10 Comments

Summary:

In a patent application filed Thursday, Apple outlined the possible creation of a marketplace for used digital goods. Amazon recently won a patent to create such a marketplace.

Apple filed a patent application Thursday to create a marketplace for used digital goods. The description is similar to the idea behind the patent that Amazon won approval for in February. Unlike Amazon’s patent, however, Apple’s possible system outlines the ways in which publishers could profit from the resale of digital goods. (Note: Apple applies for patents on lots of things, and applying for one doesn’t necessarily mean the company will do anything with it.)

Apple’s patent application describes a system that would allow users to transfer access to digital content — “such as an ebook, music, movie, software application” — to others:

“The transferor is prevented from accessing the digital content item after the transfer occurs. The entity that sold the digital content item to the transferor enforces the access rights to the digital content item by storing data that establishes which user currently has access to the digital content item. After the change in access rights, only the transferee is allowed access to the digital content item. As part of the change in access rights, the transferee may pay to obtain access to the digital content item. A portion of the proceeds of the ‘resale’ may be paid to the creator or publisher of the digital content item and/or the entity that originally sold the digital content item to the original owner.”

The application also describes many possible aspects of a marketplace for used digital goods — including how publishers might get paid:

  • How users might trace a file’s previous owner history: “A user that purchases a ‘used’ digital biology book may be interested in who previously had access to the digital school book because that previous owner may have helpful information about a class taught by a professor that required that book. As another example, a current owner of a digital movie might be able to see that one or more of her friends also owned that digital movie and, as a result, starts a conversation with them regarding the contents of the digital movie.”
  • How buyers and sellers could find each other: The patent describes possibilities like physically meeting on an airplane, using online resources, posting on a social network or physically “bumping” devices against each other: “For example, while device 230 is playing a song and is in a ‘bump’ mode and while device 240 is in a ‘bump’ mode, device 230 touches device 240. This touch or ‘bump’ causes a copy of the song to be accessible to one of Sally’s devices (e.g., device 240) either immediately or later.”
  • Payments for publishers: The patent lays out possibilities for how a piece of content’s original publisher could profit from a resale (something that rarely if ever happens with physical goods). In one possible outcome, “the percentages that each party or entity receives from a resale of a digital content item changes (1) based on the passage of time or (2) based on how many times the digital content item has been resold among end-users. For example, publisher 110 receives (a) 50% on each resale of digital content item 202 that occurs within a year of the initial sale from intermediary 120 to Jeff and (b) 20% on each resale that occurs more than a year after the initial sale. As another example, publisher 110 receives 50% on the first resale (i.e., from Jeff to Sally) and 40% on second resale (i.e., from Sally to another user, not shown).”

As we noted last month, users’ rights to resell digital content is a contentious issue under current U.S. copyright law. This year, a court will rule on whether startup ReDigi, which allows users to resell digital music, is legal. Last year, the European Court of Justice ruled that users have the right to resell downloaded software.

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  1. Can you really call digital goods “used”? Unlike physical products, there is no wear-n-tear to digital products. So unless someone is secretly working on digital goods that will expire or breakdown over time…it does get dated over time, otherwise, I really don’t see how we can create a new “used” category.

    Until the legal grounds are clear I doubt either company will dive into re-selling digital goods anytime soon. You have to take patent applications for what it is, a defense against patent trolls and it is often nothing more.

    1. David Thomas Ben Friday, March 8, 2013

      You can certainly derive information from a digital good that it has been consumed — in this case opened and pages turned — partially or completely. There is also a record of a sale — and therein lies the issue. What is happening in *that* point of commerce: sale or rental?
      I think you raise a good point about heading off trolls, and startups such as Redigi so that iApple and Amazon can control the market. They’re probably more concerned about ebay and the like. Nonetheless, it is in their interest to establish the business ahead of pending legal definitions of what really is being purchased when someone buys an ebook.

  2. I think these are fascinating iterations – both the Amazon model and the Apple model. My initial reaction – as a book publisher – was one of fear and loathing when I contemplated the Amazon patent application. But on reflection, I think these initiatives make sense. After all, there has long been a market for used paper-books, music and film CDs/DVDs, etc.

    1) Clearly, at least in Europe for the moment, the principle of resale of digital material has been embraced by the Courts. So, a market will develop over there irregardless, whether administered by Amazon, Apple or third parties.

    2) On the book side of things, the chief disadvantage will be to publishers (mostly Big Six trad publishers) who insist on aggressive pricing for digital editions, while new digital-native initiatives such as my own and many others will have the market advantage of limited resales. The incentive to resell a $15 digital edition for $7.50 (or a $40 textbook for $20) will be far higher than the incentive to resell a $3 digital edition for $1.50.

    3) Another major disadvantage for Big Six trad publishers vs. smaller operations will be the fact that the largest resale markets are for blockbuster bestsellers and textbooks – any item with very high demand. Niche books such as my and so many other smaller operations focus on tend to be ones which people with specific esoteric interests, or fans of specific small-press or self-published literary writers, want to hold on to. For example, I don’t expect for their to be an enormous after-market for our recently published “Hemingway’s Dark Night: Catholic Influences and Intertextualities in the Work of Ernest Hemingway.” Anybody who buys that really wants it, and will keep it.

    4) I suspect film-publishers will have limited exposure here, as the bulk of that content is either purchased on a limited pay-per-view basis, or through subscription programs such as Amazon Prime. The content tends not to be transferred to a device as a permanent digital file in such a way that it can be resold. In fact it is not “sold” in the first place, so much as licensed. In fact, in the burgeoning paradigm of digital access, film-publishers are better off than they’ve been previously, when their distribution has been cannibalized thru large after-markets for videos and DVDs.

    5) I also suspect that distributors of music will not be overly hurt. Why? Well, just looking at my own habits – I don’t buy a song to listen to it just once. In the same way that I always kept my collection of vinyl albums, and then my collection of CDs, I wanted regular access to my favorite bands/artists/songs. Now I’m the same with my iTunes tracks. I’m never “finished” listening to ABBEY ROAD in the way I’ll soon be permanently be finished reading the latest blockbuster bestseller.

    Anyway, there’s my two cents.

    1. I don’t think you have thought far enough into the future here, regarding your points (2) and (3):

      (2) Yes, many people would not bother reselling something for $1.50 if it required them to set up and monitor an eBay-style transaction. However, it’s likely that reselling will be integrated into the presentation software. So when the user finishes a book or movie, a pop-up will appear asking something like: “Do you want to keep this book/movie so that you can read/watch it again later? Or do you want to receive $1.50 for selling it back?” The user will click one of two buttons, and it’s the same work to keep the item as it is to receive the $1.50 cash back.

      Depending on the popularity of the item, the user may get the $1.50 back almost immediately, or the content service may have to wait until the next buyer appears, which could take a few days in the case of something like “Hemingway’s Dark Night.” However, virtually all buyers would want to buy the $1.50 “used” copy instead of shelling out the full price, since there’s no difference between used and new for a digital object. Thus, even highly niche content will fairly quickly find a buyer for a used copy.

      (3) Some of the people buying “Hemingway’s Dark Night” might want to keep it forever. But there will also be others in the following two categories: (a) they were disappointed by the work and *don’t* want to keep it – which happens often with academic work, or (b) they only needed it temporarily.

      1. Thank you, Dr. Nielsen, for once again creating clarity.

  3. Tim Acheson Friday, March 8, 2013

    Apple risks becoming a “me too” company, falling into a pattern of imitation in place of innovation.

  4. Apple is just adding another greed layer for content pimps. Once it is sold to the end user the used marketplace should be between users and no one else.

    Amazon looks to try to go down that road where apple is looking for another revenue stream they can use to gouge consumers.

    Frak you Apple!

  5. It is DRM. Both companies are trying to change the meme around this so that it can be accepted without a backlash.
    This is a very predicable path as amazon and apple have become the distribution platfroms that stand in the way of communities.
    Control of price, file type “standards” “hardware” and distribution channels.
    The leak for value extraction is the “real” world and natural altruism

  6. Michael W. Perry Friday, March 8, 2013

    Apple’s move impresses me more than Amazon’s. There’s nothing wrong with including some royalty to the publisher/author in this transfer. Art sales already give the artist a share of subsequent sales. Besides, a ‘used’ ebook isn’t really used. It’s in pristine condition. And since any sale of digital material will have to include tracking of the sale by the original retailer, who is getting a slice of the sale price, adding payments to the author/publisher can be included easily and cheaply (unlike paper books).

    Apple and the others also need to deal with another issue before they get hit with a lawsuit or have to deal with less-than-friendly legislation. There needs to be some way to probate iTunes libraries and iBookstore collections when someone dies. Given that the value of those collections can run into the tens of thousands of dollars, that is no small deal. Since no money is changing hands, transfers via probate shouldn’t include publisher/author royalties.

    And since family members may vary in which music and ebooks they receive, the process should probably include provision for transferring that ownership to multiple accounts.

  7. When one considers that most print publishing is junk with a shelf-life of a year to 18 months before it is remainder binned and then shipped at retailer’s expense back to the publisher as pulp, and that the same is true for ebooks, the notion of a discounted used market makes perfect sense if fairly and conveniently implemented. Buyers will buy more ebooks if they can discount the purchase price by resale value, the market operator Amazon or Apple will make another percentage on the resale transaction, the publishers and potentially even the authors may get another small percentage as well which they don’t now.

    Because Amazon’s or Apple’s closed resale markets will be run with their proprietary DRM controlled file formats, one can be sure that the few ebooks that are commercially successful best sellers will never be resold – there will be no market for “used” Harry Potter books so long as they sell as they do.

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