In what appears to be a fairly opaque transaction, a one year old Philips management buyout Civolution, has acquired the watermarking business of the troubled Thomson CE group. This pretty much gives it a global lead in content identification, since they were the two market leaders.
Civolution used to be Philips Content Identification but in October 2008 it departed in a management buyout led by Prime Technology Ventures.
We describe the transaction as opaque, partly because no amount was declared for the transaction amount, and also because Thomson will become a shareholder in the combined entity. This looks like a purely paper transaction to us, with Thomson getting rid of a division which is not a big money earner, and taking it off management’s desk to they can concentrate on saving the parts of Thomson they want to keep. Thomson is currently going through a restructuring of its debt and balance sheet to ensure its survival.
But Civolution CEO Alex Terpstra we know will be delighted, as he has gone head to head with Thomson in the Digital Cinema watermarking market with Thomson for a while. He said to us in 2007 ‘We are already dominant in digital cinema watermarking, with Christie, Dolby and XDC using our system. Thomson has its own technology, but ours is already in 3,000 digital cinemas and anyway Thomson’s Technicolor uses our technology in its special ‘Screener’ copies of DVDs that go out to Film Academy members voting on the Oscar nominations.’
The company doesn’t release revenues but Thomson’s entire technology division (which this was part of) only had revenues of €93 million ($132 million) last quarter, a small fraction of its total, and the content identification business is just part of the Software & Technology unit within that Technology division. We would have thought is was a fairly small business. However with the current trend among video content holders to virtually give up on trying to use DRM to prevent video being stolen, and an increasing belief that the only way to offer internet video is to put a watermark on it so any pirate can be later identified, it could turn into a relatively key business.
The two key technologies are watermarking and fingerprinting. Fingerprinting takes statistical data about the video and looks for unique or unusual relationships between say luminance and motion, and stores these in a tiny fragment of statistical data for each part of the video. It helps accurately identify any piece of video. Watermarking is the process where information is hidden in a video or audio file to show which source of video it originated from. Philips technology allows for watermarking systems to be built which are able to tell which cinema or set top experiences piracy, even if a customer films a movie with a video camera and then digitizes it and puts it out over the internet. Unfortunately video that goes onto DVDs remains un-watermarked, something we are sure to see Civolution campaign to offer, since ripping DVDs is by far the most common form of video piracy even if videoing movies in cinemas is the most damaging.
A problem for Civolution is that despite each of these companies having a set of patents, other companies are consistently filing for patents in this space, while companies like Google insist on creating their own technologies for things like video fingerprinting, to identify uploaded YouTube video which is copyrighted.
The great bulk of Thomson businesses will remain, and its current strong lines are DVD replication, movie distribution through Technicolor and the provision set top boxes, with about three others businesses, including its Grass Valley transmission business, up for sale.
Civolution will almost certainly retire most of the Thomson NexGuard and NexTracker product lines, given that they are direct rivals to its own CineFence and MediaHedge products, for instance Thomson had just entered the business for putting watermarks in at the set top, a business that Philips has been licensing to set top players for a few years now. Thomson had also begun using the Screener technology to give journalists a preview of motion pictures, which is based on a technique that Philips had supplied anyway.
Civolution has also recently acquired Teletrax, another ex-Philips business which uses its technology. Teletrax embeds a digital watermark into video at the editing stage and then reads this when it appears on satellite, cable or terrestrial broadcasts and generates tracking reports for the content owners. That way content owners can be sure broadcasters are only using what they have paid for.