Archive for May, 2008

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?

Another subject that we have covered previously, but that bears repeating in view of some recent announcements regarding the motion picture industry.
The business model that has served Hollywood is under siege.

Since the beginning, Hollywood decided what the public would see, and when it would see it in what venue. Today, digital technologies have made it possible for the public to get used to the idea that when and where, and increasingly, what, is up to them.

This stress, if you will, has been around for about a decade now. The music industry gave a tutorial on what not to do, yet the MPAA has cribbed many of the pages from the RIAA playbook. Based on the availability of pirated titles, both in physical and digital forms, these efforts are failures.

Being able to market and launch a ‘property” in the theaters, and then sequentially release it to wider and less expensive to the consumer channels over a period of time is how Hollywood has made a profitable industry out of a segment in which there are always more losing products than winners. Thanks to this ‘windowing’ model, even losers like “Waterworld” eventually return on the investment. (“Waterworld” eventually broke even thanks to licensing for games, theme park attractions etc). At least that is the thinking that continues to search for a way to have ‘display without capture.’ This last phrase is shorthand for the idea that we can show your eye a movie while making it impossible for there to be any kind of recording of it, or theft of the source that showed it to you. This is a modern holy grail, except that there is nothing ‘holy’ about it; just wishful.

Meanwhile new ventures are grabbing the shelf space in that modern geography of the internet. The studios, being part of multinational corporations, are buying those ventures in whole or part to hedge their risks. But neither the acquisition of such outlets, nor the selling of movies online suggests that the solution to the fundamental problem of answering the challenge to the business model has been met.

USVO’s SmartMarks offer an alternative. Engage the marketplace in ways that let people watch what they want when they want, and trust them to do just that- watch. Embed proof to catch the crooks- the people that steal to make their living off the investments of others.