Monday, October 15, 2012

Secondhand Singles: Is Reselling Digital Music Legal?

It's such a 21st century question, and one we'll soon have an answer to. In January of this year, EMI filed a lawsuit against ReDigi, a one-year-old digital music service that aims to take the "first-sale doctrine" digital. The court case officially got underway earlier this month.

At a very high level, the "first-sale doctrine" allows the owner of a lawfully purchased copyrighted work to re-distribtute that work as he or she pleases. This doctrine is what allows a DVD rental service or used CD store to operate. Once a copyrighted product has been purchased, the buyer has the right to resell, rent, dispose of or otherwise "exhaust" their purchase. To be clear, the first-sale doctrine only limits the original copyright holder's right of distribution. All other rights remain wholly intact, meaning that a buyer has no right to make new copies of their purchase, perform it publicly, or otherwise exploit any other rights granted to the original copyright owner under copyright law.

Until the internet came around, this was a relatively simple concept to accept. By definition, any physical for-sale copyrighted work is available in tangible form only. This made re-distribution a zero-sum game - i.e. if I buy a CD and then sell it to someone else, I no longer have the CD and someone who did not previously have that CD now has it. Easy enough, right? But can the same be said for digital works? ReDigi thinks so. EMI and the RIAA do not.

ReDigi's service requires users to download a software application that, according to ReDigi, ensures users are only re-selling music that was purchased legally to begin with and completely removes music from the user's computer once they re-sell it. EMI argues that in order for music to be uploaded to the ReDigi service, a copy must be made which is not allowed under the first-sale doctrine. The company also notes that it would be very easy for someone to make a copy of their music collection, store it on another computer, then re-sell the first copy of their collection.

If the court rules in favor of ReDigi, the implications for copyright owners could be far reaching. Not only could a large new market emerge from which copyright owners would see no direct revenue, but it could also cut into copyright owners' current digital revenue streams as consumers look to services like ReDigi for new music instead of buying from traditional digital storefronts. The problem would only be compounded if users make backup copies of their music before re-selling them.

However, could a ruling that favors ReDigi act as an impetus for even greater investment in "streaming" and "access" services by copyrights owners? As consumption moves away from "ownership" in favor of "access", services like ReDigi may lose their appeal. Aside from the obvious monetary incentive, the only reason for someone to re-sell their music is that they no longer wish to hear it. Using the access model, there's nothing to re-sell. In theory, as "access" gains popularity, much of the money that would be lost to digital re-sellers would be re-captured by copyright owners as more and more consumers pay them for the perpetual right to hear whatever they want.

This court case has the potential to act as a major catalyst for the music business. We'll be waiting eagerly to hear how it turns out.

Read More
"EMI sues MP3 reseller ReDigi" by CNET:

"US court to rule on ReDigi's MP3 digital music resales" by BBC News:

"Labels await crucial EMI/ReDigi decision" from MusicWeek:

Learn about ReDigi on their website:

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