Civolution announced on Tuesday that it is acquiring the digital watermarking business from Thomson.  Terms were undisclosed.

This move represents further consolidation in the watermarking market, following Dolby’s shutdown of its Cinea video watermarking division last year.  Civolution itself spun out of Philips Electronics and acquired Teletrax, the video broadcast monitoring business that uses Civolution’s technology, late last year.

With this action, the only major players left in watermarking are Civolution and the Korean vendor MarkAny.  Apart from those two, there are a few players in niche markets, such as Verimatrix (IPTV/digital pay TV), Verance (Blu-ray audio), and USA Video Interactive (Internet video delivery).

This development does not necessarily point to decline in the adoption of watermarking.   First of all, Thomson’s watermarking business was known to be in disarray amid management changes.  Thomson has had some recent success with its NexGuard technology for pre-release content protection (which combines encryption and watermarking), but it has been hard to get management’s attention alongside other Thomson product and service properties such as Grass Valley and Technicolor.  Watermarking is more of an enabling technology, which should fit much better at Civolution.

More importantly, the success of watermarking requires standardization.  As I noted last week, standardization in the “secret sauce” of watermarking algorithms is unlikely, and there have been several vendors, each with their own secret sauce.  Consolidation is a market force that will promote de facto standardization.  For example, Thomson and Philips/Civolution were the two suppliers of watermarking technology for digital cinema; with this deal, there is now only one supplier and thus a de facto standard.

Of course it remains to be seen whether Civolution will integrate its two watermarking technologies or leave them be.  Integration is better for the market insofar as it is feasible.