Archive for April, 2007

At the previously mentioned LexisNexis ( and Variety) Digital Rights Management Conference in Los Angeles this week, probably the most significant appearance was by Dan Glickman, the Chairman and CEO of the MPAA.

Glickman took over the position from Jack Valenti, a national asset whose reputation and hair survived over forty years and mis-steps like calling the VCR a ‘dagger in the back” of the industry. Valenti passed away yesterday and be sure to read the many praises for the man who brought us the ratings system. A remarkable life, which included being present at Lyndon Johnson’s swearing in as President on Air Force One, Valenti’s career in Hollywood covered an era of incredible changes in all aspects of the business.

Like Valenti, Glickman, brought the experience of life in the political cauldron of Washington DC to the MPAA. His childhood and business life in Kansas as a scrap metal operator being of far less interest to the studios than his nearly 30 years in various jobs in Washington, including nine terms in the House.

His speech brought all those well earned politics to bear on the challenges facing the motion picture industry today. His positive pronouncements included “If ever there was a time to think big, this is it” and “We wholeheartedly support allowing customers to make authorized copies of the content they purchase”. What I like best is that he actually called them ‘customers’. Usually the public that fuels the multi-billion dollar business are ‘consumers’. He called them that too later in the talk, but it was good to see the customer designation. Also, he clearly sees the potential of the technology revolution to expand the options for entertainment, and wants to make sure it happens on the studios terms.

The complete text is here on the MPAA site for those who enjoy reading four pages of politically smooth speech. Note the historical references. In classic USA provincialism, Glickman has Edison as the inventor of the motion picture camera, a statement sure to endear him to the French, among others.

Some thing to take away- DRM is going to be pushed for quite a while. Not only did the MPAA, and its constituent studio members pony up a $30 million ante to open MovieLabs, they put it in Palo Alto. DRM has up to this point been something that Hollywood wanted, and Silicon Valley and the CE industry paid for. Getting further than where it is now required something extra, and so the industry followed the cable industry model of CableLabs, which has successfully developed standards and practices that extended the reach of the cable operators, to say nothing of their profit options.

The flip side of this was published, coincidently in Variety. It speaks directly to the issue of trust in the relationship between the distributors and their customers. The lead “Young people prefer to download film and music illegally because they don’t think that the biz is capable of giving bang for their buck.” States the problem pretty clearly. The failure to address piracy on the value exchange basis is probably more at issue than any other.

Equally interesting in the study- Sony is the company most respondents thought of as bringing them entertainment. Neither Apple nor YouTube, or the other online sites, made this list.

Earlier this week the Wall Street Journal published “Policing Web Video With ‘Fingerprints”, which unfortunately has already gone behind their paywall. The article, as does most popular press right now, focused on the issues about copyrighted material on the viral video sites such as YouTube. You don’t have to read between the lines to see the issues in the content security area, as well as the challenges faced by USVO and other watermarking concerns.

First, is the use of the term ‘fingerprinting’. No authoritative body exists to standardize the vocabulary and use of terms in this area. Generally ‘fingerprinting’ is the use of watermarks in a manner that every individual copy has a unique watermark. This usage isn’t universal, and the WSJ writers didn’t bother to distinguish their use in this regard. If you apply the above, the article makes sense, but sometimes statements don’t.

Second, the application of watermarking to filtering material is much more complicated than its application to enforcement. As an example, if USVO technology had been applied to the post production and marketing of Spiderman 3, one outcome of the story of the title already being on the streets of China would be fingering the person or office who’s copy of the show is the source used to create those illegal copies. Just one of those can be used to find that source. This is enforcement. BTW_ Sony is saying those Beijing DVDs are fakes.

Filtering, on the other hand, means reading each and every uploaded clip of a commercially released show, and checking the results against a database of every legally licensed copy delivered. For shows that have already been on television, or are in general circulation, that database, and the associated watermarks don’t exist.

Third- As the article points out, there is a desire for standards. Yet there must be multiple watermark technologies as diversity in this regard is the industry safeguard against a single hack unraveling the whole system.

Fourth- Filtering also means the assembly and management of several huge databases, which will by definition have a great deal of proprietary business information for a distribution company. In the WSJ article it is suggested that a single watermarking company will have and hold this information for all the distribution companies. This is not a position I would want to be in, for any and all attempts by one company to challenge another for customers in one of those databases would reflect on me, bringing my integrity into question in each case.

Fifth- Possibly most significant to the long-term implementation of this worthy technology to this vexing problem, is the issue of the business model. As the article describes, the company currently testing expects its fees for watermarking to add up to a million dollars annually. That won’t sustain the maintenance on the scale of databases discussed; much less provide an ROI on the original investment. The watermarking space has many players that have investments in the tens of millions of dollars that don’t yet have business models beyond ‘buy this box’ or ‘six figure license fees’ neither of which are showing any signs of being sustainable for either the technology companies, nor the content distributors.

Now with all that to chew on, you might wonder why USVO is in the watermarking space. It goes back to that supposed Spiderman 3 DVD in Beijing. We are focused on embedding the proof to catch the crooks. When a watermarking technology is used to bust that pirate, watermarking takes off. Eventually all deliveries of popular content will be marked. That’s billions of transactions. Even at pennies per, there is a pie to be shared that makes the effort and investment worthy of all those companies in the space.

While you can be excited about YouTube and however many copies of South Park are uploaded there, the real business value is in enforcing the licenses of the content owners, a title at a time, in one business unit at a time. Once enforcement stories are being told, once a marketing underling doesn’t just lose his or her job by slipping the nearly complete product out the side door to an enterprise scale pirate but avoid prosecution by testifying against that enterprise pirate, the landscape shifts. When the focus is on finding those that steal, and make money off the theft, the watermarking, or fingerprinting, business will provide the resource to develop standards, in the vocabulary, enforcement process, and business models.

Steve Bryant blogs over at Googlewatch a service related to eweek, itself a new technology information company. Today he posted under this headline

Video Fingerprinting Won’t Stop Piracy

Some other juicy quotes-

“It won’t even be able to contain it. Anybody who tells you different is selling something. Probably fingerprinting software.

The reasons are simple: The technology isn’t perfect; users will upload somewhere else; and users will find pirated content on P2P networks, darknets, foreign servers, etc ad infinitum. “

So I wrote a reply in the comments, which I supply you here with so you won’t have to go look for it-

“I am selling watermarking, and I don’t tell anyone that it will stop piracy.
Piracy is a part and parcel of a widely circulated product having value, and therefore being something that people who would steal will steal.

Watermarking is about enforcement of the agreements that people make when they buy or license products, in this case content.

Unfortunately we have a legacy of people searching for the silver bullet that will make bad behavior impossible. DRM is an attempt to build such a bullet, as are various encryption schemes, permission keys, etc.

This has led people to think that the phrase ‘prevent piracy’ has some tangible meaning, like prevent ‘bank robbery’.

If we made money so secure you couldn’t steal it, it would be inconvenient to use. So it isn’t about ‘preventing’ piracy. It is about discouraging, and prosecuting enterprise scale theft of the products.

People who are selling anything on the basis of a promised prohibition are, well, less than honest, or maybe confused, which would be a form of incompetence.”

And I dislike incompetence as much as I dislike theft.
Prevention is a fool’s goal, much like herding cats. We aren’t promising prevention.

I apologize for the break in posting. It has been a very busy spring as the vacuum created by the presumed demise of DRM has created the beginnings of a vortex about watermarking. Whether you are tracking the government, the business press, or the many tech pundits, the tone and number of items about watermarking took a spike this month.

It wasn’t overload, or being at a loss for words. Rather it was the strange set of illnesses that seem to come with the change of seasons, and the NAB convention, where the broadcast industry gathers annually to trade smoke, expense account meals, and kick tires on the various technologies that constitute the production and distribution pipelines.

Several things need to be pointed out, some of which have been stated here before, but bear refreshing. First of all, many observers still seem to think of watermarking as a DRM scheme. While it certainly could be integrated or integral to a DRM solution, in our view, watermarking is a distinctly different and independent approach. Both in terms of values and technology, watermarking is an enforcement strategy, not a prevention one.

Another is that the marketplace for watermarking is years younger than that for DRM.

DRM has years of investment for some really simple reasons, while watermarking has not. The first is that the content distribution industry has generally enjoyed a technological boundary to theft. In the analogue era, if you didn’t have a 35mm projector, having a print was pretty pointless. The physical nature of distribution made the price of entry into any sort of theft made piracy a fairly contained risk. When video and then digital tools first arrived, they were still relatively expensive and complex. In the last decade has it become cheap and easy to scale quality pirated content. Even then, it has been natural to imagine that the very technology that enables the theft would also enable a silver bullet that would make it impossible to steal.

Except it doesn’t. That hasn’t stopped the entertainment industry from pushing the consumer entertainment and IT industries from spending a lot of time and money creating and deploying a lot of complex technologies that resulted in more expensive less capable gear that frankly isn’t even holding back the flood of unauthorized duplication and transfer of copyrighted content.

With this kind of investment, both financially and emotionally, it is going to take more than Steve Jobs saying it should go away for DRM to collapse. If you have doubts, just check out this agenda for a Hollywood high level Digital Rights Management Conference. See who is speaking? With a registration fee of $699 for the webcast and sessions on “The Government’s Impact on Digital Rights Management” this is not the meeting of a retreating army.

Something else conspires against the ‘bull market in watermarking’ that Om Malik, ‘founder and chief blogger’ for GigaOm Media., is looking for. That is the fact that the value of enforcement is still a cost.

When you wire your home for an alarm and subscribe to the service, you aren’t expecting to see a multiple of that cost show up in the appraisal of your home. When you insure it for fire , it is because there is a known risk that you are preparing for. For some reason this kind of thinking is not applicable in entertainment distribution because a loss estimated at $18 billion annually isn’t anything like their house burning down.

In fact it isn’t even like having a bad water leak. When you have a leak, you might have a flood, or have to swim through your basement or something like have a floor collapse when a leak saturated a structure. But nothing like that happens when an enterprise pirate takes a pristine iteration of your product, produces a quality rendition and goes to a market that you are overpriced relative to the wages of the population, like say the slums of Mexico City. You just don’t feel that as pain, the way you do when your house actually burns down.

Combine the two – no real pain and the myth of the silver bullet- and you have the right combination of factors to support denial and BAU (business as usual).

We have been pounding the drum, putting out the rhythm of the song “Watermarking is the answer to piracy” for over two years now. In addition to the before noted rising tide of dissatisfaction with the DRM ‘presumed guilty’ approach, we are also now seeing and hearing others tapping their feet to this tune.

In this report by S&P Equity Research authors, posted by BusinessWeek.com the analysis of the NewsCorp/NBC Universal venture includes winners ( NewsCorp & Time Warners) losers (YouTube & ValueClick) and some general predictions. On page two find my favorite -

“In 2007, we expect potentially significant technology advances (with key milestones) related to the implementation of effective digital fingerprinting technology, potentially helping the likes of Newco, MySpace, and YouTube to prevent unauthorized use of copyrighted material “

That would be USA Video Interactive’s wheelhouse folks

My favorite billionaire, Mark Cuban posted a few of his own thoughts on the music business in multiple places on Sunday, and he wasn’t doing any April Fooling, unlike those billionaires at Google.

Cuban says that something has to change for music to get its mojo back, and getting rid of the CD is one of those things. “There is no reason why each label cant be a “network” comparable to Turner, NBC Universal, HDNet, etc that gets paid by the subscriber by a distributor who then marks the cost up to consumers. Consumers get a simplified delivery of music, Labels and hopefully artists get more dollars put directly in their pockets. Its not good for the retail side of the business, but as long as CD players are dying, so will retail.”

Well, I have a reason why not. I don’t watch or listen to a ‘network’. I listen to a song, or an artist. I watch a show, or a program. Back when I had vinyl albums, I organized them by artist name, not label. When I moved to cassettes and then CDs, this has remained the method. Now that I have a digital library, I have been limited in my folders by both itunes and Media Center to artist or album, with the cross reference of genre, but only the ones they preprogrammed. (I don’t doubt I could do more, but it isn’t obviously available to me, and I am already tired of the poor help files for both of those applications so forget about it).

My PVR puts everything in alphabetical order by show name. I can create a “Comedy” classification and make shows be in that block, but that is a hassle too, especially typing using the remote navigation and select buttons one letter at a time.

Other than “60 Minutes” or “Animal Planet” shows, or ESPN, I have grown fuzzy on what show is on what network. Thanks to those California tourism commercials, I am pretty sure that Terri Hatcher’s show “Desperate Housewives” is on ABC, since she appears with Mickey and Minnie in front of Cinderella’s castle at Disneyland. After that if it wasn’t for Comedy Central putting its logo in the corner of lots of the Daily show, and “adult swim’ on all those crass animations that my kids love because they make their parents cringe, I wouldn’t know Spike from TLC.

Basic cable and its associated tier pricing have worked because it gives me a selection and a single payer price. I don’t always like the choices and groupings, but in general it is working well enough that over 80% of the US public buys its television this way. Netflix is successful because it gives me access to a huge library that my local Blockbuster or library can’t come close to. I can find the original and the remake and watch them back to back. Both of these have to keep price points within my comfort levels, and keep giving me what I want.

So while I agree that the CD isn’t a driver, and probably not the future commercial driver for music, I doubt that any service that restricts me to a ‘channel’ or ‘network’ isn’t likely to accommodate my range of tastes. Right now, I just went to the CD shelves and pulled out the most recent five purchases. They are on five different labels, and every one is not a main stream company. One I bought from the band when they were having a beer after their set. If they had handed me a url, I wouldn’t have gotten the incredibly intricate case done up in beeswax paper.

Will subscription pricing models be the answer? Can’t tell from here. But I agree that something has to shift, and it starts with going back to building relationships, with the artists, and with the customers.