Netflix Gets Hacked

First Netflix slashed its prices. Now the company’s under attack from a hacker who found a way to keep the company’s downloaded movies.

The hacker claims to have
cracked the digital rights-management software encoded in Netflix
“Watch Now” movies, enabling those who follow his step-by-step guide
to keep the movies indefinitely.

In a post on forum.rorta.net titled “How to Rip Netflix ‘Watch Now’
Movies,” a user going by the handle DIzzIE [antikopyright 2007]
claims to explain how to save and decrypt the downloadable Watch Now movies from
Netflix so that “you can convert them to other mediums and watch them
at your leisure.”

If that’s all users could do with their illegal copies of Netflix
films, DIzzIE’s crack wouldn’t pose much of a threat. The problem is
that, like DIzzIE, Internet users like to share.

It’s likely that ripped
versions of Netflix films will end up getting distributed over bit-
torrent networks if DIzzIE’s how-to guide lives up to its claims.

Netflix did not respond to requests for comment.

Of course, the fact that some customers illegally copy rented movies
isn’t anything new, but this development comes at a particularly poor
time for Netflix.

Last month, Netflix announced it was cutting the
price of two of its most popular subscription plans by $1. When Netflix reported its 2007 Q2 earnings the next day, investors
found out why.

“As expected, intense competition slowed second-quarter revenue and
subscriber growth, even while we delivered near-record net income,”
Netflix co-founder and CEO Reed Hastings said in
a statement.

On the bright side, at least for Netflix, is that its competition — namely Blockbuster — didn’t fare much better during Q2. Total revenues
decreased 2.8 percent to $1.26 billion for the second quarter of 2007
from $1.30 billion for the second quarter of 2006.

Jim Keyes, Blockbuster chairman and CEO, asked investors not to press
the panic button.

“The company is undergoing a comprehensive review of its business
aimed at identifying and implementing initiatives designed to
revitalize the company, enhance the organizational structure and
improve profitability” Keyes said in a statement.

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