The Serial Copy Management System or SCMS was created in response to the digital audio tape (DAT) invention, in order to prevent DAT recorders from making second-generation or serial copies. SCMS sets a "copy" bit in all copies, which prevents anyone from making further copies of those first copies. It does not, however, limit the number of first-generation copies made from a master.
The copy protection looks for some bits written on the subcode data. There is three states of these bits: Copy allowed (00), Copy once (10) and copy prohibited (11). If the source has the copy bits 00, and you make a copy of this, the copy will have the bit set as 00 too, allowing copies of the copies. If the source has the copy bits set as 10, every copy of this material will have the bits set to 11 and the copy from the copy would be prohibited. These bits are transferred over digital links, not over analog links.
SCMS was an early form of digital rights management (DRM).
History of SCMS
SCMS was created as a compromise between electronics manufactors, who wanted to make DAT machines available in the United States, and the RIAA, who previously hampered the availbility of DAT machines in the US via lawsuit threats. The RIAA did not want low-cost digital recorders readily available, since they felt that such technology would result in widespread piracy. These lawsuit threats resulting in a chilling effect, preventing DAT decks from becoming readily affordable.
In 1987, a member of the RIAA proposed a system where DAT recorders would have copy protection in them. The copy protection would look for the presence of frequencies in a particular high-frequency band; if there was no audio present in this band, the recorder would assume that the music in question was copy protected, and would not allow recording of the music. The record companies would then release all music with this particular frequency band filtered out. It would be illegal to manufacture a DAT machine with the presence of audio in this frequency band; the RIAA was lobbying congress to make this the law of the land.
The reaction to this proposed scheme was very negative. The Home Recording Rights Coalition orchestrated a letter writing campaign opposing this scheme. Editorials in musician's and home stereo magazines attacked this scheme. The proposed law never made it out of committee.
Even after this law was shot down, the RIAA still threatened to sue anyone who released an affordable consumer DAT recorder in the US. No one made such a recorder available.
Finally, in 1992, the RIAA and the electronics companies compromised by making the home recording rights act law. In this law, blank DAT tapes would be taxed, with the money going to the RIAA, and a new copy protection scheme, SCMS, would be enforced. SCMS was universally disliked by home musicians who used DAT decks to record their own music; it obtained the unfavorable name "Scums".
Software and design defects in certain models of consumer Minidisc player allow SCMS to be defeated. Professional-grade Minidisc systems come with SCMS disabled, but these run at several thousand US dollars.