The Future of Audio Watermarking

As the entertainment industry evolves in the face of rapidly changing distribution methods, it is necessary to develop business models that are compatible with these new distribution methods. There are a variety of business models that have been proposed in this new digital distribution space. For the most part they boil down to supporting low priced or free content using advertising associated with that content. This can be called “Ad Supported Content”, in contrast to the more traditional “Commoditized Content”. There are three ways in which watermarking has a fundamental role in enabling Ad Supported Content business models.

The Velocity of Content
Commoditized Content has a very different goal than Ad Supported Content. With Commoditized Content, the economic goal is little to no distribution velocity. Ideally, each instance (or copy) of the content undergoes one and only one transfer. Every time an instance undergoes an additional transfer (as when a consumer makes a free copy for a friend), potential revenue is lost. As a result of this, many of the technologies (such as DRM) that have developed around digital distribution have been aimed at stopping or at least slowing the spread of content.

Paradoxically, every time content spreads, there is a potential revenue opportunity (as when an unauthorized copy is played at a party and five people decide to go buy it). This has always created strange tensions in the technologies and revenue models surrounding the entertainment industry. A great example is the entertainment industry’s ongoing relationship with radio stations.

Ad Supported Content completely removes this tension because it has the opposite goal from Commoditized Content. Ad Supported Content needs to be high velocity. Because every transfer is a monetary event (if only a small one), the more transfers the better. Technologies (such as DRMs) that were developed to stop, slow, or control the spread of content are intrinsically ill suited to the high velocities desired in Ad Supported Content business models.

The ideal technology for Ad Supported Content business models will present absolutely no barriers to transfer, and will robustly survive transfers – not just between consumers but also between digital formats. There are a couple of technical choices that match this description.

The first technology is fingerprinting, or hashing. This technology looks at characteristics of the media itself to determine what the content is so that an appropriate advertisement can be presented. This is a good technology, with quite a bit of merit in enabling Ad Supported Content business models.

The second technology is watermarking. Watermarking embeds information into the media itself and, once embedded, has exactly the same characteristics as fingerprinting with respect to high velocity of content. However, watermarking has an additional feature that makes it very useful for enabling Ad Supported Content business models.

The Value of Specificity
If the goal is to support content with advertisements, it is important to make note of a very important characteristic of advertising. The more targeted the advertisement, the more the advertiser will pay for the placement. This is because advertisements that are presented to the correct audience will have a much higher conversion rate than those presented to general audiences. If you are in the business of selling advertisements, it is to your benefit to be able to present very specific audiences.

With fingerprinting, the specific piece of content is known, and a fairly targeted advertisement can be presented. With watermarking, the specific instance of content is known, and an even more targeted advertisement can be presented. Fingerprinting can tell you “this content is Stairway to Heaven”. Watermarking can do much more.

Watermarking can potentially tell you “this content is Stairway to Heaven, distributed through Starbucks, last transferred through the Hear Music kiosk in downtown San Francisco on Dec. 8th, to a registered Hear Music user who has this profile and uses a Microsoft Zune”. This entire thread of information is certainly subject to the normal ethics surrounding permission based marketing. However, without invading consumer privacy whatsoever, most of that information can be used. Extending the scenario, once that consumer gives a copy to a friend and the watermark is recovered, a very targeted advertisement opportunity is present. The elements that are potentially still valid are “Stairway to Heaven”, “Starbucks Hear Music”, “San Francisco”, and even many of the elements of the first friend’s profile. This makes for a very valuable advertisement.

Convergence of the Virtual and Physical
Technologies such as watermarking that rely on information in the medium itself have an additional extremely pivotal characteristic – they survive the transfer between the virtual and physical world and back again. If a piece of content is marked for a specific non-digital distribution channel, such as a terrestrial broadcast station in Omaha, and is then recaptured digitally for end user consumption, the entire chain of information leading up to the terrestrial broadcast is still there. Again, this allows for extremely targeted advertising.

As of yet, there hasn’t been much development of Ad Supported Content business models in the analog to digital space, which makes this area a very big opportunity.

Clearly, watermarking has a number of characteristics that make it an ideal technology for enabling a variety of ad supported business models.

-- EH

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