Watermarks: A better DRM than DRM itself? What a GREAT idea!
Since the explosion of casual multimedia piracy across the Internet, which began with Napster just a few years ago, it's been apparent that the RIAA (and, more recently, the MPAA) is fighting a losing battle by trying to "fight fire with fire."
Anyone who went to college in the 1970's knows that the audio cassette first made it possible (and cost-effective) for you and your friends to share the cost of a record album. Few of us even considered the possibility that we were breaking the law (which, of course, we were.) The RIAA responded by embracing the audio cassette. Even though it provided incrementally poorer audio quality, it was a huge hit. The price was right and the quality was acceptable -- but large-scale redistribution was inconvenient. The industry learned to accept casual piracy of high-quality audio recordings on vinyl because they made it up in high-volume sales of low-cost, but lower-quality audio cassettes.
Remember the days when PC software vendors spent months to develop crippling copy protection schemes that were broken by hackers in a matter of hours? Software vendors eventually reined in the bulk of the piracy not with draconian measures but with reasonable licensing fees and straightforward protections which made it easy for the license holder to use the software within the terms of the license. Providing free, or nearly free, plug-ins, readers, or stripped down versions of their full-featured products made it unprofitable for pirates to steal full versions and attempt to resell them to legitimate users with limited needs.
What both industries came to realize is that by lowering their prices and providing the functionality needed by many of their customers they could tolerate a minimal amount of petty theft while putting the pirates-for-profit out of business in most jurisdictions where copyrights are generally respected by the authorities.
The RIAA and MPAA made matters worse by lobbying the Congress to pass the Digital Millennium Copyright Act (DMCA), which made many casual users of popular material petty thieves for trying to deliver their duly-licensed multimedia more conveniently. Instead of embracing and leveraging the very technology which allows high volume theft of high-quality materials, the RIAA and MPAA have returned to those days when even the honest folks were "thieves" and the for-profit pirates went on about their merry way. Instead, the RIAA and MPAA should be using the technology to enhance the distribution options of its customers. By leveraging this new-found distribution channel, these copyright holders could dramatically increase their volume of customers while at the same time dramatically lowering their distribution costs. All one needs to do is look at the distribution model used by vendors of printed copyright material, like eReader.com, to understand the potential rewards of this kind of approach.
Unfortunately, the DCMA paved the way for DRM and missed the point entirely. There are (and always have been) laws against the theft of copyrighted materials. Fair Use made it possible for the legitimate user to make casual copies for their own use under certain reasonable and easy to follow guidelines. The problem is enforcement, and DRM is one of those "throw the baby out with the bathwater" kinds of solutions which makes everyone who wants a more convenient solution a potential criminal. Instead of aiding enforcement, DRM cripples enforcement by creating a market for 'workarounds' -- and the DCMA makes possession and sale of those 'workarounds' illegal -- even if you own a legitimate copy of the material in question. Making the punishment far worse than the crime for most casual users.
If we assume for the moment that over 99% of the users of this new technology are either legitimate or otherwise unwittingly taking part in high-volume piracy (through peer-to-peer file sharing), then a watermark on such materials could do a great deal to alleviate the problem. How? By providing an audit trail -- a way in which the copyright holder may determine the origin of illegally distributed materials. Such a tool would, for the first time, give copyright holders a true picture of just how big the piracy problem really is. My guess is that the dollars lost to piracy are far smaller than the RIAA and MPAA would like to have you believe. Are the recipients of such materials really potential customers, unwitting victims of pirates, or are they maliciously trying to make a buck off of somebody else's efforts? I suspect that few are in it for the money.
The problem of course is the same for watermarks as it is for DRM. Unless everyone uses the same system, cross-platform solutions will not be widely available and the tool will be of limited value -- but if everyone chooses the same scheme, then all vendors of copyrighted material become subject to the whims of a single technology provider (in this case, an MS-TiVO partnership.) The only viable solution is one based upon standards like those that brought us vendor-independent Ethernet solutions (IEEE 802.3 etc.) and wireless (802.11a/b/g). We need a standards body to accept the challenge of establishing uniform multimedia watermarks -- and we need it soon.