Second time's a charm

"The Castaway" is not a very good book. Published in 1908, Hallie Ermine Rives' novel opens with these deeply unpromising sentences:

"A cool breeze slipped ahead of the dawn. It blew dim the calm Greek stars, stirred the intricate branches of olive trees inlaid in the rose-pearl facade of sky, bowed the tall, coral-lipped oleanders lining the rivulets, and crisped the soft wash of the gulf-tide. It lifted the strong bronze curls on the brow of a sleeping man who lay on the sea-beach covered with a goatskin."

A goatskin? Crisped the soft wash? The masochists among us can read more thanks to the magic of Google Books, but Rives' story isn't notable for its prose as much as for its legacy.

The original publisher printed a notice in one edition demanding that the book not be sold or resold for less than one dollar, ever, by anyone. The publisher ended up in court over this restriction, and the trial helped to produce the "first sale" doctrine that buyers have broad rights to do what they want (subject to other laws, of course) with something they have purchased. Without that trial, you might not have the right to resell that old video game you have lying around, and you might have trouble hawking your used CDs. Publishers don't tend to like secondary markets, as they usually get no cut of the revenues.

But the first sale doctrine, (relatively) straightforward in the physical world, has been complicated by the easy copyability of digital works, the rise of EULAs, and the use of DRM and activation systems. Did the Castaway decision also pave the way for you to sell your MP3s? And if not, what's the legal status of all that digital media the young people spend so much money on at iTunes and Amazon? Do they own it? Can they sell it? What about those Steam games? Can you resell that unopened copy of AutoCAD even though the EULA forbids it?

Welcome to the murky "post-sale" world in the digital age.

Hullabaloo over Bopaboo

This month saw some controversy over Bopaboo, a site that allows people to sell their MP3s online. First sale doctrine would seem to allow the sale of digital goods, but the Bopaboo business model requires people to upload their music to the site before it can be sold—in other words, to make a copy.

As Fred von Lohmann of the Electronic Frontier Foundation points out to Ars, first sale law does not provide anyone with the right to make additional copies. The new company would appear to be treading on ice of remarkable thinness here; although it has some technology in place to forbid people from selling multiple copies of the same song, it knows nothing about the origin of those songs (P2P? iTunes?) or whether they have been deleted after uploading.

This has been an issue for years—used book stores don't know if sellers have a photocopy of the entire text stashed away at home—but digital products make the copying so much simpler as to seem like almost another class of works. If Bopaboo has no mechanism for verifying deletions after an upload, it may find itself in the music industry's legal crosshairs.

Except for one thing: Bopaboo has gone to the music labels and is currently seeking licenses for what it's doing, with the goal of putting some kind of revenue sharing deal in place. In other words, it's seeking to give creators something they have long wished for: a piece of the secondary market.

Making money the second time around

It may seem axiomatic to consumers that a business or artisan makes its money only on the initial sale. The carpenter who built your dining table doesn't get a cut when you eventually hawk it on Craiglist, and Best Buy makes no money when you resell one of its computers to a friend. This may seem like the natural order of things, but the content industries generally hate it. The music and book businesses, in particular, have been vocal over the years about their displeasure with used record shops and secondhand book stores.

Rich Bengloff is the president of the American Association of Independent Music (A2IM) and he also sits on the board of the royalty-collection entity SoundExchange. He tells Ars that the industry isn't thrilled about used sales because they don't compensate creators and investors. When I ask how this differs from every other sale of used goods, Bengloff makes the point that, in other industries, there is often some money still to be made on used goods. Car dealers continue to earn revenue through service and maintenance, while carpenters may need to repair the table or restain it. With music, there's no maintenance or service or even degradation of the product, no chance at all to earn anything in the future from it.

Bengloff says that the music industry has come to grips with used CD stores, though grudgingly. "It exists and we have to be pragmatists," he says, which is made easier by the fact that used CD are still "used." Jewel cases may be scratched, CDs may have scuffs, and booklets may be bent or missing. Even if the industry can't share in the revenues, such stores aren't directly competing with new CD sellers, at least.

But digital resale shops would pose new challenges. Put simply, the product they offer is simply too good. "Used" versions of songs aren't actually "used" at all; they're perfect copies, as good as the day they traveled through the tubes and onto a user's machine the first time. So, if used copies of digital goods are sold at a lower price, consumers have no reason at all to use higher-priced services like iTunes or Amazon. If used copies are sold at the same price, the store doing the selling is now in direct competition with those other stores, even though it doesn't have to split any profit with labels or creators.

At the same time, digital resale shops may also offer some benefit to the industry. Because the business model of stores like Bopaboo ("great name," says Bengloff) may be dodgier than stores trafficking in physical goods, the labels have an opportunity to get a piece of the market in exchange for legal security. Bopaboo's decision to seek licenses for its behavior is (pun intended) music to the ears of the music industry.