Watermarks, a friendlier DRM?

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The Digital Watermarking Alliance, a group that encourages content owners to embed unique identifiers in media as a way to combat piracy and promote new distribution models online, released a study this morning on the prevalence of illegal downloading and the motives behind it. (Download the .pdf here.) Done by market research firm Interpret, it used an online survey to gauge how many U.S. residents were downloading media legally and illegally. Then it did what amounted to a push poll of 996 downloaders (again, both legal and illegal) ages 13 to 49, exploring their behavior in more detail and measuring their reaction to watermarking technology. Not surprisingly, given who was paying for it, the survey found that embedding watermarks (called ‘digital serial numbers’ in the survey) could deter people from sharing content online. In particular, a third of the downloaders said they definitely or probably wouldn’t use file-sharing services to obtain content if watermarks were deployed, and half said the same thing about uploading.

I take some of the findings with a grain of salt, such as the assertion that using watermarks would lead illegal downloaders to buy more content from legitimate sources. Watermarks may very well drive some people away from file sharing, but they won’t stop them from going to sites that stream free songs or bootlegged movies. As the survey points out, multiple factors influence how people choose to acquire content. Nevertheless, the study provided a number of intriguing insights, including the following:

• The initial survey found that legal downloaders significantly outnumber illegal ones. Specifically, 75% of the teens and 53% of the adults said they had paid to download media in the previous three months, vs. 34% of the teens and 21% of the adults who had used file-sharing software. But the second survey -- the one that talked only to those who had downloaded content -- produced a conflicting result. It found that only a fraction of those surveyed had used legal services exclusively. The vast majority of the rest made at least some use of file-sharing software.
• A significant percentage of those who download illegally also pay for content. This is the ‘don’t attack your customers’ finding. On the other hand, even these ‘hybrid’ downloaders showed a marked preference for free (and illegal) downloads over paid ones for music and TV shows. ‘For movie studios, [these hybrids] are the group most at risk for increased illegal movie downloading in the future. However, they also represent the lowest hanging fruit for converting illegal activity to paid downloads,’ the survey found.
• ‘Passive’ uploaders -- those who share files online because of the default settings of their software -- are more likely to be deterred by anti-piracy measures than ‘active’ uploaders -- those who deliberately offer online the material they’ve bought, downloaded or ripped from rented DVDs. The population of passive uploaders is ‘vast,’ the survey found (roughly 80% of file-sharers fall into this category), and most members of this group have a hazy understanding of the legalities of their actions.
• The DRM technology used by online movie stores contributes to piracy by making those outlets and the goods they sell harder to use. But so does the studios’ strategy of releasing movies in windows, which results in legitimate outlets having less content than illegal ones do.
• Although most illegal downloaders know they’re violating the law, they don’t believe they’re downloading enough to be caught. The average BitTorrent users downloaded about two movies per month, but they told Interpret that they wouldn’t face a serious risk unless they increased that rate to nearly 500.

One might assume that such surveys underestimate the amount of copyright infringement that’s taking place -- after all, the participants are asked to admit to doing something that tens of thousands of people have gotten sued for. But unlike other illegal activities, file sharing is ‘something that people are perfectly happy talking about,’ Interpret co-founder Jason Kramer said.

Kramer and Raj Samtani, director of business development at Digimarc (a member of the Digital Watermarking Alliance), said one point of the study was to present watermarks as a less cumbersome alternative to DRM. ‘We’ve seen the stick really doesn’t work,’ Kramer said. ‘The way we presented this to consumers is more of a carrot’ -- part of a ‘new compact’ between content companies and consumers. He framed it this way, speaking from the perspective of the studios and record labels: ‘If we’re going to make this [content] available to you, if we’re going to make it free of DRM, make it useful on multiple devices and not a big hassle for you, you’re going to have to expect that if something illegal is done, we’re going to have some sort of recourse.’

Consumers have trouble accepting restrictions on the media they pay for, particularly when those limits make the media harder to consume. That’s one reason the record companies ultimately dropped DRM from their 99-cent downloads. But Kramer said that when consumers understand the quid pro quo sought by the content companies -- that buying a copy of a movie or a song doesn’t give the purchaser the right to share it with the rest of the world -- they’re more willing to accept the terms of the deal, provided that the restrictions aren’t onerous.

Samtani said he didn’t believe encryption-based DRM ‘is going to be abandoned wholesale any time soon.’ Although watermarks are used today to trace content leaks and identify the sources of some infringements, the kind of system envisioned in the survey -- where infringing content can be detected as it travels through the Net -- would require a significant amount of work by ISPs and content owners. Some Hollywood executives harbor even greater ambitions for watermarks, using them to disable the playback of bootlegged movies. Such a feature may yet become routine in Blu-ray devices, although it remains a long shot for standard-definition discs.

Ideally, Samtani said, anti-piracy technologies like DRM and watermarks would be used not as a traffic cop but as an accountant, monitoring the flow of content online to support new modes of distribution. ‘We are at the early stages in some of those changes in business models,’ Samtani said. The shift enabled by new mechanisms such as watermarks will make the market much bigger, he added. ‘It’s just a matter of getting through this transition, and getting people to embrace new modalities of doing business.’ That’s no mean feat, but Samtani -- who used to work for a DRM company -- says he’s seen a real change in the nature of the discussions with content providers. Part of that is a greater recognition of the need to balance the desire to protect content with consumers’ interests. Said Samtani, ‘There are things you will hear about more openly in the next several months that I’m very, very encouraged about.’

-- Jon Healey

Healey writes editorials for The Times’ Opinion Manufacturing Division.