ReDigi is an online service that allows you to resell your (legally obtained) media files. It seems chipper and on the up-and-up, and you can imagine that to music industry executives this video looks like a ransom video with a cute soundtrack. Thus began some lawsuits, one of which has just concluded in favor of Vivendi (VIV:FP), the parent of Capitol records. Much is yet to be determined, but it’s a bad outcome for ReDigi.
ReDigi has, as so many services do, a snappy video explaining that if you just put all your music in the ReDigi cloud, you’ll be able to sell it for credits (at which point it’s erased from your hard drive) and buy new music. From there on, it’s simply a matter of transferring licenses. ReDigi spends a lot (a lot) of time in its FAQ to clarify legal issues, which is always an interesting indicator, but its main stance seems to be: We don’t make copies but rather move a single digital file around, and thus we are in the clear.
“The clear” in this case is the “first sale doctrine,” which holds that when you buy a copy of a copyrighted work, you have the right to “sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner.” Capitol Records didn’t think this applied in a world of perfect duplication. Neither did a U.S. District Court judge in Manhattan.
There are many ways to look at this decision. One in particular stands out: ReDigi is capitalizing on the arbitrary rules put in place by music sellers regarding the use and re-use of digital files. Often, you’re not buying the song so much as the license that lets you hear the song. (A few months ago there was a good bit of speculation as to who owns your music after you die, and the answer was: “no one you know.”)
Sure, since a copy of a digital file is a perfect copy, the concept of a “used” song is vague. So is the concept of “not owning” music that you paid to download. ReDigi might not have handed money back to the labels; whether it made piracy too easy is a question for the lawyers. Still, it was keeping alive the idea that music is something for which a person pays money (or at least credits). That is: To ReDigi, songs were worth something.
What is a song worth to Spotify or competitors such as Rdio? To them, a song is an entry in a very large database—and they solve the licensing problem by managing the licenses in bulk, then allowing listeners access to their libraries of music. At some level, Spotify is not a music service but a license clearinghouse that specializes in music.
There’s money in this, apparently, but it’s not accruing to the artists. Not long ago Damon Krukowski of the seminal alternative rock band Galaxie 500 broke down his earnings from streaming services. The results weren’t great. To earn the equivalent of one LP sale, his songs needed to be played 47,680 times on Spotify. A second musician, Zeo Keating, reported that Pandora (P) paid her $1,652.75 for more than 1.5 million song plays. So far, the large music labels have been able to negotiate with streaming services, but as the streaming music players get bigger their power will increase; Spotify is apparently looking for price breaks from the major labels.
The big question now is not “whose album gets made?” but more “who gets to listen?” Not just who, but when—and who gets paid for the privilege? Oh, for the days when record stores featured bootlegs and cats. The clerks might have been snotty, but at least you didn’t have to have endless discussions about databases and doctrine. No one, anywhere, had to know how often you listened to Supertramp.
That’s another part of the puzzle. Streaming services generate a tremendous amount of data that has value of its own; sooner or later it will be used to make decisions about what gets produced.
Note that little of the technology here is new. The technology and tools needed to create a very large database of digital music that can be accessed by many thousands of people has been extant for well over a decade. If you use peer-to-peer networks to transfer songs, you don’t even need to pay for bandwidth. (There’s nothing inherently illegal about peer-to-peer networks; it’s all in how they are used.)
So this is not about technology. Nor is it really about music. This is about determining the optimal strategy for mass licensing of digital artifacts. Songs are the commodity but the licenses are currency. As a result, the labels and streaming services treat music like gold, and they treat musicians like, well, gold miners—it’s just not much of a job.
Sooner or later profitable, comprehensive mass-licensing and distribution strategies will emerge—ones that don’t panic the publishers, labels, and studios. (The artists will probably remain panicked.) At that point, any number of sleeping giants—Apple (AAPL), Amazon (AMZN), and even the sad, moping giant that Microsoft (MSFT)has become—could easily create their own systems. Note that Apple and Amazon already have patents on “used” digital goods stores.
These services may not give the users enough credit. Stock photo services have profitably operated for years, offering different resolutions, sizes, and license arrangements for each digital photo or video. The licenses aren’t that difficult to understand. If we are going to have this license hell, there should be different options available—a license to listen, a license to share, a license to send 100 copies out to anyone you choose, and so forth.
So this is the task: Figure out how to make money, reward artists enough that they continue to make new things, and pacify the labels and studios, while also creating something that doesn’t rip off, confuse, or upset the audience. If someone can do that, then why stick to movies, music, or perhaps books? New forms of media could be sold as well. Tumblr blogs, animated GIFs, casual games, and the like could all flow into such systems. Right now, when media objects are sold, it’s often as art (like the six-second Vine video called “Tits on Tits on Ikea” that artist Andrea Washko recently sold for $200). A massive marketplace in ridiculous pictures could emerge. Flickr (YHOO)could turn into a mall. Pinterest could become … Pintere$t.
There are all kinds of files. A song is just a file, as is a book, and so is a movie. People have been pointing this out for years, usually to explain piracy. For a long time, folks were gnashing their teeth and wailing that no one would pay for anything on the Internet ever; it was just too easy to steal. They went from renting their garments to renting out music. As solutions emerge, and marketplaces for licenses emerge, you have to wonder if new kinds of media will remain part of the free, “remix” culture of the Internet, or if they’ll want to participate in a for-pay market. Maybe the reason so much great creative work on the Internet is free is that it’s been too hard to charge. A Pandora, but for podcasts! A Spotify for funny animal videos! Once the framework is in place, the pitches will come. Then the licensing can start. After all, they’re just files.