The prime objective in this paper is to explore the possibility of combining the seemingly orthogonal processes of watermarking and encryption along the spirit of the chameleon cipher. By integrating perceptual models indirectly through a 'weeding' process and collusion resistant coding methodologies in the design of the decryption keys, we have shown that it is possible to embed a robust yet relatively imperceptible fingerprint at the receiver. We have also provided some insights into the softening of the encryption process due to the enforcement of additional perceptual constraints because of fingerprinting.