Just in case you haven’t noticed, today USVO was able to announce its extension and expansion of ties to one of the major distribution companies. It the one whose name rhymes with ‘box’. Turns out, and it is totally understandable if you haven’t noticed this either, that this company rarely makes what are called ‘vendor’ announcements. The last one in the IT sector was two and a half years ago when they allowed USVO to announce the initial contract. In an extraordinarily generous moment, they even let us put their logo on the release. A Google search of business news services turns up a great number of press releases from this company-so you know that their in house PR organs are functioning.

But the vast majority of its communications and outreach function only serves to promote its own products. There was, as this contract was finalized and negotiated, push back about how this announcement might divert attention from the upcoming blockbuster holiday release of the Jim Cameron film “Avatar”. Given the multi-million dollar advertising in all media and striking imagery there in, it isn’t clear how many of you small stock press release aficionados would now not be going to the theaters in the next month to see the film that some consider the make or break test of 3D theatrical exhibition as the salvation of the film industry. Really. The film, probably the most expensive production ever mounted, even allowing for inflation, is so important that it wouldn’t surprise if Rupert Murdoch himself asked the White House to go to China some other week.

So thanks to those inside the organization that see the value of telling the world that their organization has been and will be protecting their products and asserting the rights of content distributors with sophisticated state of the art technology integrated with proactive enforcement strategy. We here at USVO appreciate their courage in the face of all manner of opposition and resistance. Thanks for being willing to shine just a little of the light from the mountaintop on our humble enterprise.

As a measure of that appreciation, there will be no direct mention of the company here. See the announcement on our news page. Please go search for any such news from any other watermarking company for a direct relationship with a major content company.

Last night 60 minutes had a segment on movie piracy. Watermarking was represented, in its most primitive forms, and used crudely. The focus was on camcorders feeding organized crime. A highlight was a pirated DVD with a Mexican narco trafficker organization logo on the package.
An MPAA investigator gave a blow by blow of an arrest in a theater. Best feature was the graphic representation of Peer to Peer file sharing. Bit torrent, which has dominated file delivery for years, was presented as a ‘’perfectly legal’ technology used by 50 million people worldwide to get films for free.
Humor was provided by Stephan Soderburg with the A list director speaking for the film workers whos jobs are being impacted by reduced risk taking and production in the studio system, since the stars ‘aren’t being hurt’.
French law was highlighted for its current proposal to restrict internet access for downloaders and send thieves to prison.
So the good news is that P2P technology is prime time news. The failures of preventative strategies were well discussed. Many more minds are now prepped for the USVO approach of enforcement and active engagement of the new digitally enabled markets.

Recently published at arstechnica.com, Nate Anderson has neatly quoted over a hundred years of objections to new technologies by those whose business models were perceived to be threatened by those new technologies. Starting with John Phillip Sousa having concerns for ‘the national throat’ that player pianos would cause to atrophy through the recent transition to digital television, Anderson illustrates that copyright holders have never made a significant contribution to either creation or distribution of content. The basic argument is that copyright limits innovation.
Much like the current national debates on healthcare or climate, those who benefit by the current situation are vigorously defending the status quo while stirring up as many worst case scenarios for the proposed changes as they can. While it can’t be said that the advent of mechanical reproduction of music that Sousa expressed concerns about destroyed music or even the music industry, it is true that many businesses changed or were lost and that while some benefited, others did not.

This is true of every change in our world. When the Clean Air act was passed, many predicted that our economy would be choked. And while polluters did have to spend money to adapt, they spent that money with innovators who invented and produced solutions to cleaning the outputs that had been defined as polluting. New businesses were generated, and others were reduced- in particular areas of health care that were in less demand as people suffering from asthma and other related conditions suffered less.
In the area of copyrighted content, the malaise of the music industry has not meant the end of it, much less the creation of music. New music is being produced and distributed through an explosion of new channels. While there may never again be the focused attention that the combined forces of music and television combined to make Michael Jackson the world wide phenomena of the 80s, thousands of artists are finding audiences and sustaining their existence.
The motion picture industry is continuing this pattern. Today within the industry are people who have experience with both winning and losing in the cycle of innovation and disruption. The losers include all the vendors of various analogue services that are dwindling. Kodak for instance, already dealing with the consumer shift to digital photography, is busy seeking new business supporting the new digital capture and release in the industry. On the winning side are those companies supplying new digital cameras, digital projectors and screens as well as those who are installing and servicing them.
New models of revenue at every level are being tried out, with both successful and failing results. For every iPod there are several struggling MP3 player brands, and for each Steve Jobs – now holding the single largest position and a board seat at Disney, there are VPs and vendors struggling to find a product or service that will succeed and replace the revenues lost. Not every producer of blank VHS tapes has successfully become a DVD manufacturer.
In the not too distant past, there was a ride at Disneyland, sponsored by General Electric, as it was still known, called “the Carousel of Progress”. Animatronic families demonstrated the lifestyles of the 20th century. The emergence of leisure time and how to use it is revealed as the circular building rotated the audience from one stage to the next. As each movement occurred the robot cast would sing “there’s a great big beautiful tomorrow, waiting at the end of everyday’.
This lyric remains both the promise and the problem society, organizations, and individuals face continually; how to make it through the night without going bankrupt.
What does succeed historically, as Anderson points out, is giving buyers more choice and more power. Rights holders that exploit this will always succeed. USVO sees itself as a partner with the copyright holder companies, is to make that transition profitably.
For extra insight into the issue- read the comments on Nick’s article.

Yesterday savvy heavies and websurfers were focused on the latest FCC hearing on broadband- the 24th since embarking on establishing a national broadband policy. As reported upon in Broadcasting & Cable, John Horrigan, consumer research director for the initiative, “the underlying goal was to figure out what drives adoption, specifically what users wants”.
Judging by those testifying, the main interest was in how to put high value content on the internet- something users have shown they want- and make sure content creators, owners, and broadband providers are compensated- something users are at best ambivalent about.
With high profile representatives like Dan Glickman of the MPAA (“It must be a safe and secure environment”) and Patrick Ross, ED of the Copyright Alliance (“there needs to be a clear distinction between legal and illegal content”) it was clear that the challenge of providing users with quality content and content owners with compensation looms large not just for the content companies, but for providers, and government as evidenced by Patent & Trademark Office rep Michael Shapiro pointing out his office’s “keen interest” in the plan and the “great peril” that the plan might increase piracy.
While it isn’t clear that the hearing produced any paths toward answering the challenge, last week’s release of “The Beatles – Rock Band” along with remastered versions of the Beatles catalog made very clear that the users have no problem paying for both the music and the game. With Abbey Road the top selling album again, and the game expected to have its unique instruments sold out by November, the Beatles once again are proving that content is king.
What hasn’t been reported is any piracy. Extraordinary security and secrecy marked the long project and its many products. Next week we’ll examine how this set of releases may point at new models of content business, where relationship and service are emphasized over products.
Also in the news recently, the Digital Watermarking Alliance announced at IBC in Amsterday last week that “2009 has been a banner year in commercialization and adoption of digital watermarking solutions.”
Noteworthy for USA Videointeractive shareholders is that none of the items on the inventory of the banner year includes contracts with major studios, such as their company has. Since USVO is not a DWA member, it follows that our accomplishments aren’t featured. The list does put USVO’s accomplishments into a context that evidences what has often been stated here- USVO has accomplished more with less ( much much less) than other players in the watermarking space.

The field of competitors in which USA Videointeractive is operating has seen recent activity, changing the geography for all.

Civolution, a year old company created by Phillips spinning off its digital watermarking division, acquired the assets and team of Thomson. Given that the two largest operations and investments in the field were those two multinational giants, this is effectively a consolidation of those efforts.
Funded by Prime Technology Ventures of Holland, Civolution now is integrating two distinctly different technology teams and approaches to watermarking, as well as dealing with the overhead of two international organizations. Phillips continues its interest in watermarking by virtue of being a partner in PTV.
However Prime Technology Ventures has made a long term commitment to Civolution that makes such a process orderly. The stated goal of the new company is “international domination” of “content identification services” a term coined to cover all the ways in which watermarking and its cousin fingerprinting are being deployed and monetized. Such a far horizon view translates into a commitment of tens of millions of dollars, which certainly indicates not only financial stability for the company, but extraordinary potential for return based on what the company and industry analysts view as the revenues this market will generate.

Another significant transaction took place this summer in the field when Nielson, the company famous for its ratings services to the broadcast industry, committed tens of millions to Digimarc, the watermark patent holding company ( and a partner of USA Videointeractive). Nielson will use watermarking technologies to further automate and simplify the process of verifying just who is watching what and when. Again the commitment is long term, and the amounts point to significant return on investment as well as to a validation of the size of the market.

Like watermarking itself, one has to have special expertise or techniques to read these transactions. In terms of impacts upon USVO, the news is good. In spite of Civolution’s stated goal of global domination, the content industry has demanded multiple vendors and technologies for security. In watermarking, this consolidation along with Dolby’s having shuttered its watermarking operation Cinea, means fewer competitors, and especially half as many Goliaths in the field.

For our investors, it also provides external evidence of confidence in the market potential of watermarking. These transactions also indicate the numbers involved in developing that potential. As before USAVideointeractive remains a unique value proposition in the field, having accomplished services and secured relationships that its much larger competitors haven’t, and at a fraction of the costs. These transactions also highlight the nature of the opportunity. It has a long horizon. It requires continued investment over time. That such investments are being made during such a difficult economic cycle speaks to the vision and commitment of those companies.

As a technology development and service company, USAVideointeractive is actively seeking such partners, and we are grateful to the engagement and patience of our investors in the process.

Yesterday presented another set of circumstances that suggest, if you will indulge us for the moment, that USVO is part and parcel of what is happening in the world.

You might not have noticed that The US Open began play at Bethpage in New York. Rain shortened the day, and a bunch of unknowns led. Two members of the USVO team hit the links yesterday as well, playing in a relatively unknown charity tourney for the Providence St. Joseph Burbank Hospital Foundation. The event is so unknown that the hospital has no mention of it on its website even though the event raised over $300,000 in a day. Providence is the home of the Roy & Patricia Disney Family Cancer Center, and the Disney company features prominently in the production of the tournament. Operational staff from Disney, Universal and Warner Bros studios- the half of the big six studios based in the valley that also houses the two hospitals that are the beneficiaries, populate the organizing committees and many of the foursomes.
It was a great place to enjoy the sunshine, compete in a friendly match of skills ( or lack thereof) and gauge the thinking of some of the business middle management.

What can be reported is that people are interested in new ideas, especially about increasing sales. Getting new ideas in front of this crowd costs money, and then once they are on board, requires the ability to execute on those ideas. While USVO wasn’t in a position to use the golf event to push our agenda, the good news is that our competitors weren’t even there, much less sponsoring a hole, or a prize. We were the ones taking the opportunity to shift people’s focus from their hooks and slices to their digital delivery strategy and concerns.

Another item you might not have noticed yesterday, while you are doing what constitutes your daily business, was the announcement of a court verdict of $1.92 million against a single mother of four in Minneapolis for downloading 24 songs. The RIAA, which spearheaded the suit, has provided a great demonstration of what we here as USVO have been stating about the issue. In winning the suit, the RIAA has created a lose/lose result.
Headlines abound, and analysis make it clear that in winning, the record industry has cemented it’s reputation as the least sensible sector of the digital economy. While the RIAA spokespeople express satisfaction with the verdict, the revenues of the members’ music units continue to slide.

The absurdity of prosecuting a single mother of four for downloading, while ignoring those that actually facilitate and exploit that activity for material gain seems to be lost on the RIAA. While it has promised to not sue any individuals, thousands of individuals have received the lawsuits that are the method of message delivery to the public that while listening to music for free on the radio is ok, copying that music and sharing it with others isn’t.

It also brings out those who wish to challenge the constitutionality of the suit and award.

While out on the course, we discussed these and other important issues. The world is in need, dire need, of a proactive and credible way for rights holders to brave the digital distribution world. USVO is in need of the means to deliver it. That’s what we are working on everyday.

Events of the last week prevented my posting a more timely comment upon what has become the most visible violation of copyright in some time- the online availability of the Fox film “Wolverine”. As CNN noted in their article “In digital age, can movie piracy be stopped?” this is an especially troubling example for a business further challenged by the stalled economy and ownership more than ever concerned with the bottom line.

It is also troubling to a leadership which recognizes that the motion picture industry generates the single largest positive contribution to the nation’s balance of trade, as was discussed in a Congressional Judicial Committee hearing earlier this year. “”During our hearing in Los Angeles, director Steven Soderbergh said that in 2007, the entertainment industry generated a trade surplus of $13.6 billion,” committee chair US Congressman Howard Berman added. “Imagine what those numbers would be if we could rein in piracy.”

As any follower of USVO already knows the answer to CNN’s question about stopping piracy. First of all, it’s the wrong question. As noted in an earlier CNN article, a more immediate and relevant query is what is the harm to the film’s release? “Whether the leaked video will eventually hurt the film’s box office earnings “is very difficult to discern,” according to CNN’s source.”

“Wolverine” opened with $85.1 million in box office, first among movies that weekend. It ranked first every day since opening until “Star Trek” opened this last weekend and now has over $200million in global receipts. Did more or less X-men fans go to theaters based upon what they heard or saw of the ‘incomplete” version? Can #1 ranked $85million plus weekend be considered a damaged result?

The motion picture industry can’t tell, and would have a hard time pleading its case as it has enjoyed, especially in these times, a good year so far. And ultimately that is the question that both the industry and policy leaders need to examine- how to generate more business. Piracy existed before today’s BitTorrent, or ubiquitous processing and connections made it available to all. And the industry always found ways to be profitable regardless. It isn’t that piracy isn’t important, costly in many ways or full of individual and corporate ethical concerns. For the industry it is that the threat of digital piracy has stopped the world’s content distribution leaders from using innovative technology to engage and profit in new markets and channels to reach customers.

The good news for USVO is the mention of forensic watermarking in a number of places including the CNN initial report. In a Wired report, watermarking is mentioned as the reason Fox has confidence in catching the person who put their product outside the licensed system. USVO is cited as Fox’s vendor. Currently USVO’s product is used by the Home Entertainment unit for business to business marketing of finished product.

Overall, the expanded visibility of piracy, and its many impacts on a leading US industry sector, is good news for USVO. We find our enforcement and exploration of new business message resonating with policy leaders. We continue to field queries from business unit managers in the content distribution industry. We continue to seek the partners that will enable us to answer those queries with new business.

Although Jon Stewart of The Daily Show, asserts that copyright infringers will have to give up the word to those modern seafaring criminals off the Horn of Africa, today’s news can still assert that copyright Pirates have been convicted. Four people associated with the site The Pirate Bay, were found guilty as announced today in Swedish courts.
The trial was considered of sufficient importance that Swedish television broadcast the entire proceeding online, a first.
While the defendants were sentenced to one year of jail and over $3.6million in fines, they are expected to appeal the verdict.

As mentioned in previous posts, the motion picture industry does well during drops in the larger economy. This winter has confirmed this pattern. In this article in Daily Variety, it wonders why.
While this is good immediately, the season’s good performance meant losing domestic incentives for production and investment in the stimulus package, and is no doubt welcomed by enterprise pirates.

The pressures on the existing content companies are showing up in multiple ways as the continuing credit crisis and resulting recession in economic activity impacts grow.
But for content companies, which have traditionally done well during lean times, this cycle promises to force the issues that confronted them during the boom years.

Theory meets reality in two items in the last week. First is the budget squeeze. With recession a reevaluation of all expenditures are in order. At the studios, TV series production budgets, already under intense scrutiny, have been dropped across the board- 2- 20% according to The Hollywood Reporter. At the MPAA, the studios lobbying and unified agency for all manner of things, not the least of which is reminding the world of how much money piracy costs them, the budget for the upcoming year is expected to be cut by about $20 million. Since about half of the MPAA’s $100 million was expended in areas related to piracy, it is to be expected that the studios will have even more pressure on them to innovate their way through the digital distribution jungle while the existing strategies of lobbying for extended copyright, legislation of college networks and the cat and mouse of hunting enterprise pirates will be curtailed.

The other area is highlighted by well read blogger and Linux Journal senior editor Doc Searls complaints about his options as a TV subscriber to Verizon’s FIOS service in Boston MA. Like many of us, Doc is unhappy having to pay for all those channels he doesn’t watch. And while HD over the air is pretty well supported in his neck of the woods, those same shows are coming to him via the internet. So his call for ‘ala cart’ television is neither unique nor likely to shrink under economic duress. This week Doc dropped his TV service from Verizon.

For both Verizon, and the studios, such calls mean further erosion of steady and predictable cash flows, more complicated development and distribution processes.

Naturally, we think digital watermarking, and SmartMarks in particular, are part of the answer to both of these circumstances. If Doc could buy just the shows he wants with a personalized watermark that could be used to hold him accountable for using the content outside of his acquired rights, the risks to the producers of his favorite shows could be mitigated while new revenue streams develop. For the MPAA, which conducts much of the sleuthing for the studios, going public with catching crooks is an opportunity to let the content consuming public know that it is thieves that concern the content owners, not viewers, while trumpeting they are defending the rights of content owners.

We bang this drum here a lot, but it bears repeating. Watermarks are a smart and elegant solution to much of what ails and challenges the content industry. We have proven that this technology is adaptable, effective, and can be cost efficiently used and installed in the studio environment. We are eager to expand our demonstrations, and need our audience to support this effort, in the public discourse, and in the marketplace of both content and equity.