But for getting one-time copies out, there will always be an analog output at the end of the chain. Watermarking allows the distributor to pinpoint the device used, but the only thing they can do with this information is shut down the device. I don't see how this can be an economic threat when player prices must be kept low for consumers, but there are millions of people wanting pirated content (which is easily distributed after extraction).
How hard is it to forge the required identification or bribe a store clerk to not check identification?
If someone's house is broken into, are they going to be liable for piracy through their stolen media player? (Assuming there's a several hours before it can be disabled)
And, with regards to "are they going to be liable", I direct your attention to the track record of the RIAA.
Of course it's hard to speculate the difficulty of such forging in the future. But I would think that $10k would be enough to break some human link in the chain.
My point is, "useless" is too strong a word. It isn't silver-bullet simple, but it is a tool that can be made to work. Content providers are already costing Slysoft money; now they just have to figure out how to increase that cost fast enough to push them out of business.