A rant about second-hand digital music

A few services have tried to open online market places for reselling MP3 files. The most recent is a company called Redigi, but the first time I heard of anyone attempting to do this was in 2008 from a service called Bopaboo. They had come up with an interesting model that allowed users to sell an MP3 file that they no longer wanted, only once per file, and only after agreeing to delete the original MP3 once they had sold it. The money from the sale of the file would then have a slice taken out for Bopaboo, another slice taken out for the record label, and the rest would go to the seller of the file. The business model caused quite a stir and divided opinions about whether selling second-hand MP3 files should be allowed. How can they know whether the MP3 has been obtained legally? How can they know if the seller will delete the file after they’ve sold it? What will it mean for the the music industry when second-hand MP3s (of identical quality to the originals) are for sale for cheaper than the originals?

But could reselling MP3s be a good thing for the industry? In my opinion: yes, I believe it could.

Here’s some stats:

These points highlight that we want to encourage people to buy music, particularly digital. We should be progressing as an industry, embracing new technologies and the oportunities that they bring, and also moving away from wasteful things we no longer need (eg physical manufacturing, distribution, storage). I understand why many labels are doing vinyl-only releases at the moment. I know it’s working well for some, but I think it only highlights the point I’m trying to make here.

Here’s the problem: Buying MP3s doesn’t represent good value. If I buy a CD or record that I decide I don’t like after a few listens, I can sell it and get some of my money back. Not so with a digital album. The money we’ve spent on MP3s is essentially gone, as a digital collection cannot be resold. By telling people that the music they buy has no resale value unless it is on some form of plastic disc, we are actually de-valuing the music itself. If we want people to value the music rather than its packaging, this is something that needs to be considered. With digital music, the end product (the files on your hard drive) is the same whether purchased from an authorised source or downloaded illegally. In fact, if you think about it in terms of traditional economics (and legal issues aside) downloading illegally is actually much better value, as it doesn’t cost anything. I believe that a marketplace for legal resale of (legally purchased) MP3s would make this situation much better. It would add a (money) value to digital music and encourage people to buy.

A second hand market place would also do something else that’s even more interesting for the industry; it would open up new avenues for creative marketing of releases. Imagine this:

bq. A record label has a new album and they decide to put it out as a limited-to-500-copies digital-only release. (A limited digital release?! Yes, stick with me…) Each person that buys one of the official 500 copies of the release has their name entered in a centralised database “registry” as the official owner of “1 of 500″ or “35 of 500″ in a similar way to how limited edition prints of artwork are sold. The registry is a service set up to track official purchases of digital music, similar to how a land registry keeps a record of who owns what land. Now, of course any of the people that buy one of the official 500 albums might put the album on a torrent site for anyone to download and you could say that the files in the torrent are just the same as the original, but there’s an important difference. They aren’t the same. They aren’t official and the owner’s name is not in the registry as the official owner. If you’re a collector, you don’t want the version that’s on the torrents, you want one of the 500 official copies, and you want your name in that registry. You know that even if you pay more for the album, the value is likely to go up because the official versions of the album are rare and collectable. The official versions now have a value, a resale value, that the unofficial versions don’t.

Of course there are lots of issues that a system like this raises.

If people can sell second-hand files, won’t the full-price files (from retailers) be worth less? I would argue that, no, they will be worth exactly the same. They will just offer better value. Many people want to buy music from official sources in order to support the artist and labels and that won’t change; they will continue to buy first-hand copies. And if a new second-hand market is created, especially one with a model that pays the labels each time an MP3 is resold (like Bopaboo and Redigi have both proposed), it will give those who aren’t concerned with supporting the industry (many of whom are currently downloading illegally) a cheaper, legal alternative way to access music.

Can reselling MP3s be legal? As I’m sure Bopaboo and Redigi are aware, this is a complicated topic. In the US, the first sale doctrine means that if you own an object, you generally have the right to sell it. But in other territories, the first sale doctrine doesn’t apply. Is a file on a computer even an object? In the case of MP3s bought from iTunes, for example, there is also a question of whether the buyer even owns the MP3. Their terms of service say that they are granting you a license to the track, rather than actual ownership of it, and that license prohibits reselling it. Another question is how you can sell someone an MP3 file without making a copy of it, which would be an unauthorised copy.

These are interesting questions and obviously have a huge impact on whether services for reselling MP3 files will ever take off, but I’m of the opinion that we should be working to resolve these issues rather than fighting against the change, and that by doing so, we could make buying digital music a more appealing prospect for the consumer, and a more lucrative prospect for labels.


3 Comments on “A rant about second-hand digital music”

  • great and insightful study on mp3 retail and digital music status in general.

  • Great article Alex. Some very solid points that clearly deserve more attention in the wider market. I personally have been waxing lyrical for a while now about the abundance of mp3’s I own and no longer listen to. I would LOVE the freedom to pass that listening experience on to another…legally.

    Hopefully someone can come up with a suitable, streamlined system that doesn’t make the situation worse than it already is. I agree with the missing link between the empty value of a licensed mp3 file you cannot resell and a file that retains some value and exists as a secondary commodity. Apples and oranges as far as I see…

    Might also help if people loosened up a bit about unrealistic taxes on high quality formats ;-) just sayin… double the file size don’t equal double the price!

  • Great article mate, valid points. I dislike MP3 for reasons like that, it is versatile and for use of ease is great. Still buying both CD & Vinyl over MP3 where possible.

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