Looks like the movie studios want to tell electronics manufacturers how to do their jobs. If they have their way, apparently all manufacturers of analog-to-digital converter (ADC) chips (such as Microchip, Motorola, National, Scenix, Hitachi, Texas Instruments, IDT, Zilog, and so on and so forth) would have to include an MPAA-sanctioned "watermark detector" in order to stop filthy dirty content pirates from defeating their brilliant digital copy protection schemes:
They give PC video capture cards as an example, but the only way that this could be effectively accomplished is by integrating such a "watermark detector" into all ADC chips - leave any available for "benign" applications like electronic test equipment, medical examination tools, or laboratory measurement equipment, and someone will find them and put them to use in an evil pirate box. Of course, if you happen to be a filthy stinking content pirate, you could just go down to the local Radio Shack and buy the components needed to build your very own ADC. Unless the MPAA demands that watermark detectors be put into resistors and transistors, of course...While the entertainment industry is marching toward an all-digital future environment where robust digital content protection measures will enable a viable market, analog connections to conventional televisions, VCRs and the like will remain for a long time to come. This presents a problem in that digital devices can capture and digitize unprotected analog signals (including formerly protected digital signals that are stripped of their protection as they pass through analog outputs) with complete disregard for current analog copy protection mechanisms, thus enabling a major source of unauthorized duplication and/or redistribution. This attribute will keep analog devices and interconnects around well past their natural extinction.
The primary means to address this issue, dubbed the "analog hole", is via embedded watermarks (which have additional applications as will be discussed below). In order to help plug the hole, watermark detectors would be required in all devices that perform analog to digital conversions. In such devices (e.g., PC video capture cards), the role of the watermark detector would be to detect the watermark and ensure that the device responds appropriately.