Stop me if you’ve heard this one: a novel form of media distribution is promising to launch lucrative new content services, but the industries involved can’t agree on how to protect them from theft or how to split the revenues they generate. At the birth of the cable TV industry, in the 1970s, the story had a happy ending—the players collaborated to develop encryption standards and to set up a revenue-sharing model that now generates more than $40 billion in revenues yearly for the cable and satellite TV industries and has created more than $200 billion in business value for the cable companies, the content companies, and the makers of TVs, satellite dishes, and switching equipment.

Fast-forward 30 years and, as a famous baseball player once said, "it’s déjà vu all over again." Companies in three industries—the content creators, the broadband providers, and the PC makers—find themselves stalled as they try to deliver digital video over broadband connections. This time, there is an added element of urgency: if they fail to act, illegal distribution will likely ramp up to meet market demand, and bootlegged movies could hurt box-office and downstream revenues, much as file sharing took a bite out...