Update: Thomson joins takeover bid for ContentGuard

Thomson joins Microsoft and Time Warner in trying to over DRM company

Thomson joined Microsoft and Time Warner on Monday in trying to take control of U.S. digital rights management (DRM) company ContentGuard Holdings.

The consumer electronics vendor has agreed to purchase a 33 percent voting stake in ContentGuard from Microsoft, Time Warner and minority holder Xerox Corp., the companies said.

Thomson's addition to the bid comes less than two weeks after the European Commission issued a formal set of objections to Microsoft and Time Warner's proposal to take over the Bethesda, Maryland, DRM intellectual property company, citing anticompetitive concerns.

Thomson's presence would effectively dilute the control of the other companies, perhaps easing the deal toward completion.

Time Warner Senior Vice President Ron Grant said that the new agreement was not aimed at appeasing the Commission, however. Although the companies hope the new deal will clear regulatory approval, it was revised to open up more opportunities to accelerate DRM development, Grant said.

In its objections, the Commission said that it feared that Microsoft's strength as a software provider, combined with Time Warner's broad media holdings, could give the companies the incentive and ability to use their assets to put DRM rivals at a disadvantage.

The entrance of Thomson, based in Boulogne, France, could dissolve these concerns, and also brings another strong player to the table. In addition to being the manufacturer behind the Thomson and RCA brands, Thomson also provides digital content services, such as DVD replication and cinema post-production, and touts an expertise in intellectual property licensing.

With Thomson on board, the companies hope to capitalize on the growing DRM market, which is set to further expand with the increased creation of digital video content, said Joe Berchtold, vice president of strategy and head of electronic content distribution at Thomson.

DRM technologies are used to protect digital content, such as movies and music, from unauthorized use. As more content becomes available in digital form, the DRM market has ballooned, enticing industry players to get their feet in the game.

Berchtold said that Thomson hopes to drive a whole new host of business services for content owners. While plans for the services are still nascent and separate from the deal, Berchtold did not rule out future cooperation with Microsoft and Time Warner given their strengths in the market.

The agreement is also aimed at driving interoperable DRM standards, the companies said.

"We would like to see consumers have a choice of platforms to secure their content," said Microsoft General Manager Brad Brunell. The companies would work with existing standards bodies to champion interoperability, Brunell added.

Microsoft increased its investment in ContentGuard last April while Time Warner announced that it was investing in the company. Together the companies purchased most of the stake held by ContentGuard's original technology provider Xerox Corp. The value of their investments has not been disclosed.

With their investments, all three companies will have the right to name two directors to the company's board.

Although Commission representatives weren't available to comment on the new agreement Monday, Time Warner's Grant said that the companies respect and will cooperate with the Commission's process.

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