Why are Microsoft and the MPAA so stupid?

I just found this story on engadget.com about a new "feature" in Microsoft's upcoming OS: Protected Video Path-Output Protection Management. It will allow content providers to force the OS to refuse to play (or drastically downsample) high definition content unless the signal going to the monitor is encrypted with HDCP (which practically no existing PCs and monitors support, not even big fancy LCDs).

Way to go, MPAA and Microsoft. In a futile attempt to prevent DRM'd content from being intercepted, you've almost entirely eliminated the market for it in the first place. What's next, a monitor with a built-in webcam that shuts the monitor off if it detects you're pointing a camcorder at it?