Cinea, a subsidiary of Dolby known for digital watermarking technology, said today it will announce two major deals at the IBC show next week in Amsterdam that will position its technology in the consumer distribution space.

The deals with NDS, a major provider of conditional access for digital TV and IPTV, and another company to be announced later, are the harbinger of things to come for Cinea, which made its name in digital watermarking while working with Hollywood studios to prevent pre-distribution theft of video content, said Cinea Larry Roth, founder and vice president of sales and marketing for Cinea.

“Most of our business life we have been focusing on the professional space, focusing on Hollywood studios and protecting video before it gets to theaters,” he said. “What we have discovered is that digital watermarking is great to use in the new convergence world for IPTV and electronic distribution because it is doable with billions of devices and hundreds of millions of streams.”

Cinea has achieved that, Roth said, with Running Marks, the consumer version of its digital watermarking technology that the company introduced a year ago at IBC.

“It is essentially a vehicle ID number associated with the device you viewed a video on,” Roth said.  “We determined that, if we were going to bring this to market, the best way was to focus a great deal of energy on the conditional access providers. They have been selling security solutions to cable, satellite and now telcos. We were an added-value feature they could offer.”

The NDS deal is an example of that focus, Roth said, and of the surging interest in digital watermarking. The technology allows a content owner who discovers illegal copies of its content to trace the illegal copy back to its last legal owner, in order to determine and hopefully prosecute the content pirate. Digital watermarking is considered part of a conditional access solution that also must include encryption of content and authentication of viewers.

“From the time of IBC to NAB [the National Association of Broadcasters Show, held in the spring], there was a real sea change,” he said. “Now all of a sudden, people had actually started stepping up and asking, ‘How are we going to implement this? What is it going to cost? What are the deals?’ The studios began telling operators that they are going to require this technology for [early release] of premium content. And the operators started asking their conditional access vendors, ‘How do we do this?’”

Cinea is not at all alone in the digital watermarking business. Companies such as Veramatrix and Widevine (both currently embattled in a patent dispute) also have the technology.

“We think our product is unique to use in a couple of ways,” Roth said. “First, our message inserter that sits at the device level is ultra light. It has almost no footprint, so it can sit in a very lightweight set-top box, or it could be on a mobile phone or portable video device. Secondly, in a video-on-demand (VOD) mode, you wouldn’t even need to be down at the device, you could be up at the headend and ID hundreds of simultaneous streams without touching the devices. And thirdly, as media gateways and media servers are starting to be a big story, content owners want to mark content in a compressed domain. Our solution is unique in that we mark in the compressed domain.”

Cinea also believes digital watermarking will become more important as competing service providers look to get more content out to the public more quickly and must prove to the content owners that they are doing everything possible to prevent piracy. Content owners may be more attracted to a video-on-demand release of new content if they are convinced they can generate revenue and avoid theft, said Rick Whittemore, director of product management for watermarking technology for Cinea.

“Content owners realize that once a DVD is on the market, it is hard to track individual DVDs, to prevent theft. But if they can move revenues from the VOD space up to equal with DVD, they can have more control and have stronger content protection around their content before the DVD gets out and piracy really takes off,” he said.

If content owners can generate the revenue they want from VOD and be assured of protection, they will be happier to distribute more content that way, which will be a boon for video service providers, Whittemore said.

There are still business issues to be worked out, he conceded, especially if DVD stores and rental outlets become upset at being usurped. But these new distribution methods seem to be the way things are going, and adding an extra layer of protection will only speed that up.