Neustar gets deal to work on movie download anti-piracy system

Terms of Neustar's deal with the DECE were not disclosed.
Terms of Neustar's deal with the DECE were not disclosed. (Lois Raimondo/the Washington Post)
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By Mike Musgrove
Washington Post Staff Writer
Thursday, January 14, 2010

A Sterling-based company has been tapped by a consortium of Hollywood studios and technology companies to manage a database that would limit piracy while giving consumers the ability to watch downloaded video content on a variety of gadgets and devices.

The Digital Entertainment Content Ecosystem announced this month that Neustar, formerly a division of Lockheed Martin, will operate an upcoming "digital rights locker" system, designed to let users who legally purchase movies online view that content on smartphones, laptops or the living room TV.

The DECE technology, which is in the design stage, aims to give consumers more flexibility with the content they purchase while still employing digital rights management tools designed to discourage piracy. "Buy Once, Play Anywhere" is the marketing pitch; a launch date has not been announced.

The technology is meant to address a market in which consumers are increasingly expecting their electronic devices to connect with multimedia services. Nintendo, for example, announced on Wednesday that it will soon be possible for Wii owners with a Netflix subscription to view movies streamed via the Web to the game console.

Neustar was created as a result of the Telecommunications Act of 1996, when consumers gained the right to take their telephone number with them if they switched carriers. The firm manages the central directory of area codes and phone numbers that make calls made across competing service providers possible.

"This is actually right in our sweet spot," Lisa Hook, Neustar's president and chief operating officer, said of the DECE deal. "Our core business is managing complex ecosystems around portability."

Terms of the deal were not disclosed. The company is in a quiet period that prohibits it from disclosing details about the new business, but at least one analyst said she thinks the deal will not contribute greatly to the company's bottom line.

Katherine Egbert, an industry analyst with Jefferies & Co., downgraded her rating of the company from "hold" to "underperform" last year, and news of the DECE deal wasn't enough for her to reconsider her rating. "There's probably not a lot of money in it, is my guess," she said.

Most of Neustar's revenues are fixed by its number portability contract, she said -- and the terms of that contract were revised in a way that was slightly unfavorable to the company last year.

For the third quarter, Neustar reported revenue of $117.2 million, a 5 percent decrease from $123.8 million a year earlier. Net income totaled $24.5 million, compared with $28.4 million a year earlier. Still, in the past year, Neustar's share price has climbed from under $20 to $24.

DECE counts most of the major movie studios as members, with the exception of Disney. Many powerful tech and retail players, such as Microsoft and Best Buy, are members -- though Apple, the company with the most success in the area of selling downloadable content, is not.

Mitch Singer, president of DECE, and Sony Pictures Entertainment's chief technology officer, said that downloaded movie content hasn't seen the "hockey stick growth" pattern generated by DVDs in their early days because consumers are waiting on a technology that simplifies the process. Currently, consumers are faced with a confusing market in which content can be hemmed in by proprietary tech standards, and a movie bought from one company's online store might not be compatible with a smartphone built by another.

"On the surface, it sounds fantastic," said Danielle Levitas, an analyst with IDC, of the DECE technology. But Levitas also wonders if consumers have already gotten used to devices that stream video content and don't necessarily require the type of ownership that Neustar's database would track. "I think the market is starting to move past ownership and is much more focused on rental now," she said. "There's a cultural shift around getting stuff 'on demand' and watching it once."

While Singer acknowledged that "time is not our friend" as DECE gets ready for the market, he does not count Neustar as one of his worries.

"We're very happy with the selection," he said. "Neustar came with a very solid team, both from a technical standpoint and a management standpoint."

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