BBC's Panorama investigative TV program reports that NDS Ltd., a subsidiary of Rupert Murdoch-controlled News Corporation (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV), recruited a pay-TV "pirate" to post hacked details of rival ITV Digital's secret codes online. The report entitled, "Murdoch's TV Pirates", claims that Lee Gibling set up a website in the late 1990s known as The House of Ill-Compute or Thoic. He said NDS, a pay-TV smartcard maker, then funded expansion of the Thoic site and later had him distribute the set-top pay-TV codes of ITV Digital, a rival of Murdoch's Sky TV.
NDS denied the report, saying Thoic was only used to gather intelligence on hackers, and Gibling worked as a consultant who was used legitimately to inform on hackers.
News Corporation owns 49% of NDS and Permira Funds LLC owns 51%. Earlier this month, they agreed to sell the company to Cisco Systems Inc. (Nasdaq: CSCO) for $5 billion. NDS manufactures smartcards for all News Corporations' pay-TV companies worldwide. NDS was founded in Israel, based on encryption technology developed at the Weizmann Institute of Science. Though sold to News Corporation in 1992, 1,500 of its employees are based in Jerusalem.
ITV Digital was launched as "On Digital" as a rival to News Corporation's Sky TV in 1998. But the widespread availability of the secret codes meant ITV Digital's services could be accessed for free by pirates. The company went bust in 2002. ITV Digital CTO Simon Dore told Panorama that piracy was "the killer blow for the business, there is no question."
Gibling told Panorama the codes on the Thoic site originated from NDS. "They delivered the actual software to be able to do this, with prior instructions that it should go to the widest possible community," he said. Once ITV Digital's codes were published on Thoic, Mr Gibling said his site was then used to defeat the electronic countermeasures that the company used to try to stop the piracy. The new codes created by ITV Digital were sent out to other piracy websites.
Sky financed half of NDS's UK security unit, which was run by former senior policemen. Sky told Panorama that it had no involvement in how the unit was run and was not aware of Thoic. Both men were secretly filmed by Panorama.
Gibling said NDS paid for Thoic's servers and was across all of its hacking and TV piracy. "Everything that was in the closed area of Thoic was totally accessed by any of the NDS representatives," he said, adding that although Thoic was in his name, in reality the website belonged to NDS.
There is no evidence that James Murdoch knew about the events reported by Panorama, which says, "It was NDS. It was their baby and it started to become more their baby as they fashioned it to their own design."
NDS declined to be interviewed but said in a statement that it never authorized or condoned the posting of any code belonging to any competitor on any website.
Published by Globes [online], Israel business news - www.globes-online.com - on March 27, 2012
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