[bigmac]

The problem comes down to key-hiding. You can encrypt it all you want but if the attacker can extract the key from the software the game is over.

Working with the mobile phone providers, you can embed the root key in hardware. This makes it more difficult to extract. Straight software solutions exist, but are typically provided 3rd parties or by the OS vendors themselves. The software solutions are obviously more convenient, for the reasons you've alluded to.

Netflix gets to make lots of money exactly because they do the hard work of working with the backward-facing industries.

[wmf]

But why is Android any worse than, say, Windows XP in this respect?

[bigmac]

The encryption/decryption libraries exist on Windows. For example, http://en.wikipedia.org/wiki/Windows_Media_DRM

[jpravetz]

I think that Netflix also doesn't want to be in the business of building the full secured/DRM code stack on all these platforms themselves. They'd rather leverage. And for whatever reasons I believe they are/were a Microsoft video encoding shop on the backend, which can limit their choices (e.g. they won't use Adobe Access on Flash, which is not universal either).