Digital Resale And The Restoration Of Value To The Creative Process


1 (1)This article examines the detrimental fallout from the landmark case of Capitol Records, LLC v. ReDigi, Inc, how it created a music economy where the resale value of digital music is effectively zero, and how blockchain technology might be able to alter consumer behavior to better benefit artists.

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Guest Post by Bryce Weiner on Zapchain

Imagine you spent hundreds of hours pouring all of your love, wealth, time, and effort into an artistic creation, and in the swipe of a pen a court decides that your creation can only be sold once and then it has no intrinsic value.  That’s exactly what happened in 2013 as a result of the now infamous Capitol Records, LLC v. ReDigi, Inc. lawsuit.

ReDigi bills itself as a “virtual marketplace for pre-owned digital music” which allows users to re-monetize digital content purchased on iTunes or Amazon. Used record stores are still quite popular among Millennials, proving that the resale of music isn’t dead in the digital age.  It is the aesthetic qualities of physical media which continue to propel the sale – and resale – of physical media.  It is the sense of ownership and connection with the artist that comes with the feel of physical media that has not been duplicated in online content.  This is, in fact, the core of the court’s decision: when one sells a MP3 or like digital content (such as the new MQ format) there is no transfer of art, but the sale of a copy… and under modern copyright law that’s considered stealing.

The Right of First Sale

The crux of the legal arguments is over something known as the “right of first sale,” in which artistic works may be transferred given the permission of the copyright holder.  It is under this legal ruling that such services as Netflix and your local used record and book stores are able to legally re-sell media. Software and digital content publishers claim such rights under End User License Agreements, but such legal frameworks are overly cumbersome and nearly unenforceable in the realm of digital media as the ReDigi case proved in court.

The Fallacy of the Grass Roots Gold Record

1The theory goes that the illicit distribution of copyrighted content helps artists in creating viral network effects.  This has been debated for some time, however such debates have only persisted in a vacuum of fact.  In 2010, Bernie Lydell Glover was found guilty of felony to commit copyright infringement for supplying the music piracy group “Rabid Neurosis” (known as “RNS”) with stolen content for online distribution without royalties.  While the battle cry in defense of such behavior has always been similar to that of a “rob from the rich and give to the poor” mentality, such thinking is fundamentally broken in a global music economy born from the digital age.  At no time has illicit distribution of an album ever been documented as helping an artist.  Smaller signed and unsigned artists must now suffer the loss of retention of ownership over their works, which has demonstrable long term effects on the profitability and popularity of stolen content.  The sad truth is that viral releases of albums are actually finely crafted affairs and there is no such thing as a “grass roots gold record”.  While the anarchists’ dream of monies freely paid for artistic creation might seem viable in the age of cryptocurrencies and blockchain technology, such thinking is itself antithetical to anarchist philosophy in that it forces individuals to participate in a specific manner.  Forcing or coercing people to do something they don’t want to do simply isn’t anarcho-capitalism, and as a result record companies will always exist because some people will always desire to profit from their art.

Right Decision, Wrong Effect

While the ReDigi decision was legally and morally correct given the evolution of the digital music marketplace, the end result of the litigation is an environment in which should an artist elect to digitally distribute the fruit of their creative labor they are essentially destroying the value of that work in that it has a resale value of zero.  This is somewhat shocking in that it creates a “disposable culture” for artistic creations, and could very well be argued as the cause of the anecdotal sentiment which claims a reduction in musical quality of popular tracks.  The monetization of music is the monetization of the experience of the emotional content that music creates.  To state that after the initial purchase the experience has no value is simply abhorrent, but was none the less necessary given the technology available.

Blockchain to the Rescue

While attempts are being made at the proper settlement of royalties from purchased content, no solution to date has sufficiently addressed the retention of value through secondary markets.  It is this aspect of the copyright quagmire that this author is quite confident that blockchain technology can come to the rescue.  The difficulty is then in devising a means to alter consumer behavior beyond an attempted guilt trip for the illicit distribution of digital content.  Services such as Spotify have created “trust silos” which serve to disincentivize piracy, however it is still an insufficient solution as your music is still held captive to the ecosystem in which it was purchased.  The proper application of a decentralized solution may just be the special magic needed to solve this crisis of culture now and in the future.