Irdeto Access B.V. has a marquee customer licensing its encryption system, but the customer isn't a cable operator. It's Netflix Inc. (Nasdaq: NFLX)

Netflix will be using Cloakware -- which gives underlying conditional access (CA) and digital rights management (DRM) systems an extra layer of protection from hackers -- to help guard its popular "Watch Instantly" offering, a video streaming service with thousands of titles that Netflix bundles with its by-mail DVD subscription service.

Irdeto's been pitching Cloakware as a protection scheme for "TV Everywhere," the catchphrase for services that add broadband movie and TV access to a traditional video subscription. Cloakware, a software-based platform that Irdeto acquired in 2007 for $72.7 million, is designed to hide the encryption keys of the underlying CA or DRM system, supposedly leaving hackers with an irreparable mess to sort through, should they manage to break through the first line of defense. (See Irdeto Keys on Cable IPTV .)

As services like Netflix video streaming become available on a growing number of broadband-connected devices, managing content protection becomes more difficult, and the risk to piracy becomes greater, says Jan Steenkamp, vice president of Irdeto's Americas division. "If you want to monetize content on broadband... you have to address content security and have the ability to keep [content] safe," he says.

In fact, hackers have already posted instructions on how to defeat Netflix DRM (developed by Microsoft Corp. (Nasdaq: MSFT)) and save movies that are being streamed.

Netflix will need to put a stronger lock on that content if it's to maintain the trust of studios and become a more formidable competitor to cable-fed video-on-demand (VoD) services. Steenkamp says Cloakware can "associate" with any DRM put into play by Netflix.

Netflix chooses its DRM on a platform-by-platform basis, although Microsoft Windows Media and PlayReady are the most common, according to Netflix VP of corporate communications Steve Swasey.

"We selectively use Cloakware as an additional content protection technology for platforms when we consider it appropriate," he adds via email, but he declines to say where Netflix will employ Cloakware first.

It could show up in a wide range of broadband-connected devices that support the Netflix streaming client, including PCs, Roku Inc. boxes, several Blu-ray models and TV models, and game consoles such as the Sony Corp. (NYSE: SNE) Playstation 3, the Nintendo of America Inc. Wii, and Microsoft Xbox 360. Of most recent note, Netflix developed an app for the new Apple Inc. (Nasdaq: AAPL) iPad. (See Netflix Launches iPad App, Netflix Goes Wii, and Netflix to Stream to Sony PS3.)

Steenkamp calls Netflix "an early mover" with Cloakware, and he believes others will use the technology to help shield their TV Everywhere-esque services.

Cable has targeted TV Everywhere products at the PC, although a move to other broadband-fed devices, including mobile handsets, is expected to happen later this year for some operators. As premium video services extend beyond the confines of the set-top box, MSOs will be faced with a new, ongoing security challenge to address and manage. (See Comcast's 'Xfinity' to Go Mobile in 2010 .)

"For the first time, the [cable] operator is programming something (the PC) that it doesn't own," Steenkamp says. "Content won't continue flowing on that platform if it's not secure."

— Jeff Baumgartner, Site Editor, Light Reading Cable