy "25 King Kongs, or over 350 Brokeback Mountains, or 1,000 $5 million episodes of a big-budget HBO series like Rome or The Sopranos." Maybe it was folly to suggest that Intel buy a few studios and give away content as a loss leader to sell hardware, but the point still stands: Intel's market cap is over three times that of Tsujihara's parent company, Time Warner. But Intel and the rest of the CE giants have been jumping through hoops to please these relatively tiny companies since day one, when their marketing budgets (Intel's alone is typically over $1 billion) could have easily paid for enough premium content to sell hardware.

While it may be a mystery as to why Intel and the rest of the CE industry have let things get to this point, it's perfectly clear why Intel is in the position it's in at this week's CES: ARM.

Strong ARMed

When Tsujihara was shaking Eden's hand on stage, he was probably thinking about the upcoming spate of ARM processor announcements that would happen that day, and about the fact that it probably wouldn't make much difference to him in the long run if Intel had refused to play ball. In everything from smartphones to Internet-connected TVs to Windows workstations, the CE industry will soon have a viable alternative processor architecture in ARM.

The many makers of ARM chips can easily add any kind of module that Hollywood likes into their SoCs, consumers will buy them, and nobody will editorialize about how this or that chipmaker sold out to The Man. Hollywood can play the individual ARM chipmakers against each other, and it can play the whole ARM ecosystem against Intel in order to get what it wants. The studios now have all the leverage they need at every level of the stack, from chips to software to devices to service providers. An Intel with a monopoly on CE might have been able to keep Hollywood in check, but no one has a monopoly in the CE space. And that works to Big Content's advantage.

Hope springs eternal

Despite all of the developments described above, the way the music DRM struggle turned out gives some hope that sanity may yet prevail with movies. Eden may have kowtowed to Tsujihara publicly, but the Kangol-wearing geek may have the last laugh. In the end, Sandy Bridge's DRM-enabling features (which could also be used for more constructive purposes, like preventing game piracy) won't do a single thing to combat the movie piracy phenomenon, and Eden certainly knows that.

The nature of digital files is that once there's a single unencrypted HD copy available in the wild, there's an infinite number. Hollywood would have to secure every last digital copy with hardware encryption comparable to Sandy Bridge's, and that won't happen. Blu-ray has proven all too crackable, so every Blu-ray release is quickly available on file-sharing networks. Indeed, while Intel and Warner Brothers may speak of closing the gap between a Blu-ray release and a 1080p digital download, for many tech-savvy PC users that gap is already just a few hours.

Here's hoping that Hollywood will spare consumers and the CE industry the pain of developing, implementing, and maintaining the kind of cross-device DRM interoperability that Verizon and Time Warner execs fantasized about at the CES kickoff keynote, and just start selling unprotected downloads.