Could audio watermarking help make MP3s free?

An appealing alternative to DRM comes around again

A technology mostly associated today with crackdowns on music and movie pirates could instead be used to help make multimedia content free -- and file-sharing legal.

So claims a small Seattle firm, Activated Content Corp., which appears to be the leader in the small but growing field of audio watermarking.

Audio watermarking involves taking a song and manipulating it digitally to create an audio pattern that is unmistakable to the right software -- such as Activated's -- though undetectable by human ears.

"You can't hear it, so you don't know it's there," said Eric Silberstein, CEO of the 12-employee, seven-year-old company. Moreover, because the watermark becomes part of the audio itself, it is much more difficult to remove than, say, a text string embedded in a digital file, such as the ID3 metadata tags that Apple Inc.'s iTunes embeds in songs.

Only "if you had a Cray supercomputer and a month and a half" could you break Activated's watermarks, claimed Silberstein.

Other experts claim that a well-crafted audio watermark can even survive being rerecorded using an analog cassette deck with a relatively low-fidelity microphone.

A DRM alternative

Audio watermarking has gained some popularity over copy protection and other digital rights management (DRM) schemes, which can sometimes prevent music from being played depending on the device, according to Eric Garland, CEO of BigChampagne LLC, an online media research firm.

But audio watermarking today remains a niche application. For instance, many record companies are "slavishly devoted" to placing audio watermarks on any advance albums they send out, and on master or prerelease copies floating around inside their offices, Garland said.

"I've heard record company employees tell me that if their copy is lost and turns up on the Internet, it will get hunted down and they will lose their job," he said.

But audio watermarking has its limitations, Garland said. One is its relatively high cost per disc, currently at least. The other is that audio watermarking, while it has enabled record companies to gather oodles of evidence on consumers illegally file-sharing music, doesn't overcome the fundamental problem -- that starting to sue pirating consumers on a mass scale would create an even bigger "backlash," Garland said.

Silberstein says that the record industry is finally starting to accept that overhauling the business model is the way to move forward. How does he know? Because of the many record companies, large advertisers and cable and mainstream broadcasters that are licensing audio watermarking technology from Activated in preparation for trials that would allow consumers to download unprotected music or movies in which the content as well as the advertising is tracked using audio watermarks. Some of those companies, including Sony Music and Universal Music are listed on Activated's site, and many others are operating under nondisclosure agreements, according to Silberstein.

From piracy to promotion (and back?)

The tracking technology allows advertisers to gather information about the consumer and the effectiveness of the ad. Such data, according to Silberstein, is so valuable that advertisers would be willing to pay five to 10 times rate of a regular ad for an watermarked ad. That data works particularly well with "call-to-action" type of ads, in which consumers, after listening to an ad, respond or click on a link to buy something or otherwise opt in to the advertiser's campaign, Silberstein said.

"What content owners have been afraid would reduce their income is now an opportunity to increase their income," Silberstein said.

It also suddenly turns pirates from forces that hurt a record company's bottom line into unpaid marketers on their behalf.

Record companies publicly listed as Activated clients include Sony Music and Universal Music Group. The latter said last week that it will test the sale of thousands of songs for the next half-year without copy protection. Silberstein declined to confirm whether Universal is placing audio watermarks in those songs.

While Activated already had its own patented technology to allow broadcasters to deliver audio watermarks on the fly, it announced Wednesday that it would license audio watermarking technology developed by Microsoft Corp.'s Research division.

That technology, Silberstein said, is key because it creates simpler watermarks that can be decoded by MP3 players in smart phones, not just full-fledged PCs. Smart phones that can natively detect Activated watermarks will start appearing by early next year, he said.

Silberstein promised that the price Activated charges -- it not only sells its software to record labels, advertisers and broadcasters, but also charges per transaction it handles on their behalf -- will not "impede adoption." And he pooh-poohed notions that the move toward ad-supported media is just a ruse designed to gather information on pirating consumers in order to someday crack down on them.

"I don't think that's ever going to happen," he said. Fighting piracy is "where we started, but the truly important use is the digital linking of consumers to content owners."

Copyright © 2007 IDG Communications, Inc.

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