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Microsoft would like to see Vista made the basis of a home entertainment system. To do that, they'll need to be able to play all of the most popular movies.
The companies that own and distribute the movies are reluctant to do that, because digital distribution makes copyright infringement very easy. Since these are clearly properties with value, in the sense that people will pay for it, they don't want to compete with illegal free copies.
Microsoft is jealous of Apple, which leapfrogged it on the music scene with iTunes Music Store. Apple made iTunes so popular partly because they got a lot of major music companies to sign up, and they required DRM to be comfortable with that.
DRM is less effective for music, partly because CDs don't have it. Since it requires only one copy to be ripped, there's no real reason to have DRM on anything, so Apple is gradually getting rid of it.
The market for home delivery of movies, however, is still open, and Microsoft would like to win that. DVDs, unlike CDs, aren't easy to copy, and since good-quality rips are so big, illegal downloads are unreliable.
MS hopes to make their DRM the standard, with all of the movie and TV studios buying into it. Potentially, that would open up an enormous market for Windows machines, next to every television set.
Thus far it doesn't seem to be working, for a variety of reasons. The studious haven't yet bought into it. Vista offers few real advances over XP, and the dearth of video content isn't making it any more compelling, so the studious aren't jumping to take advantage of it.
And besides, people can still rip DVDs, and an awful lot of people are content with low-quality copies downloaded via p2p, even while HD broadcasts are making those copies look even worse.
Nonetheless, MS has a strategy, and they don't seem to be able to change course.
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