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Mastering engineer Denny Purcell let out a long sigh. "Does anyone in this room really believe that any of this is going to do any good?" he asked. Of the eight or nine people—each with decades of experience in the music and/or audio industries—hanging out at Georgetown Masters Studios in Nashville for SDMI's Phase II listening tests, no one said "Yes." The consensus: The watermarking issue will probably be dead and forgotten within a year.

Even those who believe that the music industry has legitimate justification for trying to develop some method of protecting its products have questioned the enormous amounts of time, money, and human resources the Secure Digital Music Initiative has spent on watermarking. The watermarking effort is the result of entertainment-industry lawyers fanning the flames of executive hysteria; the executives, fearful of losing sales to piracy, then demand solutions from engineers, who dutifully offer every cure they can concoct.

Watermarking is but the latest wave in the entertainment industry's long tradition of opposing new technologies, which are always seen as threats, not as opportunities: can anyone say "Tape Tax" or "Macrovision" or "Serial Copy Management System"? Yet every supposed threat to the industry's revenue streams has become a revenue stream in itself. Pre-recorded cassette tapes were immensely more profitable for the music business than were vinyl records; videotape rentals made winners out of hundreds—thousands—of loser films. These new technologies were greeted with fear and hysteria by an industry eager to keep on doing business the same old way.

Fact of life: People make copies of movies and music. They make copies of newspaper and magazine articles. They cut and paste Internet items into e-mails and send them to friends. Most of them do so within the so-called "fair use" provisions of copyright law, which allow copying for noncommercial purposes. Whether or not watermarking is eventually made workable, people are going to continue making copies. An enlightened industry would encourage new technology rather than try to hinder it, and find new and more efficient ways to let people share information and entertainment—and develop more efficient ways to extract profit from the process.

I believe that artists and writers deserve to be compensated for their work. I also believe that the publishers and distributors of such work deserve to be compensated. Therefore, unlike those who profess that "the music should be free," I am not opposed to the entertainment industry's attempts to maintain control of the distribution of its products. I'm just dubious of the way it's being done.

I think the watermarking effort is misguided and will fail for a few simple reasons: Audiophiles—the upper end of the market—won't stand for it. Whether they can hear it or not, they will object on principle. Ordinary music lovers—the vast bulk of the market—won't care if their music is watermarked or not, but will object to players that require authorization from some central authority (ie, the official watermark) in order to play, a feature that could be included in the next generation of players. Recall the Divx debacle?

Beyond the marketing problems lies an obvious engineering truth: Any encryption or watermarking technique that might reasonably be applied to consumer audio will be hacked and defeated. If a watermark can be detected, as it must be in order to work, it can be removed. We haven't even begun to discuss wholesale piracy, a major industry in some parts of the world, where copyrights simply aren't taken into consideration; nor have we addressed the global mass market for music, where quality isn't an overriding concern. Watermarking will have no effect on the world's millions of street-corner entrepreneurs.

As a method of containing piracy, watermarking simply won't work. The music industry might be better off canceling the contracts of the legal eagles who keep pushing for it as a guarantee of job security—think of the thousands of copyright-infringement suits it could generate—and instead plow the extra funds into developing business plans that would reduce the incentive for piracy. In other words, make the authorized music more affordable.

But that may be too simple a solution. I suspect that the watermarking tests, and the associated "hack SDMI" challenge, are not really about DVD-Audio, or SACD, or any high-resolution audio format that involves the transportation and delivery of physical products. I think they're parts of a larger research-and-development effort for a future only beginning to dawn: one in which Universal or BMG or Sony Music Entertainment will pump a wide-bandwidth datastream directly to consumers for a monthly subscription fee. They want to sell you the music, and they want to make sure you don't sell it to anyone else. Will the resulting system be a scary "Big Brother" conspiracy depriving you of your basic rights or a simple, solid business delivering the essence of life to music lovers? Just like today, that will all depend on your place in the transaction.