Nobody really uses the analog hole. It's actually easier to do it digitally, and will remain so, because securing a device against arbitrarily many attackers with physical access and arbitrarily large amounts of time and resources is a practical impossibility. The analog hole is just the formal proof that DRM can never be effective, because if you can see it or hear it you can record it.
Actually Cinavia is an interesting example of trying to close the analog hole. You can point a camcorder at your screen and record a movie, but if you try and play that recording back on a fancy TV or BluRay player, it still won't work because the audio track has encoded instructions in it saying "expect an encrypted/DRMd media stream". If the player sees the content expects to be DRMd, it silences the audio after about 20 minutes.
That's quite interesting! Does it rely on steganography? Because as far as I know, it's quite difficult to keep the integrity of stego contents if the system is public knowledge (e.g. a low pass filter may destroy high frequency watermaking). The sheer amount of degrees of freedom in a minute of 30fps 4k video though makes it seem not so hard to accomplish a steep ( video quality x decoding probability ) tradeoff for attackers.
Of course, then there's the software integrity problem -- I can't imagine a feasible system that prevents bypassing the software verification completely. Or, for hardware checks, I can't see a regulation enforcing "All TVs must have this enabled" (i.e. you just buy from an open brand).
This would be more interesting though for authenticated video streaming. Imagine every user is required to reveal a real identity to retrieve content. Then they can not only watermark the content but point to the exact user responsible, as long as the content has enough degrees of freedom to support it. Makes file sharing a lot harder if you can be held responsible after an indefinite period.
It watermarks into the audio track and is by all accounts incredibly sophisticated and robust. Pirates have been trying to destroy the watermarks for years and all they achieved is making the soundtrack unlistenable.
For bypassing the software verification, it can be made quite hard although it's kind of irrelevant today because it only became mandatory (via BluRay Consortium "regulations") in 2012. So there are still lots of players around that don't do it and this will be the case for the forseeable future. Verance is doing a big push to get it into TVs and other things but I'm not sure how successful they are being. The technology works without a doubt but of course when you add up licensing costs, etc, it's not always necessarily a win.
It's not even necessary to exploit the analog hole. You can get an HDMI splitter that will strip HDCP, and an HDMI capture card that will let you save full quality, digital video from any protected source.
There is still the question of the analog hole[1], but that's a separate matter (unrelated to open source vs. proprietary binary blob).
[0] https://blog.mozilla.org/blog/2014/05/14/drm-and-the-challen...
[1] https://en.wikipedia.org/wiki/Analog_hole