Archive for January, 2007

Today there is a meeting in Geneva, sponsored by the World Intellectual Property Organisation (WIPO), Interpol, and World Customs Organization, with the support and participation of the world business community. Given the when and where, this meeting signals how big piracy and counterfeiting are. Scheduled on the heels of the Davos World Economic Forum, and right around the corner, so to speak, this conference enabled many of the leaders of modern western civilization a day off from heavy thinking to ski or just rest up and then confront the questions posed in sessions. Motion picture piracy seems almost petty when you consider the threats to health and safety posed by piracy in the pharmacological field.

A quick look at the scheduled panelists shows that piracy is on the screens of movers and shakers worldwide. Among the titles I wish I could listen to- VP Supreme Court of China, the Minister of Commerce & Trade for the United Arab Emirates ( a woman), the General Director of Investigation and Surveillance for South Korea’s Customs Service, a Justice of the Supreme Court of South Africa. You get the drift.

Piracy has arrived.

By the way, the related subjects weren’t absent from the Davos agenda, they were just expressed as “How Web 2.0 will mould the future” or “Relinquishing control of web content” and “Balancing the need for security with the need for privacy”

Read the summaries and between the lines and you can see that the need for a clear and understandable strategy ( maybe something like “embed the proof to catch the crooks”) is called for.

Looking back at what showed up in my inbox regarding the digital distribution world, the range and scope are daunting.

You have the advertising world wondering when it will figure it out. Dave Morgan reports from DLD, a pre Davos conference in Germany asking “When Will We Deliver On The Promise?”. His laundry list of what’s wrong, aesthetically and from a business perspective covers all the holes in the ground so far.

You have the rogue distributor/producer/NBA franchise owner Mark Cuban asking why haven’t we thought about inverting the TV on the internet question in “Computer to TV: Shouldn’t it be the other way around?”

Why wouldn’t we want cable quality in our video? Why should we accept badly compressed flash images from YouTube or anywhere else?

Cuban, in his customary contrarian posture, questions the P2P excitement.

And gets answered right back by those in the throes of it.

Thanks to TorrentFreak, I also got quick linkage to this report today on piracy, which states that “only 40%” think illegal downloading to be “a serious offense”. Hmm. Not sure where the ’serious’ boundary is. More significant is that 32 million Americans downloaded in the month previous to the study.

Efforts to abate this in the growing marketplace are also in evidence:

A new appliance has been rolled out by a French company promising to read ‘fingerprints’ of content on viral video web sites so that their owners can be notified. A bit deeper reading shows that the technology scans content for patterns that are unique, and merely can machine identify content.

This is distinctly different from SmartMark, which identifies the license and to whom that license is granted for the content in which it is embedded. This is but one example of how the terminology is not well defined in this area, notwithstanding the language barriers.

Also in the ether is news that Fox has served YouTube and LiveDigital to find the identity of people uploading “The Simpsons”. At the same time Universal Music Group, part of Paris-based Vivendi, filed a copyright infringement lawsuit in November accusing MySpace of allowing its users to upload and download pirated songs and videos. The lawsuit also named Rupert Murdoch’s News Corporation, which acquired MySpace for $580m in 2005.”
Maybe someone already has done this, but we need a site that tracks who is doing what to whom, especially in court.

And I haven’t even got to who benefits most from VOD, what other watermarking companies are up to, (not talking to the right folks IMHO), or what a mainstream journalist wrote about the HDMI time bomb in the LA Times this week.

The field is exploding, and my main point today is that all of it makes SmartMarks more valuable and appropriate.

This report in Variety on a ruling in Italy raises the issue of how different jurisdictions have different rules and views. The key point- “the unauthorized downloading of copyrighted movies, music and video games is not a crime if the downloader does not profit from the action.”

Certainly the offense in question was an attempt to distribute beyond even the social circle of the perpetrators, but the fact that the criteria was ‘profit’ to the perpetrators as opposed to harm to the copyright holder is significant. And this in a western industrial nation whose government is headed by a media mogul.

Crossing the cultural boundaries combined with the effort by piracy forces to have their own country, the challenges culturally to a globalized digital distribution market are immense. So are the rewards.

Motion Picture Industry: Business models under attack

The motion picture industry contributes over $83 billion (2003) to the national economy. It is the single largest positive contribution to the United States foreign trade balance. It is also the medium of export of the values and culture of the country. Over the last one hundred years it has established itself as the dominant medium in every aspect of life in which it has been applied – entertainment, news, advertising and music.

The business models that evolved – theaters, television, cable, satellite and home video – are all built on variations of centralized distribution, with ‘Hollywood’ as the acknowledged center. Those business models are under attack. The advent of digital technologies that have revolutionized content has also created a revolution in distribution. The same perfection of digital delivery to theatres and homes also enables piracy that is currently estimated at over 18 billion dollars annually world wide.

Digital Rights Management: Presumes customers guilty

For the last ten years the motion picture industry has attempted to prevent piracy through a set of technical strategies. By engaging the Consumer Electronics (CE) industry, the motion picture distribution business successfully exported both the responsibility and cost of implementing Digital Rights Management (“DRM”) protocols. DRM refers to technologies that control and/or restrict the use and access of digital media content on electronic devices with such technologies installed. Unfortunately, many DRM efforts to address piracy restrict consumers’ rights to fair uses, often frustrate consumers. These initiatives have inspired a large number of hackers and dark net participants’ to break these various schemes. Early adopters report negatively on CE equipment that is more expensive and less capable than previous models.

CSS (content scramble system) was hacked by a teenager in Norway just weeks after its release. . Even Apple has gotten push back on its DRM strategy with the iTunes and iPod offerings.

DRM has failed to stop the growth of piracy. Studio executives lament the failure in published interviews. The state of these various DRM initiatives is such that even Bill Gates has commented publicly that there are “huge problems” with DRM.

Besides the technical issues, there is the philosophy which underlies this approach, which the Fritz Attaway, VP of the MPAA has stated as “keeping honest people honest”. Besides being an oxymoron, the problem with suggesting that the honest consumer needs to be kept honest is that it is offensive to the honest customer. It presumes the customer is guilty. This creates an antipathy even among the most ardent fan. Even more damaging is that these strategies combine to inhibit transactions, often making it more difficult for consumers to purchase and use the media as they are accustomed to with analogue or physical media.

SmartMark: The presumed innocent approach

USA Video Interactive Corp. (“USVO”) sees a different set of solutions to these attacks on the distribution of media in a digital world. They are supported by a philosophy consistent with both the history of western jurisprudence, and how people are used to obtaining and using media. We call this the ‘presumed innocent’ approach.

USVO’s SmartMark digital watermarking technology places an invisible, indelible mark within the motion picture that identifies the particular source or copy, and ties that copy to a specific license and use of the media. Watermarks are already recognized by U.S. courts as proof of license violations. SmartMarks are compatible with all existing forms of distribution, as well as DRM technologies, and in any format.

A good analogy is money. If we were to attempt to make money impossible to steal, it would no longer be convenient to use. Instead, we make money easy to use, and implement techniques to make it easier to catch those who steal it. In the same way SmartMark is a technology that keeps digital media easy to use, while making it easier to catch those who steal and enforce ownership rights. The benefit to the distributor is a more transparent and open marketplace, security that does not restrict transactions, and a relationship based upon trust of the customer.

SmartMark usage permits customers to obtain through new channels and use the media as they always have. At the same time, SmartMarks carry the information to protect the copyright holder from abuse of the fair and customary rights permitted to the honest customer.

The goal is to enable transactions – letting the customer enjoy the product under the rights of their purchase or rental, while making it easier to catch those that would abuse those rights. Whether delivered into the distribution channel, or at delivery of a digital file, SmartMarks enable the transaction – transparent to the customer – while adding the value of traceable ownership specific to the licensed usage.

The requirements to implement SmartMarks depend on the existing distribution methods and data flow. USVO can work with any content owner to add SmartMark technology to their distribution systems. USVO has working relationships with existing vendors in both physical media and server based content distribution to make adding this protection simple and easy. In certain implementations, USVO’s team can help generate new efficiencies in delivery that will add the security value of SmartMarks, while lowering overall costs of distribution.

USVO SmartMark technology embeds the proof to catch crooks.

If you’ve been reading the articles that have been posted on this blog, you may have started asking yourself, “I wonder how far pirates will go to keep illegally copying and distributing movies?”

Well, I may have an answer for you.

Making the rounds on the Internet, is discussion that an organization in Sweden - The Pirate Bay - wants to “buy” their own “country.” The thinking basically is that way they would no longer be under any copyright laws and can pretty much do as they please.

Here are some articles about it and a video on Fox News.

With determination like this, is it any wonder that Hollywood is scared, and trying to find, and do anything they can to stop illegal copying?

Here and elsewhere you can find plenty of debate about DRM. My fellow compatriot on this page has focused on the significant and serious discussion of the challenges to DRM.

Just for a bit of relief I thought today I would share some of the less technical and social reasons that there needs to be an alternative approach to the security of content.

When one Googles “DRM Failure” there are 1,180,000 items. Top of the list is this satirical fiction. ” We lost our key and can’t decode our own content” laments the fictitious head of B-Movie Studios. The Humorix site offers a lighter look at much technology.
Other notable results - “The Five Stages of DRM Failure” which articulates just how the various rationalizations for various DRM strategies parallel the famous Kubler-Ross analysis of that most difficult reality- death.

More commonly the listings are accounts of hacks like this one where it is reported that Apple’s OSX can be run on any x86 box.
And you can find plenty of sarcasm like this post that suggests DRM is joining death and taxes among life’s inescapable miseries.

Naturally you can pay big bucks to various analysts to get their reports that explain the challenges to existing business models that DRM is supposed to answer. And there are whole organizations focused on the subject.
And this post where a previously happy user of a locked silo DRM recounts his discovery of the underlying thinking in the schemes- you are presumed guilty. Especially sharp point “DRM is the only technology which is entirely dedicated to disabling features for the primary user of the application. How weird that we’re spending brain and computer cycles on forcefully removing features?”.
And it isn’t just brains and machine resources that are invested. This 2003 post by Bill Rosenblatt, a paid consultant to the DRM enterprises, explains why it isn’t content companies paying for this reduction in capability, although it is clear that Bill thinks they should.

Even when it isn’t time or money, there are other costs to DRM. Like the Walkman and the delay in the Playstation 3 roll out. To be fair, much of the PS3 problem is supposed to be about producing diodes, but getting the copy protection working played a role in stalling the delivery until just before Christmas.

To be frank, it isn’t really lighter reading is it? So pick your poison folks. Load up on the technical challenges or stick with the social costs and collateral damage.

OK OK, I promise I’ll stop, and start posting some good news about why it doesn’t really matter what happens with DRM. Maybe it will sort itself out or possibly just inconveniencing honest people just enough to keep them from inadvertant copyright violations will prove to be worthwhile. Because the suspenders solution to the DRM belt is SmartMarks.

Topic #1: AACS DRM has it been hacked or hasn’t it?

A couple weeks ago I wrote about a news article in which a hacker claimed he had broken the new DRM - AACS - being used on HD-DVDs and Blu-ray discs that prevents copying. There has been a lot of discussion in the online world of whether or not this person actually hacked it or not. Bill Rosenblatt at DRM Watch wrote a good write up about this discussion. I suggest you read the article here first before continuing with my posting.

So from that article it sounds like the “hack” was only a 1/2 “hack.” However, AACS is brand new and the hackers vs Hollywood battle over AACS is just beginning. Over at this website you can read the postings of a group of people who are very self-motivated to fully break AACS DRM. Also posted is the original “hacker” stating why he decided to break the DRM (basically his movie wouldn’t work) and how long it took him to break the DRM (about eight days). From reading the group’s postings it looks like they are making a lot of progress rather quickly. And now there is talk that the first pirated HD-DVD movie is available online.

My personal opinion is it’s just a matter of time before a full, complete hack of AACS is done by someone (or a group of someones) and made freely available to the world. Hollywood will probably respond with a “fix” and the hackers will respond with a new hack of the “fix.” I don’t see this tennis match ending as long as DRM exists. Meanwhile, your average everyday consumer is stuck in the middle of it having to deal with and understand all this DRM “stuff” and all these “fixes” for their expensive equipment and content.

So what does this mean? To me, just further evidence of what USVO has been saying. In the long run, DRM is not the right way to go. We believe digital watermarking makes a lot more sense, and in our case, SmartMark, makes a lot more sense.

Topic #2: A new twist on the HD-DVD versus Blu-ray format wars

So, in addition to the hacker vs Hollywood DRM war, consumers also get to be in the middle of the HD-DVD vs Blu-ray war. Like I mentioned in my previous posting, this is like a rehash of the VHS vs Beta wars of the 1980s.

However, this time it appears there’s a new twist that has taken place. Warner Brothers has released movie content called Total HD that can be played on either HD-DVD players or Blu-ray players. In addition, LG Electronics has released a player that can play either format as well. Of course, these solutions increase the manufacture costs, which likely mean higher costs to the consumer. Nevertheless, for those consumers out there already buying the latest tech stuff, this may be a viable alternative. Personally, I see this as more of a temporary solution, rather than a long term one, but, as always, time will tell.

Every day my inbox has something stuffed in it about or related to the digital distribution issue. Here is a sampling of the last 24 hours-

A history of DVD security efforts which was inspired by one person’s account of his DRM Christmas.

My favorite part of the history- ““the only long-term effect of copy protection is to ensure that those who defeat it are immortalized.” which came from a previous entry by Mark.

Next up is this report on the first HD movie on BitTorrent.  Note that the file size is over 19GB. Think about virtualized distribution’s impact on the internet flow. Recognize the power of the tiered pricing proposals to a company dependent on that flow.

And lastly, only because I have other work pressing, check out this NY Times report  (currently not requiring registration) on how the content industry is scrambling to deal with incessent violations of their copyrights on viral video outlets. Key statement by Marc Shmuger, chairman of Universal Pictures, “I think that the marketing side of our company and the copyright-protection side have contradictory impulses. But there is a huge appetite for content, and we are well-advised to recognize that appetite and find constructive ways to feed it.”

Will try to have weekly sampling to illustrate the dimensions of the marketplace and issues that SmartMarks are relevant for.

One doesn’t have to look very hard anymore to find evidence of almost anything. Google, and the like, has made putting a finger or nose in the air more productive than at any time in history.

Among the acronyms (see other posts for DRM, HDMI, MPAA, etc.) that are relevant to the development of the digital marketplace, two stand out- CRM (customer relationship management) which can be thought of as the attempt by companies to organize and structure their interactions with the people that pay for the company’s products and services.

For the most part, CRM is a pyramid structure with the company on top and the customers on the bottom.

The other is VRM (vendor relationship management), a term so fresh that it is yet to post a result in normal search on wikipedia. The interest in VRM is liveliest amongst the bloggers and proselytizers of the digital identity initiatives. It has also attracted attention in the academic centers such as Wharton, dating back to the turn of this century, and The Berkman Center at Harvard, where Doc Searls has a seat, and beats the same drum he first used so well in the Cluetrain Manifesto.

This has all the elements of a popular uprising too, including a Customer Manifesto. Unlike the dark net, where the revolt is about breaking the store windows and grabbing the product, this effort is a civilized discussion. The most recent discussions in VRM are about how to make VRM a compliment to CRM, instead of an inversion. It isn’t just about giving consumers a way to get the lowest price.

The point for content distribution is that there is a well organized, and thoughtful attempt to resolve the problems of a digital marketplace that considers how to have a lively and prosperous, as well as efficient and safe, way to do business. In developing alternatives to restrictive and inhibiting technologies, the digital distribution business can draw on a large active population thinking through the challenges. Put VRM on your ‘watch’ list.

The goal of most content distributors is to deliver their content in exchange for something of value- cash, viewer attention, or some other information that has value.

The current model of achieving this exchange involves creating awareness, leading to intent, and then an action- a purchase or giving attention to the content. Today, the digital networked marketplace is bogged down in intermediate steps aimed at reducing the risk of theft by a public that is presumed not trustworthy. Exchange has been stifled instead of opened up. Fear is in the tone of the content distributor’s voice, and the public recognizes that the open hand of the distributor is not held out to them.

What would a world where the customer’s intentions are presumed good be like? Where the power to choose how and where to spend one’s money is what vendors want for consumers? Where satisfying specific needs and wants is the focus of the sales conversation? What if technology made a customer welcome in the virtual entertainment store and content library?

Let’s say you could visit the entire world of possibility in content, and filter it for your tastes. Say you liked a little nudity in your content, but not swearing (something Hollywood doesn’t provide today). Or you enjoy historical battle accounts but not spurting blood. Let’s also say you live in a town that doesn’t get the full offerings of entertainment in your local movie house or on the one independent station you can get on cable or through the air. And let’s say you want to be able to take content with you while you travel, whether it is around the world or from your living room to your bedroom.

How could technology do all this in an environment of trust?

It could if every time the product was delivered it was modified in a unique way, with an identity specific to that time and that customer. What if the modification process fit seamlessly into the existing means of delivery, both mechanically and conceptually. What if this information was held by the distributor and the consumer willingly gave the distributor information about which products they wanted, both from a library or in the future? What if the approach were one of a traditional market, where the buyer and seller interact, learn about each other, and build a trusting and confident relationship?

Today the digital marketplace is not a two way conversation. It is dominated by technologies that are built on the assumption that the customer needs to be ‘kept’ honest.

Large distribution entities, as well as small ones, continue to apply the thinking and methods of the recent past marketplace, while focusing on the threats of the new.

The opportunity to engage in a personal and direct way, enhancing relationship, while building in security, has yet to be recognized.

SmartMarks are USVO’s contribution to the digital distribution marketplace built on presumed innocence, trust, and technology. This solution to the challenges of digital content distribution gives content distributors the technology to welcome the public to their stores. It also dramatically reduces the hardware and infrastructure costs of high volume distribution across the network, and essentially makes piracy visible.

The focus is on making it easier to catch and prosecute those who would steal, as opposed to engineering compliance in ways that inhibit transactions, complicate consumer experience, and communicate distrust of the very audience that is being served.

By embedding specific license related information into the product delivery routine, SmartMarks provide the proof to enforce distributors rights, reveal pathways through which stolen products reach markets, and catch crooks.