Archive for January, 2008

So the year is off to a stumbling start in the markets, what with the crisis in confidence in the home loan sector. Contrast that with the consumption optimism suggested by the Consumer Electronics Show, and the lively discussions about digital distribution. Like the NFL, the action is on, and the biggest players are making plays.

NBC’s Beth Comstock, President of Integrated Media reported a billion dollars in revenue from digital sources is expected in 2008. That’s a $300 million rise over the analysts estimates of what NBC did in 2007. This is during the writer’s strike over just what part of the developing digital marketplace should writer’s work be worth. Clearly the studios aren’t worried about their negotiating position that these are immature markets.

One of those digital revenue channels at NBC is Hulu.com, NBC’s joint venture with NewsCorp.  With parents like those, one wouldn’t think that Hulu would need the $100 million in private equity it received from Providence Equity Partners last fall. It doesn’t. PEP, focused on media and entertainment, wanted in on what is widely recognized as the way media is going- online.

The market is developing, and a number of significant landmarks have emerged. NBC, fresh from withdrawing television content from Apple’s iTunes store, announced a partnership with AT&T and Microsoft to develop ‘anti-piracy measures”.  DRM has now been abandoned by the four major music labels, as reported in Wired. The same article notes their experiments with watermarking. These experiments are about facilitating filtering, as opposed to forensic tracing of thefts. Filtering has been proposed by the Japan Ministry of Internal Affairs and Communications (Somusho) as a way to keep the web safe by removing anything it considers “harmful”.

Concerns over censorship and invasion of privacy certainly animates much dialogue about proposed security measures. Including those who regard piracy “as innovation” ( an interesting definition articulated here and in the book by the same author “The Pirate’s Dilemma”) the resistance to most forms of security is widespread and intellectual compared to the brute force of commerce exerted by content distributors.

Just this week Steve Jobs has leveraged his board seat at Disney into movie rentals of content from all the studios. The tradeoff Apple has made is that the rentals are temporary. From the moment of purchase, a customer will have 30 days in which to hit ‘play’. For the next 24 hours, they can watch that title as many times as they want. The studios, according to an analyst quoted by Forbes “view iTunes movie rentals not as potential competition to DVD rentals but as a new option that will provide consumers with true handheld portability”.

The big companies, not just in the entertainment industry, are looking for ‘new options’ to reach customers, and generate revenues. Ultimately the path of least resistance for both the content distributors and customers will emerge with simple security measures that enable transactions, not impeded them.  As stated by James Cicconi, senior vice president, external & legal affairs for AT&T,  “What we are already doing to address piracy hasn’t been working. There’s no secret there.”  While AT&T is focused on catching pirated files transported across their network, as opposed to catching crooks (bandwidth is what they charge for- not content) their cooperation with the content companies is due to a common need. “We’ve got to figure out a friendly way to do it, there’s no doubt about it,” he said.

The Consumer Electronics Show, the annual convocation of electricity based consumption in Las Vegas, ended yesterday. Thanks to many of the past innovations delivered there, one can see much of what went on there, including view or read all of the keynote speeches given, including Bill Gates last appearance there. There are tons of critiques, reviews, video clips (see Gates bring on Slash to win a $20 bet about who is best at Guitar Hero!) and photos to make it possible for you to have the CES experience without leaving your desk.

Over 130,000 people attend speeches, demos and wander the booths of over 2700 companies. As has been the trend for several years, delivery of motion pictures, particularly of the HDTV flavors, dominate both current offerings and predictions about the future. Consistent with the larger societal concerns about energy costs, and sustainable strategies to transform the developing countries in the world, Green values were large.

Indulge yourself to the extent that you have time. There is no end to the economic expansion portended by these developments. Many are directly related to quality of life and increasing access to information that makes a difference in individual experience. From healthcare to education, the use of high quality immersive imagery to help people, increase their understanding of their world, their options, and explore it all, demonstrate the paradigm of high volume low individual transaction cost as a basis for spreading the information technology impacts into every aspect of modern living.

This is exactly the model which USVO has built its product MediaSentinel for.

Let me suggest one keynote that you might want to take the time to view as it has several on stage demos that are very fun, and great examples of the potential of ubiquitous wireless broadband and high quality video to transform the experience of socializing, doing business in a far away place, or remote real time collaboration of performance like music.  Besides the cultural variety on stage (Suits without ties share the stage with jeans, untucked shirttails, mock Mohawks, real time Mandarin translations, virtual nose rings, and  a real time virtual garage band -Smashmouth actually) Paul Ottelini, CEO of Intel, suggests that the future of the internet requires two way communication so that companies can know what people want, and the need to support secure and confidential ways to support consumers sharing the information about themselves that will make it possible. Trust is going to be the value that companies will have to establish with customers.

This and the other keynotes are examples of media the authors want to give away. We won’t see watermarking of collateral marketing content. But if the vision of Ottelini, and his team at Intel- a vision shared by many other companies competing and collaborating in realizing it, you will be able to select and watch what today we think of as a film or television show anywhere anytime.

The simple clear and obvious way to make this simple, secure and enforce the licenses that support legal transactions for motion pictures is watermarking. Trust isn’t going to be one way either, and watermarking offers the most cost effective and least technically demanding way to provide it for content distributors.

Sometimes the calendar throws us a bigger space between the actual holiday and the next likely working day. I don’t know about you, but I was at my desk on the second looking to move ahead. I got many voice mails saying call back on the seventh. So yesterday there were a lot of busy numbers!

With a week already in the year, that means that we have a lot of things to cover! First of all, let’s take this change of calendar to look at the overall context of things. Despite all the election hoopla, most of the business pages are dominated by the problems caused by the increase in foreclosures in the housing sector, and the related damage in the lending sector. Foreclosure has never been so visible, and in certain neighborhoods in the nation where sub prime loans accounted for a good portion of sales, the skew to the supply has depressed prices, and created a buyers market where buyers are waiting for further weakening of prices.

I track a few economists, and each and every one says that the total number of sub prime defaults, even in worst case (they all fail) scenarios, are not significant enough part of the loan and home sales markets to undercut the current economic growth cycles. Other doom and gloom stories from peak oil to a radical Islamic Pakistan also do not seem poised to interrupt the engines of the current economy.

What does this have to do with watermarking and content security? Well a lot it turns out. Content, particularly motion pictures, are, and always have been, one of the lower cost discretionary items in the palette of our modern western suburban lifestyle. Even though going to the theater is now a two digit ticket, the other options- rent a title, buy a title, go to a store, get it online – are all still relatively low cost ways to divert ourselves in our spare time. So the projected growth in the economy is good news for the content companies and those who serve them. So Happy New Year!

Over the next few posts we’ll review the developments in the space that occurred over the holiday period, and examine the events and tea leaves from the Consumer Electronics Show.