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When we purchase Hardware that plays electronic Media of any kind, the manufacturer (or distributor/retailer) of the Hardware will have to encode the purchaser's PassKey (Last Name, SSN, etc.) into the Player. When digital media is purchased, the same will happen...the purchaser's PassKey will be encoded into the electronic Media. (Of course they may use their wife's/Friend's/Boss's PassKey if it is a gift.)
The Player will only play the media if the passkeys match. Of course there will be ways for pirate hackers to take a general media, pull the pass code out and insert another one... but if it is a complex enough system they won't want to spend their time working on a hack for weeks when they can just download the song or movie for $5. FileSwapping like Old Napster and Kazaa are then extinct.
If your HardwareKey fails.... go back to the retailer or manufacturer and have it reset or replaced. This is a fairly old idea in software. A Finite Element Analysis package for $15000 comes with a Hardware key. The Software periodically checks the serial port for the hardware key that came with the software...if it isn't there, it doesn't play. When will this technology catch on in entertainment??