Thomson Multimedia S.A. is banking on smart-card and encryption technology to put Hollywood more at ease with developing and distributing digital video content. Thompson's SmartRight system would use smart cards to prevent viewers of digital films and video broadcasts from sharing that content beyond the walls of their homes. Observers say movie studios and television broadcasters are concerned that a video version of Napster will lead to such redistribution and eat into home-entertainment revenue.

For SmartRight to be effective, it would have to be adopted by makers of high-definition TVs, set-top boxes, digital video recorders, and PCs. Thomson makes high-definition televisions, set-top boxes, and satellite television hardware, but it would need the cooperation of computer makers and legislators, who would have to mandate the inclusion of the technology in future hardware. Dave Arland, director of government affairs for Thomson, says he expects significant resistance from computer makers, which have historically opposed the embedding of copy-control technologies in their products.

Analysts are applauding the move as a needed step toward providing the security Hollywood desires, but they're skeptical that consumers will embrace devices that require use of smart cards. Moreover, they say, movie studios and broadcasters may not respond to a viable security system if consumer adoption of HDTV remains sluggish. "Hollywood has to see value in the channel," Webnoize analyst Lee Black says. "Right now there's no value."

Arland admits that the SmartRight technology is "not a panacea" for securely distributing digital video, but he scoffs at the notion that consumers won't buy devices dependent on smart cards. Arland points out that Thomson has sold 10 million DirecTV satellite receivers equipped with smart cards during the past seven years. He says SmartRight simply represents an effort to encourage Hollywood to develop digital content. "It's one way to keep the digital genie in the bottle."