DRM Is Not A Binary Decision

Consumer rights with respect of ebooks continue to be up in the air.

Only last week, Sony, the prime driver for Adobe’s ACS4 adoption back in 2006 said that they were coming back into the Digital Rights Management (DRM) market.

This week the Electronic Frontier Foundation announced they have commissioned the vocal DRM opponent, Cory Doctorow, to take on DRM technologies that they believe threaten security, privacy, and undermine public rights and innovation. The objective of their Apollo 1201 Project, is claimed to be "a mission to eradicate DRM in our lifetime."

Named after the US Apollo space prograame which took some 10 years to achieve what on its creation was viewed by many as an impossible mission.

What is certain is that the DRM that today inhibits consumers ability to transfer files between the various ‘walled gardens’, is going to either change radically, or be unilaterally be removed. It is hard to envisage what we have today as being sustainable over the next decade. The EFF mission goes past ebooks and is aimed at games, apps, video and all cases when DRM inhibits interoperability.

EFF raise the issue of Section 1201 of the Digital Millennium Copyright Act (DMCA) which outlaws the circumvention of copy controls. They agrue, ‘That ban was meant to deter illegal copying of software, but many companies have misused the law to chill competition, free speech, and fair use. Software is in all kinds of devices, from cars to coffee-makers to alarm clocks. If that software is locked down by DRM, tinkering, repairing, and re-using those devices can lead to legal risk.’

However as we have argued many times DRM is not and should not be a binary decision, where DRM is either on or off. We should look hard at the whole issue not just one element and we look at opportunities as well as threats.

One issue that must be addressed is provenance of ownership. In ebook terms look at this as an’ex libris’ stamp that can be traced back to the sale. It doesn’t have to be invisible and it may be open to abuse but if validated could revolutionise the ownership versus licence position and enable the first sale doctrine and resale of ebooks. This may be apporant to many in the trade but if watermarking soft DRM is not adopted then this door shuts whilst the stable door of DRM is potentially flung wide open. Some would say a very stupid situation.

The resale of ebooks is currently being fought out in the Dutch courts where Tom Kabinet is being challenged by the Dutch trade. Tom Kabinet which to resell ebooks and offer a service similar to ReDigi is try to establish in the music market. The court has instructed Tom Kabinet to close temporarily as not all titles can be proven to have full provenance of ownership. So the courts may take a different position if such a position could be established. The door is half open to the trade to create an opportunity, or to blindly slam shut and rejoice in potentially a false victory.

Judith Mariën, a Tom Kabinet’s founder, said that she believes that despite the court verdict, it is ‘good news’ in that the court ruled that the site’s basic business model is essentially legal.

What is important that the trade start to think consumer, think service, think and avoid closed doctrine and protectionism for the sake of protectionism.

Hear, See and Speak - No Used eBooks?

How do industry bodies and major players respond to new entrants who offer something different? Do they go out to squash them in order to maintain the status quo? Do they attempt to reign them in and restrict their influence and impact? Do they invest in them and work with them to create new channels, new markets and new revenues? Some believe that many stick their head in the dark and wish them to go away?

This last week we have all read the Amazon Press Release over their ongoing battles with Hachette and one of the most relevant statements came right at the beginning in their reflections of the current consumer offer.  

A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive.

The somewhat throwaway line that caught our attention was that, ‘there is no secondary market ebooks cannot be resold as used books.’ With the revelations earlier this year about Amazon’s used ebook patent, we know that it has had its eye on this opportunity, but that the first sale doctrine is maybe a battle too far today. But used ebooks are almost certainly to happen and the change will be either driven by consumer demand or other start-ups who are prepared to push the envelope. It took the likes of Waterstones, Dillons and others some three years from starting to discount in 1991, to the collapse of the Net Book Agreement in 1994. It took years of patient lobbying for the B&Q and other large UK retailers to open up Sunday trading. It took years to change UK licencing laws. Things change in time and they change in favour of public demand.

Last month a judge for the District Court of Amsterdam ruled that Dutch used ebook reseller, Tom Kabinet can continue to operate while it is being sued in court by the Dutch Trade Publishers Association. Tom Kabinet enables users to resell DRM free and digital watermarked ebooks.

The Tom Kabinet site takes a 10% commission on all ebooks sold and have offered to pay a 5% royalty on all sales to authors for each ebook sold on their marketplace.

However, Tom Kabinet like the used l digital music service ReDigi are also up against EU legislators and a strong lobby. Although ReDigi is still in operation today, and have been awarded a patent earlier this year for their marketplace platform they have had to adapt their service in light of losing legal battles.

When Napster first threatened the music production business, the industry fought back through the courts and set out to shut down the new file sharers. The propaganda PR and lobby machines were wound up and the sound bites and messages broadcast. The political lobbing started as the industry  set out to shut down the new file sharers before they could establish themselves. The problem was Napster was free and consumers made it go viral.

The music industry won its battle with Napster, but then had others to deal with who had watched the Napster battle and learned new tactics. Although the music business kept winning they also kept losing and by the time they tried to get the Napster brand under their umbrella it was too late and the stable door was wide open.

The music streamers came next. First there was Spiral Frog who failed to deliver, but they were followed by Spotify and Pandora who did. The big music producers had learned some lessons and bought into the service but also tried to tame it and minimise the risk to their model. However they failed to understand that the threat wasn’t free, nor was it sharing, but it was about the whole ownership ethos that they had profited from for decades. The streaming services asked why you needed to buy when you could access on demand, from anywhere at anytime. Spotify with its 24 million users, of which 6 million are subscribers and the other services started to redefined ownership and how we paid for and listened to music.

It’s amazing how long the music industry took to include downloads into its charts and that they have only just opened the door to include streamed music. Today 228 million downloads happen across the various services every week in the UK and that is up from 142 million in 2013 and 67 million in 2012 (Official Charts Company). The maths of how many tracks on average people download a week, is not hard to calculate and is significant. Some 41.5% of singles are streamed and 12% of the current top ten are streamed. The UK alone has delivered a staggering 18.5 billion streams and in 2013 overall market revenues from streaming pasted the $1 billion mark for the first time. Interestingly, while streaming has experienced explosive growth the overall revenues of the global music market have only increased by a mere 4.3% (IFPY and Spotify).

We wonder how long it will be before they fully recognise the impact YouTube has made and that some suggest that more kids now watch their music today than listen to it. Interestingly, the success of streaming is negating the demand for used digital sales and in a market where growth is clearly in a new ownership model enabling secondary sales makes sense and will generate further income for artists.

Change will happen and denying used digital media a second life and sale will increasingly be seen as wrong and an untenable position by the people that matter the consumers. Denying a second income opportunity also impact creators at a time when their own first sale income is increasingly not meeting their expectations and the pool is being shared with even more fish.

Unlike music, ebook consumption is relatively low and prices relatively high and this will reduce some of the appeal of on demand ebook subscription services. The book market will remain a mixed economy for the foreseeable future with physical, digital, see through and subscription offers.  Perhaps it time that publishers work with new stat-ups to create and support a thought through and complimentary used ebook market and not wait for the collapse of the restrictions they have today and the chance that the result may not be favourable. 

Digital Resale: Opportunity not Threat?

Last week Apple followed Amazon with a patent application to create a service which many fear would wreck the digital booktrade – a used ebook market.

Some will suggest that it will never happen and that the lack of a first sale doctrine on digital files, be they, software, music or ebooks is covered by law. Others will suggest that the law may bow to consumer pressure and the arguments against resale of digital files are not in the interests of the consumer. Whatever the point of view, the consumer awareness is now being raised and the issue is being tested in the courts. We first wrote about Redigi last year and still await the US court ruling, but we already have seen a the software case brought by Oracle fail in the German court. Redigi has also stated its intent to come to Europe and to not just sell music but also ebooks.

We then had the patent granted in the US to Amazon and now an application by Apple. The Apple application goes into great detail on how the process will work and cites different scenarios. So are the two giants squaring up to close the door to others even before it is even open?

Anybody standing on the sidelines would probably suggest that the writing is already on the wall and that it is less of a case of ‘if’ and more a case of when.

The logic against resale would appear strong:

·         The file is pristine and not worn and therefore it has not lost value

·         Resale of what are ‘new goods’ would undermine first sales.

·         How do you authenticate genuine ownership?

·         The resell would put nothing into the copyright owner purse and in fact will reduce their earnings.

·         It is difficult to guarantee that the original file has been deleted on resale.

However, we would suggest that rather than looking at the glass half empty, the potential to resell digital ebooks could be a great opportunity not only to raise additional revenues, appeal to consumers but also address some of the black holes in today’s digital environment.

The Honesty Box

A controlled resale marketplace offers the opportunity to finally make the initial first sale market transparent to all. If digital licences need to be authenticated then that has to be auditable and transparent to owners. In other words unless a licence can be authenticated it is a ‘rogue’ and as such can’t be resold. Not only do we start to see all licences granted but also all licences transferred.

Authentication

To be able to resell authentication needs to be established which could be easily achieved via watermarking technology. Some would suggest that watermarks could be removed or amended. This is true but once removed or tampered with they become rogue and clearly pirate copies. Being able to sell used copies may be a bigger incentive to consumers than sharing free via pirate or unauthorised sites.

DRM

Rather than flipping from the current heavily restricted encrypted files which remain locked for the life of the owner, we can move to a more social DRM environment based on authentication of ownership and which rewards honesty.

Walled Gardens

Today we have what is often referred to walled gardens . These are platforms which lock customers and their content into one service and exclude or make it difficult for others. They thrive on their own encrypted files and DRM and Amazon and Apple’s parents would perpetuate this situation. However if a open resale marketplace were to be established, it could change this situation in a similar way to how MP3 broke the iTunes stronghold on digital files.

Revenue sharing

Fixing the price of a second sale may sound easy but may prove impossible. However, fixing the levy paid to the copyright owner on a second sale may prove easier to enforce. If we presume a file may have more than a second life this would mean that revenues would be generated on each resale which itself could prove a sustainable revenue stream. Interestingly, it is easy to see how this promotes reading for free where the buyer pays and recoups their investment on sale. Would this destroy new book sales – no. It would certainly alter them but unless there is a copy in of new titles produced but could also stabilise the cannibalisation of print.

We have to look at both the negatives and well as the positives and discuss these with a view to moving forward. We could sit on our hands and expect nothing to change but it will and by not exploring the positive we will just inherit someone’s else’s rules.

The glass can be half full but only if we look at it that way.

the marketplace someone has to buy that first copy. This may skew the number.

Related posts:

Redigi to Land in Europe and Sell Music and Books! Jan 2013

Digital Files Aren't Just For Christmas, But For Life July 2012

First Sale Doctrine: Digital Threat or Opportunity? Jan 2012

Amazon Patent Digital 'Used' MarketPlace

The first sale doctrine which currently restricts the resale of digital files and in doing so obviates the second hand market, has always been suspect and now looks like its about to be tested even further by another piece of the evolving Amazon jigsaw.  

The abstract below is from a US patent filed by Amazon in May 2009 and just granted in January 2013.

Abstract

An electronic marketplace for used digital objects is disclosed. Digital objects including e-books, audio, video, computer applications, etc., purchased from an original vendor by a user are stored in a user's personalized data store. Content in a personalized data store may be accessible to the user via transfer such as moving, streaming, or download. When the user no longer desires to retain the right to access the now-used digital content, the user may move the used digital content to another user's personalized data store when permissible and the used digital content is deleted from the originating user's personalized data store. When a digital object exceeds a threshold number of moves or downloads, the ability to move may be deemed impermissible and suspended or terminated. Additionally or alternatively, a collection of objects may be assembled from individual digital objects stored in the personalized data stores of different users, and moved to a user's personalized data store.

What does it mean to ‘used’ digital media such as music and ebooks is not clear today. We still have legal rulings to be declared in the ReDigi US case and we have the same company declaring its intent to come to Europe to resell digital music this year. Now we have Amazon holding a patent, which like ‘one click’ could restrict others whilst opening up a market that has been threatened for so long, yet ignored by so many.

Not all patents convert and many sit in drawers. Amazon’s intent today is unclear and whether this was just to cover their lending programme, or is intended to cover full resale’s. Today their contracts restrict players such as ReDigi from using their files , but does this mean that they have been planning a further extension to their ‘walled garden’ all along?

Can this patent be used against others such as Redigi, or be used by them to support resales?

How will this piece of the Amazon jigsaw fit with the other significant pieces such as; Prime, FreeTime, Autorip, Lending, KDP etc?

The one thing that is very clear is that one company is building a jigsaw and can envisage the picture whilst others are merely tinkering with the individual pieces and the edges.

US patent detail

Redigi to Land in Europe and Sell Music and Books!

Are we about to see the demise of the lack of a first sale doctrine on digital files? Although ReDigi is still locked in a US court case with Capitol records accused of copyright infringement they now plan to bring  their service to Europe. Amazon is releasing its AutoRip service which gives buyers of the physical they can resell and a digital copy for life in the cloud. Others a queued up watching as many start to push the boundaries on digital media, the right to resell and the whole question of the licence you get when you buy digital media.

ReDigi move to Europe is within the next quarter and is not just about music files but also ebooks and potentially video, games and software. This means that publishers who may have been watching the music industry from the sidelines are now potential in the arena alongside them on this one in Europe.

Last year in a EU court ruling the door was opened for the resale o media file to be fully tested. In a case between UsedSoft and Oracle, the EU court stated that the UsedSoft service could enable the resell of Oracle software and that the copyright owner’s rights could not prohibit the resale by its customers. Many ignored the ruling thinking it only was about software, but it wasn’t and its now threatening to come home in the shape of Redigi. If the services takes hold in Europe it could itself impact the US and there would appear to be no reason why consumers would not embrace the service.

Redigi in effect broker the resale of digital files for a reduced price and so create a second hand, or used media market. ReDigi only allows people to sell music files they have legally purchased and scans users’ computers and devices for illicit files and requests them to be deleted. Redigi recognise that a digital file can be copied and have built their service on moving the digital file to their servers and removing it from the seller’s system. The buyer retrieves the file from Redigi.

ReDigi also has enabled artists to register with its site and receive 20% royalty on sales through its platform.

The objections from the industry are based around the lack of ‘first sale doctrine’ on digital product and that the file is always ‘mint’. The fear of piracy drives copyright owners to the barricades whilst the service itself drives consumers to challenge them. This Mexican stand-off often overrules the need to find a solution that works for all. Some would suggest that the visibility of the dual standards being adopted between physical and digital rights themselves will generate more piracy than the service itself!

Related blogs:

First Sale Doctrine: Digital Threat or Opportunity  Jan 2012

Digital Files Aren’t Just For Christmas But For Life July 2012

Using DRM to Enable ebook Resales?

We all know that the DRM licence is often only as good as the availability of the server ,or service it was initiated and ‘stamped’ by. In other words you may have a perfectly valid and paid for copy of a title, but if for any reason you need to redownload it and the service has gone – poof! So has your licenced copy. Ok you may expect that, but when the licence is from a generic provider such as Adobe and their widely adopted ACS4 service you could transfer the licence but no, Poof, its gone! An interesting challenge when some may not be around into the future.

We now read with some interest another twist on the ‘Poof it gone’ DRM story as it relates to Barnes and Noble. This is about a request to redownload being refused because the credit card details held against the specific ebook licence had expired. This itself raises many questions about why credit card details are being held against a third party additional licence in the first place and whether  these are being held in perpetuity?

It is amazing that we continue to endorse the DRM route claiming protection of publisher and author rights, but we blatantly ignore or abuse consumer rights. It appears a sale is only as good as the consumers ability to back up any file and hope they never change their credit card, or it doesn’t expire and of course, they don’t need to replace the file. Some would suggest that an ebook may be for Christmas and not for life.

However with tongue in cheek, this also raises the thorny question of first sale doctrine. It is claimed that a digital file is always pristine and therefore a second sale practice is not the same as ‘used books’ and potentially undermine the market. However, some would suggest that if DRM is as rigid in its rules as it appears , then it would be easy for a service such as Adobe to validate the file is genuine and enable a resale. After all this is the argument in the current Redigi case where they validate files against itunes. It is also possible then to transfer or create a secondary licence to the new user thus controlling resales by DRM.  

It would be somewhat perverse to think that perhaps DRM does have a place after all? Using DRM to promote and control secondary sales would be an opportunity which we feel would itself send many DRM supporters over to the other side! Of course it will never happen but it demonstrates once again to that we have to becareful what we wish for.   

References:

Original article on Barnes and Noble at The Passive Blog

Digital Files Aren't Just For Christmas, But For Life

We talk about DRM as if it is the only issue to be addressed in the digital market. However some would suggest the most onerous digital issue that persists today is the fact that digital downloads can’t be resold. Like it or not you have it for life. With music you may be tired of the song, or even the artist, with software you may have moved onto other software, with books you may have simply read the book. In all cases if the product was physical it’s yours to resell, if digital there are no options it’s yours for life – or is it?

The first piece of news is from the European Court of Justice this week where they ruled that individuals or companies may resell used software licenses. The case was between  UsedSoft a German and US software giant Oracle ruled it permissible to resell of software bought over the internet and downloaded. By allowing the resale used packages with often legally obtained license keys a new owner is able to download the latest version of a given program directly from a company's Internet site and obtain all new updates and patches in the process. The European court ruled that the so-called principle of exhaustion applied whenever software was originally sold to a customer for an unlimited time span and effectively prevented the producer of the software the right to prevent the resale of that software.

The court did state that whoever resold pieces of original software and their accompanying licenses must also erase every copy on their own computers in advance and that they are not allowed to keep a copy after resale.

The second and more interesting piece comes from ReDigi.com, which is a US start-up launched last year aimed at facilitating the resale of digital music. ReDigi lets users load old, unwanted tracks into an online music locker, where others can purchase them for around 70 cents. To ensure it is not flooded with pirate copies, ReDigi's special software forensically analyses the tracks to verify that the files were purchased legally, deletes the songs off the seller's hard-drive, as well as any other devices that sync with it and holds them in a cloud based locker.  As  Apple’s contract with its users  doesn't prohibit customers from reselling iTunes bought files,ReDigi  only allows customers to trade tracks bought off iTunes.

 Despite the logical and moral process adopted by ReDigi to protect copyright, Capitol Records is suing ReDigi  and accuses them of infringement, arguing that the transferring tracks amounts to illegally duplicating files and running a business “built on widespread, unauthorized copying of sound recordings.”

As if they had not learnt from the Naspter days and the RIAA’s pursuit of individuals the music business appears to be making yet another public relations blunder. You can understand them worrying about declining revenues, the emergence of the Spotify model. But restricting resale only on digital is just going to fuel piracy and drive more ridicule on an industry that is weighed down with bad decisions and PR.

If the case rules in favour of ReDigi it will have a significant impact on all digital media download sales and it will be interesting to see if the door is left wide open or caveats are stipulated on the measures that must be in place to permit it.  The whole thing could blow open if Apple where to change their contracts. 

However what is most interesting would be the impact of a used sales market on the migration to subscription and on demand streaming service rentals such as Spotify. The digital remains 100% pristine and never gets worn out and there is no packaging to get lost and the digital file will retain a high residual value that they don’t today. This may even raise the original cost of files and give the owner value in their ownership that they don’t have today. If addressed properly there could be secondary revenues on resale to the creator in the form of royalty.

Merely allowing resales without some changes would open up a flood gate of secondary sales with little benefit to the industry.  

First Sale Doctrine: Digital Threat or Opportunity?

One of the drawbacks with ebooks is that there is no second hand market for them. Unlike physical books you can’t sell a book once you have read it. You can’t even put it on your bookshelf. It is doomed to sit often forgotten on some virtual bookshelf.

The lack of ‘first sale doctrine’ on ebooks is a big opportunity lost today as we find ourselves tied up in DRM knots and fear of the digital unknown. Too much of what we do is negative and restrictive and denies freedoms, rights and norms taken as a given within the physical world. Denying established social practice just helps fuel further consumer piracy.

Music is probably the last sector media should look at for digital guidance.
Last week EMI filed two lawsuits against different online music services, Grooveshark and ReDigi for breach of contract and copyright infringement.

The first case against Grooveshark is understandable in that it is claimed that the digital music service has paid no royalties since entering a licensing agreement to stream music nearly three years ago. That it has taken three years to issue a lawsuit is somewhat amazing and EMI’s filing comes after three other major record companies; Universal Music Group, Sony Corp and Warner Music Group, all filing accusing Grooveshark of pirating thousands of songs.

Founded in 2006, Grooveshark claims 35 million users and has major adverting support contracts. It allows users to upload songs to their servers, which it then lets other users stream for free. A virtual ‘swopshop’. The music industry is starting to accept services like Spotify and Rhapsody that stream music by subscription, but Grooveshark is again different and operates heavily under the protection of the Digital Millennium Copyright Act.

Founded only last year ReDigi is different again and operates under the “first sale doctrine” legal concept, that allows users who buy a copyrighted item like a book or CD the right to sell it or give it away. ReDigi operates a ‘used music store’ where users upload unwanted songs and buy others at a discount. ReDigi claim that they can verify individual MP3 files were legally purchased and not ripped or downloaded from a file-sharing network. Interestingly the sellers must also install a ReDigi program on their computer that removes any copies of a song from the seller’s computer.

The case pivots on the claim ReDigi is infringing copyright in making copies of digital files as part of the process of uploading songs from a seller’s computer and transferring them to a buyer’s. EMI claim that, unlike selling a used CD, a used MP3 is theoretically the same as a new one and hence the infringement. ReDigi counters saying it is merely acting as a responsible marketplace. Again EMI is not alone and the RIAA (Recording Industry Association of America) has also sent ReDigi a cease-and-desist letter.

So we return to the question of opportunity versus restriction, or a glass half empty versus a glass half full. Digital files have been made different not by technology, but by unimaginative thinking, restrictive DRM and bad law that is no longer relevant to the times. We must all realise that just as like having different tax rules for the same product, having different consumer rights will just drive more honest consumers to cut corners and disrespect copyright. The publishers may protect today’s revenues, but in doing so may end up losing tomorrow’s and their customers.

Publisher be they music, games, ebooks all have to realise that the right to resell is a given and finding a way to allow that is a must. We already have digital rental and loans and restricting or denying resell is just plain lunacy. The resell markets could in fact blooster the price of the original sale and start to create value added ownership. It could even offer the independent bookstore a digital lifeline. The ebooks and publishing market is a very fragmented and getting consensus of vision let alone action is often a challenge in itself.