Digital Media and the, ahem, Business Model of the Future

Nicholas Sheppard

I worked for some years as a researcher in copyright protection technology, though my funding has long ended and I've since moved on. Digital copyright issues probably don't generate quite the fuss they did back in the hey-day of Napster, and this year I discovered that the ACM Workshop on Digital Rights Management — where I think some of the most interesting work in this field was presented back in its own hey-day — is no longer on the calendar. Does this subsidence indicate that issues of copyright and digital media have now been settled to everyone's satisfaction, or just that my former co-travellers in digital media and security have gone off to write about more current headlines, like Facebook's privacy policy?

One recommendation that I heard over and over again is the one that the music industry must combat infringement of its copyrights by "getting new business models." Ironically, perhaps, one of the original hopes for rights management technology was that it would enable new business models based on paradigms other than the exchange of physical copies, not usher in an era of confusing and inconvenient rules of use.

Retailers have, in fact, tried a number of different business models — possibly more than critics give them credit for — including subscription services like Rhapsody, ad-supported services like Spotify, "viral" services like PotatoSystem, and bundled-with-device services like Nokia's Comes with Music (now largely defunct). Well-known bands Nine Inch Nails and Radiohead even tried giving their music away for free or in return for a donation, though neither of them is doing it any longer.

By all accounts, though, the most successful retailer of digital music is Apple's iTunes, which charges a one-off fee for a recording to be kept and played as often as the buyer likes. Sounds rather like the old business model to me.

Might it be that music listeners — or the ones willing to pay for the pleasure, at least — are not as interested in new business models as would-be copyright reformers thought they would be? And did we go through all of that Napster-inspired anguish only to find ourselves doing exactly the same thing as before?

Not quite, obviously, since Rhapsody, Spotify and others do have customers — even if it's not so many as iTunes — and there may be factors other than business models contributing to iTunes' success. One certainly hopes that we've learned a thing or two from the experience.

The video industry, intially protected from file-sharing networks by the time it took to download a video around the turn of the century, is one that has had chance to learn from the experience of the music industry. The trend for copyright protection technology here has been towards so-called "rights locker" services like the Digital Entertainment Content Ecosystem's Ultraviolet and Disney's KeyChest, along with infringement-detection systems like YouTube's Content ID, rather than the copy-prevention technology that the software and music industries experimented with in times past.

A rights locker is, in essence, an Internet database that records a buyer's right to use a song, video or book. When the buyer wants to access the item, his or her device checks with the locker that its user has, indeed, purchased the right to use it. If well-designed and -implemented, rights lockers might eliminate some of the inconveniences that customers experienced with copy-prevention technologies, including incompatability, an inability to format-shift, and an inability to make back-ups. They also seem to fit nicely with the pay-once-for-eternal-usage model that we have become accustomed to.

Rights lockers, however, don't actually work very much like the books, CDs and DVDs that got us used to the pay-once model in the first place. Since the right to use something is governed by a record in a database rather than possession of a physical copy, it looks more like an "access right" than a "copy right".

How much does this matter? It certainly matters to lawyers, for whom an "access right" and a "copy right" could be quite different things (see Marcella Favale's analysis of EU law for a recent example). But will the average user continue to think that he or she owns something, even if it is an entry in a database rather than a physical book, CD or DVD? Or will the user get used to the idea that "this work is licensed, not sold", in the words of many a software agreement? And, if the latter, will he or she be more likely to explore alternative business models?

Recycled music in the digital era

Adrian McGruther

I remember spending countless hours after school, rummaging painstakingly through the ‘new arrivals’ bin of my local second-hand CD store. My meagre income as a suburban paperboy meant the new release section at Brashs Music was well out of my reach (unless I was content settling for a Jason Donovan single in the bargain bin). Having whittled a crate's worth of CDs down to a shortlist of five or six, I was left with the painful decision of which two or three were truly worth shelling out for. Upon arriving home, broke but beaming, I’d invariably discover that one of my new treasures had a deep, long scratch across its surface, right in the middle of a blistering Kirk Hammett guitar solo. Bummer. But, you get what you pay for, I’d remind myself.

Had I gone to school during the digital age, I might’ve turned to a new US-based service, ReDigi, which offers ‘second-hand’ mp3s for sale online.

What is ReDigi?

ReDigi describes its offering as ‘recycled digital media’, but with the benefit that, unlike physical media, its products never scratch or wear out. Users who wish to sell digital music files that they no longer want can ‘upload’ the tracks to ReDigi’s server for other users to purchase and download. ReDigi claims to have what it calls ‘verification’ and ‘hand off’ technology, which ensures that the digital music file is from a legitimate source and that any additional copies of a sold file are also deleted from the user’s computer.

If a copy of a file that has already been sold reappears on a seller’s computer or synced device, and the seller does not delete it after receiving notice from ReDigi, the seller’s account with ReDigi may be suspended or terminated. ReDigi also pays a percentage of sales to the relevant artists and labels. ReDigi is different from file-sharing sites in that each track offered for sale is a unique, identifiable file, and has not been cloned from a master file.

Is it legally legit?

That’s the big question at the moment. Many record labels and industry bodies are casting a raised eyebrow in ReDigi’s direction because the service treads upon a legal grey patch. The way digital music sales normally operate is that when a customer purchases a song, a reproduction of the ‘master’ file is made, which requires a licence from the label or artist.

The Recording Industry Association of America (RIAA) and international record label EMI Music have objected to the legality of the service on the basis that ReDigi is infringing copyright when a 'copy' of the track is made as it is uploaded to ReDigi’s servers. They claim that this copying has not been done with a licence, irrespective of the fact that the original file is removed from the user’s computer once it has been uploaded to ReDigi.

Google has also weighed in on the legal debate by suggesting that a finding against ReDigi could potentially place the legality of cloud computing under…well, a grey cloud.

But in the midst of the current legal stoush, the short-sighted labels appear to be missing the elephant in the room: consumers are willing to pay for music. In an era when music piracy is rampant and labels desperately scramble to give users a commercial incentive to pay for music, the success of a service like ReDigi should be seen as a silver lining.

What does this mean for music lovers and music labels?

Legal hurdles aside, services like ReDigi provide a compromise between the mainstream digital music stores and the illegal (and unreliable) file sharing sites. As songs on digital music stores in Australia now nudge upwards of $2 each, it is unsurprising that consumers are turning to alternative sources.

Though ReDigi shows promising early signs, it is still difficult to assess its potential popularity with music fans. On one hand, the lower price point may be enough to persuade the teetering, borderline 'pirates' to start paying for music. But, humans are creatures of habit, and convincing someone who perceives little value in digital music that they should all-of-a-sudden pay for music, might require some pretty strong arm-twisting. Nevertheless, the concept of second-hand digital music might serve as an acceptable entry-point for those who don’t currently take part in the legitimate music market.

On the other hand, retail consumers rely on trust and seek consistency. One-stop-shops, like iTunes or Amazon (which never 'run out of stock') offer the reliability and consistency that consumers will want. The seamless shopping experience and interactivity offered by the major players is unlikely to be replicated by ReDigi. But ultimately, that is something that will depend on how widely ReDigi is adopted, and the depth of its repertoire.

Would I use it?

Maybe. If I’m confident that I’m not breaking the law, that the file will be compatible with my devices, and if it’s well-priced, then I don’t see why not. But a lot will come down to the user experience. If I have to spend hours on end refreshing the site, trawling for that one pesky Jason Donovan track, then I’m better off trudging down to my local second-hand CD store and putting up with those darn scratches.