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Creating Business Opportunities in Digital Music and Movies through Digital Watermarking Technology
Viable Business Models are being Created by Companies such as Philips, USA Video Interactive Corp., Thomson, and Verimatrix, through Innovations in Content Protection
June 2007
Ann-Marie Fleming, www.DigitalMediaStocks.com
With the rise of Internet usage and the increasing speeds of Broadband, the amount of digital music and movies being distributed globally has skyrocketed. While this surge has created new sources of revenue generation for digital media companies, it has also fed the piracy fire leading many to look to watermarking technologies as a possible solution. Turning content protection challenges into viable business models using watermarking across music, movies, and Pay TV, are companies such as Philips (NYSE: PHG), USA Video Interactive Corp. ( OTCBB: USVO; TSX: US.V ), Thomson S. A. ( NYSE; TMS) , and Verimatrix.
Driving the Need for more Effective Content Protection
The digital world continues to evolve and it has been this industry’s progress that has also led to the growing need for improved content protection. Paul Erickson, Market Analyst, Digital Consumer & Broadband Group, IMS Research explains, “The Internet and the spread of broadband have made the acquisition and redistribution of digital media easier and this has become a much greater threat to the content industry.”
High-speed internet connections have definitely changed the method that digital audio and video content is being distributed. Moreover, as Alex Terpstra, CEO, Philips Content Identification, with Philips (NYSE: PHG) describes, “With today's high definition video content and displays, good quality copies can be made from copyrighted material using a camcorder, bypassing existing copy-protect mechanisms. The content industry requested additional protection mechanisms to maintain control of its copyrighted material.”
The Internet has rapidly changed the way consumers access information and entertainment. “The exponential growth of hi-speed broadband connections has enabled the world to view, share and re-distribute audio and video content, simply at the click of a button. This provides the challenge for content owners and providers to adapt their current business models and capitalize on this great new opportunity,” adds Terpstra.
Mr. Patrick Gregston, Business Development for USA Video Interactive Corp. ( OTCBB: USVO; TSX: US.V ) acknowledges, “The digital era has improved the speed and quality of what consumers can accomplish, and this in turn creates multiple threats that are within the means of millions. This evolution of digital media is forcing content producers to pursue new technological methods of protection against piracy.”
Jean-Luc Moullet, VP of Software & Technology Solutions with Thomson’s (NYSE: TMS) Technology division states, “Content piracy is a critical issue for the media and entertainment industry. Digitization of content, together with widespread compression tools and easy-to-access broadband distribution networks, has facilitated piracy.”
As a result of the increase in digital media piracy, the industry has turned to watermarking as a key part of the overall solution. Reed Stager, Chairman of the Digital Watermarking Alliance (DWA) describes, “A number of digital watermarking providers are helping major content owners in the media and entertainment industry today to mark currently distributed movies and music with unique identifiers. Digital watermarking allows greater and safer dissemination of copyrighted works while at the same time ensuring appropriate compensation to the owners.”
Digital Watermarking Creates Multiple Business Models:
Music
The content industry has struggled to keep up with the Internet, which changed the way that people view and share media. The music industry, which had to deal heavily with the problem of piracy as the Internet gained in popularity, was taken by surprise and appeared unprepared to handle the flood of pirated music being distributed. The industry has now evolved and has taken steps to curb the problem and has implemented monetization strategies that have combined the ease of access with affordability.
Part of the music industry’s solution has been the use of watermarking. Mr. Stager describes, “Digital audio watermarking has been deployed in conjunction with licensed DVD-audio implementations to prevent playback of unauthorized copies. Most pre-release music of major artists from the main music labels carry media serialization watermarks in the music tracks that can help them identify leaks prior to the release of an album. In movies and TV, either audio or video (or both) watermarks may be deployed. Many theatrical releases and DVDs now carry audio watermarks inserted into this content by several major motion picture studios. This alone has created an ecosystem of tens of millions of pieces of marked content. Audio watermarking is being considered as part of the standard for AACS which protects high definition DVD formats (HD-DVD and Blu-Ray).”
“Since the digital watermark data inherently survives the ripping process and format conversions, digital watermarking has the ability to identify copyrighted songs, movies, TV or radio programming and images on a P2P system and online communities such as MySpace, YouTube, Google and Yahoo, even after that content has been ripped,” adds Stager.
Despite the efforts by the music industry many feel that the main focus has shifted to digital video now that broadband speeds have made distribution feasible, fast and as a result, popular. However, the problems plaguing the music industry have become lessons for movie producers and solution providers.
As Paul Erickson explains, “The video content producers have been able to take what they learned from what happened to the music industry and as a result have become proactive in dealing with how they protect re-distributed content against piracy. With the piracy problem growing as broadband speeds have made video downloads and distribution more popular, video content owners have become much more aggressive, and watermarking is one of the ways that they are implementing their protection strategies without compromising the user experience.”
He adds, “Going forward video is going to be more of a challenge because it will be a much more attractive target for pirates than music. While watermarking is not focused on directly preventing copyright infringements, it is believed that it will dissuade the act of piracy since it enables content owners with the ability to track distribution.”
Video
New technologies and services are required to detect, identify, trace and monitor the millions of downloaded copyrighted material every day; so that content owners stay informed of what is happening on the web, and are able to apply business rules to monetize the identified content.
For this Philips (NYSE: PHG) offers a fully automated content identification service called ‘MediaHedge’, which is based on Philips video fingerprinting technology. This identifies content by its own unique characteristics, so no specific marks need to be embedded prior the video release.
According to Alex Terpstra, “MediaHedge enables content owners and internet websites to realize new video distribution business models that allows consumers to easily access, more and more, new high quality content in a legal way. Philips Watermarking and fingerprinting technologies, based on years of Philips extensive R&D and image processing know-how, are well positioned to deliver content identification solutions and services that enable both the entertainment industry and the consumer to optimally sell, share and distribute audio and video content with respect for copyrights. Philips Content Identification’s broad product portfolio is used for content monitoring, forensic tracking, rights clearing, copy protection and interactive applications. These are used throughout the movie creation and distribution chain.”
Additional watermarking technology from Philips includes Philips CompoTrack and Philips CineFence products. Philips CompoTrack, is applied for dailies and pre-release material and has been successfully used for identifying the source of illegal copies of the 2003 Academy Award Screeners, and ever since, and is now in use by major Hollywood Studio’s for protecting their valuable pre-release and theatrical releases content assets. The Philips CineFence is a forensic marking solution for digital cinemas, which fully complies with the DCI specifications, and is already deployed in thousands of digital cinemas today. Philips recently introduced VTrack forensic watermarking for PayTV applications.
USA Video Interactive Corp’s ( OTCBB: USVO; TSX: US.V), MediaSentinel product is an integrated anti-piracy device for use in modern video production environments that uses SmartMarks, invisible forensic information which is embedded into every video frame without compromising video quality. According to the Company, MediaSentinel enables inclusion of forensic data in video content: information about ownership, production or post-production, time and date, usage rules, or other information for increased traceability and piracy deterrence. SmartMarks are virtually impossible to remove and survive a wide variety of conversions and attacks and complement other content protection methods such as Digital Rights Management or encryption (scrambling).
USA Video has also developed MediaEscort, a software application specifically designed for content distributed via the Internet and is working closely with a major Hollywood studio to implement this technology. “The MediaEscort application resides on customer’s video servers and automatically and seamlessly embeds SmartMarks during Internet delivery, providing the proof courts need to protect intellectual property rights, indicting and convicting the individuals who steal the original material,” describes Patrick Gregston.
Thomson (NYSE; TMS) , a world leader in digital video technologies, leverages it expertise in content security and in digital video technologies to provide patent-protected, innovative watermarking solutions which are both invisible to the naked eye and robust to attacks.
Jean-Luc Moullet explains, “Digital watermarking solutions can be used as a dissuasive tool all along the content production and distribution chain. Business models can vary depending on release windows, with use case ranging from pre-release master protection in post-production, down to watermarking of VOD-sessions in a consumer environment.”
“Thomson’s strategy has been to focus first on pre-release content, when the value of content manipulated is at its peak, and expand progressively towards more downstream applications, such as watermarking of digital cinema projections or other more consumer oriented applications, including the ability to embed watermark during video-on-demand sessions.”
Pay TV
Verimatrix, is designing unique and complete solutions that take advantage of the effectiveness of digital watermarking, in collaboration with major Hollywood studios, but which are tailored to the specific content security and revenue enhancement needs of the pay-TV marketplace.
For pay-TV operators, watermarking can help in obtaining program rights as it contributes to demonstrating adequate content protection. In the future, according to Steve Christian, Director of Marketing, “demonstrating multiple layers of content protection techniques will enable some operators to obtain higher value material – such as early release HD movies.”
The Verimatrix VideoMark™ is a secure and invisible content tracking solution that enables forensic, user-specific marking of analog video at each PC or set-top box client in a pay-TV system. Christian explains, “The VideoMark payload has proven robust against a wide range of video content manipulations, with recovery of the unique client identification possible from all unauthorized analog and digital distribution formats. Because any pirate copies can be traced to a unique source, and not just the network operator, content owners are assured of protection that extends beyond the digital network. VideoMark also complies with the rigorous requirements of the Digital Cinema Initiatives, LLC (DCI).”
Marketing
Digital watermarking has also become an effective tool for online marketers. Paul Erickson explains, “Taking the technology out of the content protection fold, the non-intrusive nature of digital watermarking lends itself to online video used for marketing purposes as a means of tracking without interfering with people actually spreading the video. Reuters Television is currently using digital watermarking for this purpose, to monitor and track how the Company’s news videos are being viewed and distributed over the Internet.”
Results through Dissuasion
Many understand the use of watermarking as a means of content protection through dissuasion rather than prevention. Digital Rights Management, which focuses on prevention, has fallen short of expectations, leading many to believe that piracy is more likely to be reduced through trackable watermarks that can act as forensic evidence of content violations.
Rather than trying to control the behavior of its customers such as through DRM, USA Video is focused instead on the behavior of those who would steal from the industry. According to Patrick Gregston, “USA Video has chosen to state simply and clearly that what we do is "embed proof to catch crooks". Let the honest person go about their life, buying and using the content the way they always have. We say put SmartMarks in all your products and then go after the thieves, especially enterprise scale thieves. That doesn't show up on a bottom line until thieves are going to jail and paying restitution to content owners. Once thieves are not just losing their inventories, or sources, but their freedom and bank accounts, the number of people willing to be a thief is going to drop, the business of piracy is going to become more risky and complex and more of the demand met by pirated content is going to come to the legal market.”
“Enforcement will complete the kind of cause and effect that most business managers look for in their spreadsheets, and open up the investment in both marking and enforcement that the industry is currently not doing. USVO states this philosophy, which we like to characterize as a presumed innocent approach to the issue, emphatically because it is on this honest and open approach that all the best business is done,” adds Gregston.
Video and audio watermarking are both already successfully being used for TV broadcast monitoring which allows rights owners to know where and when there content is being broadcast. Video watermarking is also successfully being deployed in pre-release movie “screeners” and in digital cinema installations. Reed Stager describes, “Successful commercial deployments of digital watermarking by the music, movie, broadcasting and advertising industries are already having a significant impact on reducing piracy in pre-release music and movies, and improving the ability to monitor, track and manage digital media.”
The most well-known demonstration of how effective forensic watermarking can be, according to Verimatrix’s Steve Christian, was the screener watermarking project applied to DVDs distributed to Academy Award voters in 2004. “When illegal copies of some of the screened movies became publicly available, the leak was identified and the juror causing the leak was held responsible. Success stories like this do not only eliminate individual leaks but more importantly change the perception of the general public on the legalities of copyright abuse which reinforces its status as a crime.”
As the methods of digital media continue to evolve and distribution of content expands, the need for watermarking will continue to increase. “Digital watermarking opens the door to new and legitimate business models, new protection methods, and enhanced consumer experiences by potentially providing the foundation to provide access to additional related content in a “connected media” fashion that truly enhances the entertainment experience and links users to additional information or commerce opportunities,” states Stager.
Ann-Marie Fleming
Ann-Marie Fleming completed her MBA in the United States, where she attended Webster University. She also holds an Honors B.A from the University of Toronto. She has over seventeen years of experience within the financial industry to include retail banking and brokerage, investment banking, and mortgage brokerage within the United States and Canada, with a firm background in corporate research.
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