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Content ownership and resale

Amazon's AutoRip service could further complicate matters

Over the past few weeks we’ve seen some landmark decisions on whether you really own that content you bought and if you can resell it. First, in the Kirtsaeng vs. Wiley case we learned that it’s OK to buy low-priced print books from overseas, ship them to the U.S. and resell them for a profit. That’s a victory for the middleman entrepreneur and everyone frustrated with high-priced textbooks. Well, it’s a victory till publishers raise their overseas prices to be more in line with U.S. prices, at which point students in those foreign countries lose.

Next, we have the federal ruling against ReDigi on the digital content resale front. I’m hoping ReDigi appeals but for now this means you can’t sell your iTunes library, for example. That ruling is considered a victory for labels (and publishers as ReDigi is looking to move into used ebook sales) and a loss for consumers.

The simple rule appears to be you can buy your physical product from anywhere and resell it to anyone but your digital products are really only licensed to you and you can’t even resell that license. Now let’s add Amazon’s AutoRip serviceto the discussion to see how it further complicates things and the dangerous precedent it sets.

If you’re not familiar with AutoRip, it’s a nifty way for consumers to get the digital version of CDs or albums they’ve bought from Amazon. It addresses the issue everyone has experienced at least once in their life: you bought the album so why can’t you have the CD, cassette or MP3 version free? Not all tracks are AutoRip-eligible on Amazon; presumably Amazon got permission from the labels for AutoRip-eligible songs.

So what happens if I buy a CD from Amazon, get all the tracks into AutoRip and then sell the CD to someone else? Maybe I’ll sell it via Amazon’s own Marketplace service. I get to keep all the songs I originally bought, still in AutoRip, and I’ve paid far less for them than I probably could have in any physical or digital format. Victory for the consumer! Maybe the labels participating in AutoRip still haven’t figured out most people are ripping CDs on their own and then reselling them. By participating in AutoRip they’ve helped the consumer avoid the ripping step and are further encouraging resale of that physical CD. A resale, I might add, that the label gets zero revenue from. At least with ReDigi the labels were able to participate in the resale revenue stream.

Now let’s consider the dangerous precedent this sets. What exactly is the value of the digital content from the consumer’s point of view? In the scenario above it’s the price the consumer paid after netting their original CD purchase with whatever they earn on the resale of the CD. IOW, the perceived value of the content is pretty low.

What happens when AutoRip is extended into books? Buy a print book today and get the Kindle edition free. In fact, Amazon could easily give you a free Kindle edition of every print book you’ve ever bought from them, including ones you sold to your local used bookstore years ago. Again, a victory for the consumer. But doesn’t that further erode the value the consumer places on the digital content? The ebook basically becomes a free item tossed into the deal long after you made the purchase decision. It’s like floor mats for the new car.

What worries me most about this model though is how it once again keeps publishers away from establishing a direct relationship with their customers. If you really want to give the consumer a free ebook version of the print book they bought, why not bring them to your own site and get to know them? The answer to that question, of course, is publishers would have to give up DRM to provide the free ebook. So once again, we have DRM being a tool used against publishers and their ability to create a direct channel with their customers. What a shame.

P.S. – Here’s a related article on Dear Author on how DRM also prevents independent bookstores from competing in the ebook space.

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  • Ed Bear

    “So once again, we have DRM being a tool used against publishers and
    their ability to create a direct channel with their customers.”

    ORLY? Might I remind you that the *publishers*, just like the music industry before them, insisted on DRM. If they’re suffering, it is entirely by their own choice.

    The “agency” model didn’t exactly win them any friends either.

    • jwikert

      Ed, yes, you’re absolutely right. Publishers are the ones who have locked onto DRM as a lifejacket in the sea of piracy. My point is that their decision is now, once again, being used as a weapon against them as well. It’s like a self-inflicted wound that keeps getting worse.

  • http://twitter.com/copyrightandtec Bill Rosenblatt

    Joe,

    Three issues with this otherwise very interesting post, in order of decreasing importance.

    First: “If you really want to give the consumer a free ebook version of the print book they bought, why not bring them to your own site and get to know them? The answer to that question, of course, is publishers would have to give up DRM to provide the free ebook.” No, not true at all. You could run your own DRM server and give consumers a free DRM’ed e-book. Price, DRM, and direct sale to consumers are all almost completely independent from one another. Many publishers have run their own DRM servers. In my view, the reasons why most of them don’t any more are a) cost and technical hassle, and b) no one goes to most publishers’ websites to buy anyway (yours being an exception).

    Second: “Maybe the labels participating in AutoRip still haven’t figured out most people are ripping CDs on their own and then reselling them.” Sure they have. The difference between doing that and what Amazon does is that the former is a speed bump and the latter isn’t; take my word for it that the labels understand this difference very well. Amazon started offering AutoRip because it’s constantly on the lookout for ways to draw customers from Apple. And some of the record labels prioritize taking market share away from Apple over enabling speed-bump-free copyright infringement. Amazon only offers the service under license because someone tried doing it without licenses (AnywhereCD, back in 2007) and got nastygrammed.

    Third, regarding the ReDigi decision:”The simple rule appears to be you can buy your physical product from anywhere and resell it to anyone but your digital products are really only licensed to you and you can’t even resell that license.” No, that’s not what was decided. You’re talking about the ambiguity between the rights consumers get under copyright (including the right to resell) and the rights available from a retailer like iTunes under license. This wasn’t at issue in the case, and it’s still unsettled. Although, to the contrary, the judge in the case saw things your way: he said that the buyer of a track on iTunes *is* the owner and *can* resell it, as long as she doesn’t make another copy in doing so. The problem is that in order to satisfy that condition, you’d have to sell your entire hard drive or device. (FWIW, my own view is that the judge was incorrect to make the assertion about ownership, given that it is legally unsettled. But it doesn’t matter, because, once again, that wasn’t the issue being decided in the case.)

    • jwikert

      Hi Bill. I’ll respond to your three points:

      1. Yes, they could certainly set up their own DRM capabilities and provide the free copy that way, but they’ll have to ignore the largest ebook platform on the planet: Amazon. I’m not aware of a way for publishers to offer their own DRM’d version of Kindle books that can be loaded on Amazon’s devices, are you?

      2. This was intended to be tongue-in-cheek but obviously didn’t come across that way. :-) Yes, of course the labels realize people are ripping their own CDs, but allowing Amazon to offer AutoRip will only accelerate what I’m describing. Good point about labels wanting to use Amazon as a way to steal power from Apple though.

      3. I think we’re splitting hairs on this. I still maintain that the result of both rulings, at this point at least, is that you can buy/resell physical goods regardless of their origin whereas you’re unable to resell digital goods you legally purchased. Can we at least agree on that summary? Again, it’s just where things stand today and could be changed tomorrow.

      • http://twitter.com/copyrightandtec Bill Rosenblatt

        Joe,

        Regarding the first point, sure. If you want to draw traffic to your own site and sell people Kindle DRM’ed e-books there, just be an Amazon Affiliate. And you don’t even have to run the DRM server :-)

        Now, of course, if you want to offer a Kindle-compatible DRM’ed e-book *and* make the money you’d make by selling them without Amazon’s involvement, that’s a different story… but then it’s a question of whether Amazon deserves more of the revenue from the transaction because they supply the platform. It’s not unreasonable to suggest that they do.

        • jwikert

          Bill, going the Amazon affiliate route here doesn’t really address the main reason I’m suggesting publishers should go direct to consumers: to establish a relationship with everyone reading their books. Amazon won’t share that information with the publisher so that’s not an option. The revenue is one piece of the puzzle but I feel the direct relationship is just as important, if not more so.