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There is no "DRM" [digital rights management] without watermarking. DRM [without watermarking] cannot offer any way of handling content once it is rendered, heard, seen or enjoyed. Further, predetermining the price of newly released content is about as effective as Soviet pricing schemes. The "little knowledge is a bad thing" argument Paul Boutin makes is a perfect example of why the only technology that can act as an objective means of serializing, and thus accounting for, content is digital watermarking.
Professor Felten's argument misses the entire point; he is not an expert in digital watermarking applications nor the business models of the content industry. His hacks, like our own 120 SDMI hacks (though we also were one of the three companies being hacked), do not equate with a failure of watermarking as a solution. When digital content is watermarked, it should be watermarked using a cryptographic key: just like a digital signature of a text document. SDMI did not focus its attention on this point; instead it tried to make an authentication tool into a copy prevention tool.
The real problem is: Once copies of media are released in a manner that is not unique, copying will happen. There is no commerce without serial numbers and receipts; only key-based watermarks can provide this utility and bring the current holy war to a rational discussion of what and where the problem of piracy is. If a content company has high profits, is there piracy? Can the government collect 100 percent of taxes? There is no answer to these questions.
It would seem that the complication is more about consumer acceptance. To balance piracy with privacy is indeed difficult. To offer systems that do not fairly compensate consumers for the value propositions they have grown used to (fair use, copying, and so on) is not the fault of those consumers. The focus should be on content itself, not content file formats or government-sponsored "rules" for handling content.
A small fraction of content accounts for a lion's share of the revenues realized by content creators. Picking hits continues to be guesswork, at best. An important issue is that content needs to be made unique, even though copies can be made. Key-based watermarks are the only technology that enables such uniqueness to be integrated with the content and to indicate any subsequent tampering. Without receipts for information content, it is unreasonable to expect success in predetermining price and commercial viability of newly released content (traditional access restricted DRM).
Before there can be successful rights management, responsibility for individual copies, not wrappers or locks, needs to be attributed. Otherwise, how is any party to a content transaction able to properly account for or differentiate between piracy and marketing?
-- Scott Moskowitz, founder, president, CEO, Blue Spike, Inc.