A system for watermarking and distributing material includes a data
processing apparatus, which operates as a watermark encoder. The data
processing apparatus is operable to process an original material item to
form a reduced-bandwidth-version of the material item, marked with a code
word from a predetermined set of code words. The data processing
apparatus is operable to form an impaired version of the material item
from which a marked representation of the original material item can be
formed. The impaired version is formed by subtracting the
reduced-bandwidth-version of the material item from a copy of the
original material item. As such, the impaired version can be mass
distributed, but a representation of the original material item cannot be
formed without the reduced-bandwidth-version of the material item. By
watermarking the reduced-bandwidth-versions, a representation of the
material item, formed by combining one of the marked
reduced-bandwidth-versions with the impaired material item, can be
uniquely identified. However, only a low bandwidth part of the material
item need be watermark encoded, which is more easily distributable to
individual recipients than watermarked copies of the original material
item.