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Yesterday marked the official release of the “2010 JOINT STRATEGIC PLAN ON INTELLECTUALPROPERTY ENFORCEMENT” , a 65 page document from this administration’s Office of the U.S. Intellectual Property Enforcement Coordinator, one Ms. Victoria Espinel. Ms. Espinel delivered the document to the Senate Judiciary Committee this week. And the top law enforcement officer in the nations top law enforcement officer joined in. “The Department worked closely with administration officials to develop key aspects of this strategic plan to better protect our nation’s ability to remain at the forefront of technological advancement, business development and job creation,” said Attorney General Holder. “
Additional facts revealed- So far this year the department has launched more than 150 new investigations that involve all areas of piracy. Espinel warned pirates: “We’re committed to putting you out of business.”
Top of the executive summary ‘letter to the President”? Making sure that the government isn’t using pirated products itself.
Key for those who have followed the USVO story- frequent and prominent use of the term ‘enforcement”. USVO advocates and calls for more resources to be focused upon enforcement of copyright. Watermarks are the primary forensic tools used in enforcement efforts for motion pictures.
The plan was declared “Not Nearly As Bad As Expected; But Not Great Either” by TechDirt, a customary critic of ‘the Hollywood’ business model.

As the summer movie season starts to unfold, it should come as no surprise that pirates are as busy as the bees, taking the marketing nectar from the Hollywood releases and converting that desire to see the major movies events ( known as “tent poles” in the trade) into the honey of derivative income.
Unlike the bees, who perform an essential function for their ecosystem, pirates are parasites with no apparent contributory value to their hosts. While recent studies have cast doubt upon the actual damage to industry of all sorts of piracy,
Yet there is something that piracy accomplishes. It proves there is an audience out there for entertainment delivered over the internet- people who just can’t wait for the title to be in their neighborhood theater. Now how many of those would be willing to pay for that privilege isn’t known, but the opportunity is there to discover how many of the estimated 50 million people who pirate content.
Today brings us just one example of the activity and attitudes of people who are in this sector. “Piracy is still a major issue for the content industry which hinders the distribution and access to content,” said Wim Bus, SVP Product Management at Civolution.”
Civolution, for those of you new to this sector, embodies two significant corporate investments in digital watermarking of content. A competitor of USAVideoInternactive, it’s story also illuminates what makes USAVideointeractive such an interesting and compelling opportunity. Born from the Phillips and Thomson efforts to build and sell digital watermarking, Civolution represents over $50 million of investment in a field who time is just now arriving. Due to these legacy investments, it’s product offerings are built upon yesterday’s assumptions about how content companies want to protect and function.
Today, USVO is an engaged partner with a major multi-national content corporation, which is telling us exactly what it wants to both exploit the digitally networked world and fight piracy. Our powerful and adaptable technology is not built on an idea that both business and technology have past, but is prepared for an evolving marketplace that is challenged by both what is known- today’s circumstances- and what is yet to be discovered.
Tent poles will keep going up, but those in the tent will be those contributing to the returns to the tent builders- the content companies. Watermarking is a key factor in making sure that those coming in the door pay their way. We invite you to explore this sector, both here on the USVO blog, and website, but throughout the investment media space and see why appropriate investment today will yield a powerful result in the future.

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.

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.

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.

Over the past year, a few of you have written comments asking for information that speaks to USVO’s strategy and financial position. This is not the appropriate venue for that information for a number of reasons. Those questions should be directed to corporate leadership. As a publicly traded company, USVO must adhere to rules about ‘news’ and the use of the blog page has not been deemed as the channel for this type of news.
We appreciate your interest in USVO and the issues discussed here, which are the core technical, business and social issues surrounding digital content distribution and security.

Wednesday the New York Times printed on its front page an article with “Digital Pirates Winning Battle With Studios” as the headline. It’s first bit of evidence to support that idea was that Warner Brothers had ‘failed miserably” in its attempts to keep track of every physical copy of the film. Yet “By the end of the year, illegal copies of the Batman movie had been downloaded more than seven million times around the world”
The article goes on to suggest that “Hollywood may at last be having its Napster moment”, as if 1) Napster was the cause of the music business’s woes or 2) Hollywood is suffering anything like the music business.
The evidence otherwise is right at the top of the nation’s agenda, as Hollywood had it’s tax break in the stimulus bill removed based upon the simple fact that Hollywood had a great January.
In fact when one examines the “The Dark Knight” ( I can’t share with you the IMDB Pro page where one finds this data) the $185 million production has grossed nearly a billion dollars worldwide as of today. Hardly a failure, and certainly nothing to cry about.
At the same time, if even a fraction of those seven million estimated illegal downloads could have been converted into transactions, the success would be that much greater.
The MPAA, source of the often quoted figure of $18 billion annual losses to the industry, had its voice in the article. John Malcolm, the association’s director of worldwide antipiracy operations, said “There are a lot of very technologically sophisticated people out there who are very good at this and very good at hiding. We have limited resources to bring to the fight.”
This last statement begs the question, not asked by the writers, of just what Hollywood’s budget is. Also missing is any discussion of alternatives. Fortunately the readers of the NY Times have supplied this in their comments.
Some of the highlights include our favorite- “one way to protect streamed content is with a digital watermark.”
We have written extensively here in the past about why and how watermarking is a solution not just to piracy but capturing new business for Hollywood. And we have written about what we think is required. Unfortunately, we are not yet operating at a level where we can take those lines of thinking to the forums where the Hollywood is listening.
We need your help. We need your voices to chip in and saturate those writers with encouragement to follow these ideas instead of accept studio sourced quotes, and old interpretations. Write them at http://topics.nytimes.com/top/reference/timestopics/people/s/brian_stelter/index.html?inline=nyt-per and http://topics.nytimes.com/top/reference/timestopics/people/s/brad_stone/index.html?inline=nyt-per

My apologies for not posting, as there has been quite a backlog of work since the Telecosm event. One of the requests given to me was to articulate a bit the distinctions of the various terms used here regarding ‘the motion picture industry.’

“The Industry” as it likes to refer to itself, used to be a collection of companies that were based either in New York city or the greater Los Angeles area, and which had studios where their product was produced for distribution in theaters that the companies owned all over the United States. In the early 50s, these companies (‘the industry’) was forced to divest the theaters by the courts. This consent decree, along with the arrival of television in our homes, and the aging of the moguls who had founded the companies, led to an unraveling of the “studio system”.

“Hollywood” was the generic term applied to ‘the industry’ even though the physical locations of the studio facilities were spread all over the Los Angeles area. Of the original companies, only Paramount and Columbia were actually in the geographic area of Hollywood, which in the earliest silent film days did host a very high density of the many entrepreneurial start ups that had fled the east coast and Thomas Edison’s Motion Picture Patent Company, which had sought to claim a royalty on every film produced.

Today, these three terms- “the motion picture industry,” “The Industry”, and “Hollywood” have come to be applied to a wide variety of companies, and enterprises that are hardly homogenous, geographically proximate or even within the sector of motion pictures. Dominated by the big six – Fox (or NewsCorp) Paramount (Viacom), Disney, Warner Bros (Time Warner) Sony (comprising MGM, Columbia and Unitied Artists) and Universal/NBC (GE) which themselves are all part of multinational conglomerates, with activities and products in music, television, computer games, theme parks, publishing in all manner of forms – the business sector that falls under these names also includes thousands of content creation, service businesses, and related enterprises (talent agencies, unions, hardware suppliers, equipment vendors, dedicated health care etc.).

Geographically their market is truly global, crossing national, cultural, and language barriers. While “Hollywood” does not produce as much screen minutes as Bollywood in India, or the largely unknown production center of Shaighai in China, it nonetheless dominates the world market in income and sets the standards in quality, and methods.

This is why USVO focuses it attention on those big six companies, who distribute the most motion pictures with the largest value in the world. It is these companies that have the greatest opportunity, and threat, presented by the revolution in digital communications that computing and internet technologies provide.

Telecsom is the George Gilder and Steve Forbes  hosted  conference “to promote investment in innovation”. The audience is traditionally science and technology focused executives and entrepreneurs with experience in creating and capturing future value.

This year the focus is the Exaflood- a Gilder coined term to describe the 50 fold increase in data on the internet in the next seven years. The discussions will be about the policy and investment in digital and communication technologies significant to the next phase of internet infrastructure.

This conference is a great opportunity for  USVO to present its technology and business proposition. Our target customers are the single largest potential users and beneficiaries of what is considered to be the next wave of internet growth- motion pictures on the net.

While those pictures will take many forms, live interactions such as videoconferencing, new content producers and distributors, remote medical services and so on, by far the largest application will be delivery of traditional news and entertainment programming through portals, cable and telephone company services, as well as the studios themselves selling directly to the public.

For our story to break through USVO has committed to sponsoring the title panel “The Exaflood: Managing the coming digital deluge”

Moderated by Bret Swanson, Policy Fellow at the Progress & Freedom Foundation who has coauthored articles with Gilder on the Exaflood, the panel will also feature Bob Metcalf, co inventor of Ethernet, Joe Weinman VP of strategy at AT&T, Lane Patterson CTO of Equinix , the company that supports Hulu, a Fox and NBC joint venture in online content, and Johna Till Johnson, founder of IT analyst firm Nemertes Research.

There is also a ‘commentator’ in the Telecosm format, and for this panel it will be a pioneer of VIOP, Tom Evslin.

A key element in any presentation, and a best practice from show business- is to know your audience- from the conference site: “250 - 300 senior VP and C-level executives, engineers, strategists, technologists, sales representatives, serial entrepreneurs and government representatives, as well as business leaders from technology and communications companies, institutional investment advisors, and high-net-worth private investors, accompanied by media and trade press and leading public policy officials.”

Two of these are our primary targets- media and trade press, so that we can apply the tools of mass media to amplify the message USVO shares in its story about motion pictures and the value of watermarking, and high-net-worth private investors. 

The watermarking sector is a developing technology sales and service business, and as such will require, right up until the moment of widespread adoption, investment in building and implementing watermarking applications customized to the many niches within the motion picture distribution industry. As such investors need to be interested in capturing the future value that will be reflected in conventional business metrics after that tipping point.

The USVO story, in contrast to the physical infrastructure that preoccupies most of the discussion of the next phase of internet expansion, is about technology addressing the fundamental need in business for trust. We will highlight the fact that the most visible and profitable content distribution companies in the world are missing out on the benefits of digital technology, and that our technology is an enabler that will be a key part of changing this.

Some of you have noticed that USVO is sponsoring a panel at the George Gilder produced technology investment conference Telecosm later this month.  Walt Ordway will be telling the USVO story on that panel, which has some very impressive participants.  Our agenda at this conference has a number of elements and let me start with giving some background on Walt, and his singular (as in the only time ever) accomplishment while leading the Digital Cinema Initiative.

So first let me tell you about the Digital Cinema Initiative.

Some time ago, right down the street from you, or wherever you went to see a movie in a theater, the movie was delivered as film on reels in cans. For most of you, this is still true today.  Those prints cost about $10,000 each. With the emergence of wide or world wide release ( a movie being in 3500 theaters simultaneously) a distributors’ cost of releasing a film became much more expensive (previously a ‘big’ release had required about 1200 prints). For most of you, this is still true today.

About a decade ago, some folks got the idea to put a high quality digital projector in the booth, and present the movie using high definition images using technology from computing. At the time the resolution was super VGA. While film purists agonized, audiences praised the stability of the picture ( no weaving or jitter) and lack of scratches. There were a number of challenges, but the thinking emerged that if the industry could change the third of theaters in the most densely populated areas of the United States to this type of presentation, then the distributors could save about a billion dollars annually on prints.

That’s right a BILLION dollars a year. Consider that at the time the theatrical gross revenue was just over $8 billion annually (today that is just over $9 billion).That kind of savings proportional to that gross is significant.  There were a number of issues to overcome. Technical, as in how good must the image projected really be? How will the product be delivered?  And financial as in if the distributors are saving the money, but the equipment that enables that savings is in the theater, who should pay for it, and who should own it?

For a little more than three years, these and other questions just sort of hung there. At one point a projector manufacturer brought in a bank that was willing to finance the entire project for the lease revenue on the equipment. The industry couldn’t say yes.

It didn’t take long for there to be agreement around some of these questions. For instance, there had to be multiple vendors, but a single standard form much like 35mm film. There had to security both in transport and delivery. These last two consensus led the studios to go to Congress and get the special permission required for competitors to join together in a venture. That was the beginning of the Digital Cinema Initiative (2002). Walt Ordway was given charge of this project.

One would think that now, with all of the studios committing to DCI, that the engineering, manufacturing, financial and business issues would get settled forthwith. But it took four years, not counting getting to the beginning of DCI. And it was a miraculous accomplishment even then.

It wasn’t just getting agreement between the studios. As mentioned elsewhere in this blog, the studios are not single entities led by all seeing dominant executives. Within each is a technical staff, a content security team, sales teams for all the different markets and windows the products emerge from, as well as an archive department charged with keeping the value of the products viable for as long as possible. All of these groups and individuals have their own priorities and concerns, and they all had to come to agreement about what the DCI recommendation (they gave up on the term “specification”) would be.

By the way, forensic watermarking is a part of the DCI recommendation, with every presentation of a digital ‘performance’ watermarked so that a camcorded pirated film can be traced back to its time and place of origin.

Now in spite of the fact that there were literally a BILLION DOLLARS on the table, the industry took a decade to pick it up. In fact it is still in the process, as the DCI recommendation has been out for 2 years (and was recently updated), and the second wave of converting that first third of theater projection rooms to digital is just starting.

The DCI represents the first time that the studios have in fact ever agreed on anything technical. They had different versions of sound when that first came in (1929). They had different technologies for wide screen, color, and, most recently, multi track sound. Parallel to the digital change is the advent of 3D, and there are multiple systems for this too. For digital projection, they were brought to agreement by DCI, who in the details was really Walt Ordway.

In the end, it was Walt Ordway’s engineering, business, and most significantly, diplomatic skills that made the DCI recommendation a success.

Shifting the industry to a new concept, even when it is a significant financial benefit to the industry, is a big challenge, one that we understand lies before the watermarking community as well.  DCI proved that it can be done, and we expect to gain a great deal by our association with Walt Ordway.

Next- why Telecosm?