There’s quite a thread going on at the Sling Community forum regarding Sling’s new encryption “feature” and its impact on At-Large Recorder. Jeremy T from Sling is doing his best to answer the critics, and has made his third post.
The money quote (emphasis mine):

Finally, I’ve tried to be clear that there are issues regarding this topic that I simply cannot discuss. Some of the other users in this thread have guessed at them, and I appreciate those posts. In my last comment I asked readers to sit back and really think about our motivation here. You think we are motivated to try to “screw third parties”? I already stated we plan to have some form of API/SDK coming out down the road. You really think that we want to “screw Slingbox owners”? Why on Earth would we want to do that??

I guess Jeremy didn’t really make it clear that there were other motivators to the decision. Web users, and especially early adopters like those who buy Slingbox devices, are very sophisticated, and the attempt to say encrypting the stream to “protect users privacy” didn’t really make sense to anybody. Likewise with the protecting “content owners” reason. He probably would have been better off saying “I simply cannot discuss” like he finally did in the third post. While nobody likes that excuse, they can respect it at least. I respect it.

The fact that Sling cannot discuss the rationale for the decision makes for an entertaining game of speculation. The Sling Community forum participants certainly have a lot of theories. Since I have no inside knowledge, I get to speculate, too!
Sling has received a huge amount of investment money – $55 million or so. One of the investors is EchoStar. The content people are always paranoid about these new technologies (TiVo has investments from the major networks), and investing in these companies is a good way to keep the technologies under control. One theory is that as a condition for the investment, Sling agreed to ensure the stream couldn’t be redirected. They probably didn’t think it could be done until At-Large Recorder appeared, hence the need to quickly add encryption, and the fact that this was “always on the product roadmap” as Jeremy suggests.

This also keeps them out of possible legal trouble with HBO, MLB any anyone else concerned with geographic rebroadcast issues.

Sling has taken great care to ensure the streams couldn’t be “split” and beamed to several people at once. Theoretically, if the stream can be recorded, it can be retransmitted to several people at once. This breaks the legal protections they have put in place.

I don’t think the “recording” aspect is the cause for the consternation. The way At-Large Recorder works, you can’t really retransmit in real time anyway, as the file isn’t viewable until recording ends.

Anyway, that’s MY theory. We’ll probably never know.

Sling is in a bit of a pickle, in that they can’t do anything and everything to make their product the best it can be. It would be great is they could be more open about the reasons behind the decision, but this may leave them open to legal trouble by recognizing any legal weaknesses publicly, so it’ll likely remain a secret. I believe that if Jeremy T could say more he would – he’s clearly (and rightfully) a little upset about being beaten up on the Sling forums.

Sling and Applian are a little similar, in that we both are pushing the envelope of what people can do with their media. Sometimes we can’t market our products the way we’d like either. Fortunately, people are still able to find us when they want the best tools for recording online video, music or radio, and they tell their friends.

If Sling wants to work with us to make a recording solution that doesn’t put them in legal jeopardy, that would be terrific. It would be great for Sling, and their users. Or maybe products like HAVA and others will add this capability, and they’ll just open it up, as it will cease to be an issue if everybody is doing it. I hope we’ll be able to come up with a solution soon.