The gun rack that is EME is absolutely falling under category 2. There is no native encryption, but there will be soon. The W3C doesn't want to create an encryption scheme, but it wants to allow other people to supply it.

In my mind, having a way to stream hulu/netflix (sorry, I'm not sure if there is an aussie version of either service...) that doesn't require a plugin that gives the computer access to my harddrive is a pretty good thing. Not as good as plain old mp4/ogvs, but better than a plugin player.