Watermarks Used for Good, but Are They Evil?

Watermarks Used for Good, but Are They Evil?

Watermarks Used for Good, but Are They Evil?

It seems that another major media company has woken up to the reality that DRM-free does not equal piracy. Random House Audio Publishing announced recently that they were going to start selling books to customers in formats that they actually want – DRM free MP3.
It turns out that Random House came to this conclusion after an internal study concluded that the DRM free books they had been distributing though online retailer eMusic.com have never been pirated. This is not to say that Random House never found hot copies of their audio books in the dark corners of the internet. Rather, Random House found that pirated copies of their books came from one of two sources: ripped CDs or DRM'd files with the DRM removed. This study does a great job of underlying a fundamental truth of DRM: it can be beaten by anyone who wants to, so all it does is inconvenience users who want to play by the rules.
This announcement is great news for everyone who believes in rational intellectual property protection. However, it begs a question – how did Random House know that none of the eMusic files had been pirated?
It turns out that files had been watermarked. Watermarking itself is a complicated process that can take many forms, but basically it embeds a piece of identifying data in a file. For example, I could send you an MP3 of my band's new album. Hidden in that file would be some identifying information like your name and email address. Later, if I found that file illegally distributed I could look at the watermark and know that it came from you. This is the same technology that the Academy of Motion Picture Arts and Sciences (the organization that puts on the Oscars) has been using to track down leaked DVD “screeners” they send to members.
So what's wrong with watermarks? The first problem is notice. Most people are not aware of the fact that files they purchase have personally identifying information hidden in them. Although some news coverage of eMusic's decision to sell audio books mentioned watermarks in passing, it was not included in the press release. Also, there is no mention of watermarks on the eMusic audio book help page or in their privacy policy
The second problem is persistence. Watermarks do not disappear with time. Unless a user is savvy enough to strip the watermark out, something that watermarks are designed to prevent, they are there forever.
This persistence is linked to the third problem – content. It is unclear what the watermarks contain. They could contain something as simple (and relatively innocuous) as your eMusic username. Alternatively, they could contain something more complicated such as all of your billing information and your credit card number. There is no one standard for what watermarks contain, so there is no way that users can easily know how much information is stored in them. In fact, since there is no easy way for a user to examine the watermark, there is no easy way for the user to make sure that the information that it contains is even correct.
In a way, watermarks are like browser cookies that you can't see and can never be deleted. Unlike your cookies in a browser, there is no way for a user to examine their watermarks to find out what kind of data they contain. If watermarks are going to be the price of “DRM Free” content, shouldn't users at least be able to see what they are getting?