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  1. The MPAA is concerned that innovation in the film industry will be ruined if consumers get the right to resell movies and other media purchased online. Responding to discussions in a congressional hearing this week, the MPAA warns that this move would limit consumer choices and kill innovation. mpaa-restrictedThis week the U.S. House of Representatives’ Committee on the Judiciary’s Subcommittee Intellectual Property and the Internet held a hearing on the issue of “digital resales.†In other words, whether consumers should be allowed to sell digital videos, music files and software they purchased previously. Proponents of the rights to resell digital goods want the First Sale Doctrine to apply in the digital domain as well. However, this argument is meeting fierce resistance from the entertainment industries who see this right as a threat to their online business models. For example, the record labels previously pointed out that MP3s are simply too good to resell, as they don’t deteriorate in quality. Responding to the hearing in Washington, the MPAA also voiced its critique of the plans. According to the movie studios digital resales would hamper innovation, increase prices and decrease the availability of online film. In their view it would undo most of the innovation the Internet brought. “Critics say the movie and television industry was slow to embrace the Internet. But ironically, now that online video is ubiquitous, some of these same critics are trying to reverse time and drag the creative community—along with audiences—back into the pre-Internet era,†MPAA’s Neil Fried notes. The ability to resell movies bought on the Internet has the potential to create a huge secondary market. This would make it much cheaper for consumers to access media, and the MPAA believes therefore that content creators will be wary of making it available in the first place. “A new government mandate requiring creators to allow reselling of licensed Internet content would undermine incentives to create, reduce consumer choices, and deter innovation,†Fried argues. “Forcing creators to allow resale of Internet content they license would either require creators to substantially raise prices or discourage them from offering flexible, Internet-based models in the first place,†he adds. The MPAA believes that those who want to own movies and resell them should stick to the offline world. The physical ownership model doesn’t translate to the online world, which is better off with a licensing scheme that restricts resales. “This is a relatively new marketplace. Government intervention now, seeking to force the content community to return to a 1908 construct built around physical ownership, will only short-circuit the experimentation and innovation that is going on all around us,†Fried says. Of course there are also many people who object to the arguments of the copyright holders. John Ossenmacher, CEO of the MP3-reselling platform ReDigi, gave a testimony during the congressional hearing where he laid out a variety of counterarguments. According to Ossenmacher the content owners are trying to change consumer rights that have been in place for more than hundred years, only to guarantee maximum profit for themselves. “The First Sale doctrine is premised on a simple concept – you bought it, you own it – and it has never concerned itself with a specific format or technology, nor with the condition of the goods being resold. It establishes the commonsense principle that the creator deserves to be paid once, and then the owners, and subsequent owners, have the right to resell that good, to donate it or to give it away,†Ossenmacher said in his testimony. “It is not an extreme position to advocate that ‘you bought it, you own it.’ It is a logical, conservative position that adheres to the long-standing principles of law. It applies in every other type of good; it should apply here as well,†he added. It will be interesting to see how this debate plays out in the months to come. One thing is for certain, we haven’t heard the last of it yet.
  2. Responding to a consultation of the EU Commission, various music industry groups are warning against a right for consumers to sell their MP3s. IFPI notes that people should be barred from selling their digital purchases because it's too convenient, while the quality of digital copies remains top-notch. Interestingly, the UK Government opposes this stance with a rather progressive view. To gather the opinions of the public and other stakeholders on copyright reform, the EU Commission launched a consultation a few months ago. The call resulted in hundreds of submissions, which were made public recently. One of the topics being covered is the issue of “digital resales.†In other words, whether consumers should be allowed to sell digital music files, videos and software they purchased previously. In the United States the ReDigi case has been the center of this debate, with a federal court ruling in favor of Capitol Records last year. In the EU, however, the Court of Justice previously ruled that consumers are free to resell games and software, even when there’s no physical copy. In the submissions to the EU Commission consultation numerous parties weigh in on the subject. Interestingly, the UK Government takes a rather progressive stance by stating that people should be allowed to sell “used†tracks bought in the iTunes store, or used videos they’ve downloaded from Amazon. “As regards the resale of copies, the UK notes that traditional secondary markets for goods can encourage both initial purchase and adoption of technologies, and the prospect of sale on the secondary market may be factored in to an initial decision to buy and to market prices,†the UK response reads “There seems to be no reason why this should not be the case for digital copies, except for the ‘forward and delete’ issue noted by the consultation,†it adds. In other words, according to the UK Government people have the right to sell any digital files they have bought, as long as the original copy is deleted. This stands in sharp contrast to the various record label groups who warn that digital resales may crush the industry. IFPI, for example, notes in its submission that allowing digital resales would hurt the entire music industry, and threaten the livelihoods of many artists. “In the recorded music sector, the consequences of enabling the resale of digital content would have very harmful consequences for the entire music market,†IFPI writes. “The notion that the exhaustion principle should apply to copies acquired by means of digital transmissions in the same way that it applies to physical copies ignores the many differences between the two kinds of copies and between the two distribution processes,†the music group adds. IFPI signals three main differences between digital and physical distribution that warrant a ban on digital resales. According to them, physical music is different because: the quality of these deteriorates with time, and often due to wear and tear or mishandling purchasing an item at a used record store requires traveling to the store and searching for a copy of the phonograph record the resale only concerns the original recording, not copies of that recording In other words, people shouldn’t be allowed to resell digital music because it’s too convenient, and because the copies don’t lose their quality. While it’s no surprise that the labels are against digital resales, these arguments do raise some eyebrows. After all, there are also many physical products that are easy to ship and keep their value over time, which are perfectly fine to resell. IFPI is not alone in their restrictive view on selling used digital files. The UK-based music group BPI also submitted a response to the consultation, using similar arguments, as did individual labels such as Universal Music and Sony Music. “The consequences of allowing resale of previously purchased digital content would be devastating to the music industry. It would compete directly with the sale of original digital files as they would be entirely substitutional,†Universal notes, for example. It is now up to the EU Commission to sift through all the submissions to see what the ideas of various stakeholders and the public are on the matter, and how this should impact future legislation.