Specifically, the AnyDVD HD software cracks the Advanced Access Content System (AACS), a specification for managing content stored on the next generation HD DVDs. A consortium of companies, including IBM, Microsoft, Intel, Panasonic, and Sony, developed the spec and license it to manufacturers in an effort to protect video content.

"Officially, the film industry and the AACS consortium is, of course, not very happy about this development," SlySoft said in a published statement. But the company also said that, behind closed doors, the movie industry is "likely pleased" that users are now able to make "unlimited use" of the HD DVD platform.

Beyond Cracking

It is unlikely that the film industry will consider the cracking software to be a boon to the industry -- judging by its responses to such software in the past -- but AnyDVD HD does far more than crack encryption. It lets consumers adjust the speed of an HD DVD drive to reduce its noise level. And the software lets consumers remove subtitles, FBI warning messages, and the RPC region code that would otherwise prevent them from watching movies on any HD DVD player.

AnyDVD HD also comes with a file ripper designed to make it easier for consumers to store the movies on their hard drives. And, according to SlySoft, the "magic file replacement" feature even lets consumers remaster commercial movie discs.

The Antiguan developer, which also produces several other copy protection cracking software tools, said it plans to develop a similar program to crack Blu-ray copy protection. Blu-ray discs have an added layer of protection beyond AACS. A beta version of the Blu-ray cracker will reportedly be available in the first quarter.

SlySoft's claims about it software appear to be accurate. The company has a track record for its ability to hack CD and DVD copy protection and let consumers clone the files.

Copy Protection

Adrienne Downey, a senior analyst at Semico Research, said she is not surprised that SlySoft cracked HD DVD encryption, or that it's selling the software directly to consumers.

"Consumers can find a key on the Internet to crack just about any software these days," she said. Unless the AACS devises a new system for copy protection, which would also require a change on the hardware side, SlySoft's $79 program could leave HD DVD open to piracy, Downey noted.

Although some industry analysts believe the film and music industry will eventually scrap complex copy-protection schemes, concerns over piracy could instead lead the movie industry to develop a distribution model in which consumers download content and pay for a predetermined viewing time before access expires, Downey suggested.

"There would be a huge consumer backlash against something like that," she concluded. "But it may be the best way to protect the content."