First sale doctrine – your legal right in the US to sell a book, movie, CD, or game that you own – has never really made sense to me. It implies that a piece of media is a durable good, which means its value doesn’t get used up over time and doesn’t depend on its owner. For most media, though, that just seems plain wrong.
The classic example of a durable good is the car. Assuming routine maintenance, the lifespan of a modern car is over 100,000 miles, or roughly five to fifteen years. Cars are also rivalrous, ie only useful to one owner at a time, but it generally doesn’t matter who the owner is. A car is just as useful to anyone who can and will drive it.
Media is different. Personally, after I’ve read a book or watched a movie or played a game a few times, I feel like I’ve gotten most of the value I’m going to get from it. I’d replay some games and reread some books, but not many, and even then, the marginal value gets pretty damn low after the first few times.
This doesn’t apply across the board, of course. People happily replay music for years, or even decades. Still, most media seems like a consumable in that I can use it up…but the catch is I only use it up for me. If I sell it to someone who hasn’t played it yet, it’s still brimming with value for them. This makes it a kind of virtual, owner-dependent consumable good.
Economics and property law aren’t as comfortable with this as they are with straightforward durable and consumable goods, and first sale doctrine is the clearest example I know of.
We generally want laws to encourage good things and discourage bad things. In this case, if someone derives value from a piece of media, we want the creator of that work to be compensated. Basic market economics.
Given that, if media is an owner-dependent consumable, first sale doctrine seems unfair. People can keep reselling a single copy indefinitely, each one extracting the lion’s share of the value without compensating the creator or publisher. The used games debate is only the latest incarnation of this. The whole thing just seems broken, and I don’t see a benefit we get in exchange.
(I don’t consider cheap used media a benefit. Sure, media prices are probably artificially inflated right now, due to lost sales and the added potential resale value. If used markets disappeared, theoretically those prices should come back down. That would mean less revenue, but publishers and creators would capture all of it, instead of losing a chunk to unhelpful middlemen. That’s a win in my book.)
I know this makes me sound anti-consumer, but I’m not, honest! I do think the current system is a bit anti-creator, though, which is just as bad.
It’s worth noting that most media is out of print and not currently sold. First sale doctrine enables used markets, which make it possible to buy and experience that media legally. I see that as an argument for better distribution and archive access, though, not a direct argument for first sale doctrine per se.
Happily, digital distribution is already addressing this. Online stores have big back catalogs of “out of print” music, movies, ebooks, and games you can buy and play right now, and that will only grow over time.
More importantly, digital distribution points the way forward. When you buy a piece of digital media, instead of a physical artifact, you get a license, which isn’t bound by property law or first sale doctrine at all. It’s another example of technology gracefully working around outdated laws.
Interestingly, first sale doctrine is just a US thing. Does it need reform? Should we adopt the European droit de suite model? Can we let it quietly fade away, obsoleted by digital distribution? Or am I off base entirely? I don’t know, but it will definitely be interesting to watch and see!
You’ve taken the provocative position here; most bloggers write about the loss of their first sale rights. I like how you turn that argument on its head. Property law of the last 3000 years just doesn’t make sense for collections of bits.
What annoys me is the transition from resellable things to things you can’t resell. It’s absurd and offensive that a Kindle edition of a book costs more than the paperback; the Kindle edition is intrinsically less valuable since I can’t resell it. I’m also annoyed at the way videogames have slowly gone from resellable things to not; particularly the crazy trend of included single use unlock codes for contents. OTOH the Steam version of a game is actually more valuable: I can play it without a CD in the drive, I can play it on multiple machines (Mac and Windows!), and I have some reasonable guarantee it will be playable for many years to come.
Great post, Ryan!
Nelson, I disagree that a Kindle edition is universally less valuable than a paperback. For me, it’s significantly more valuable, and I’d be willing to pay more for a digital version of a book than a physical version. Resale value is a tiny fraction of what I consider when I buy a book (most of my old books have such a low resale value that I give them away for free). Instead, I value things like accessibility/portability (I can read a Kindle book at home on my Kindle, at work on my Laptop, or in the store line on my iPhone), ease of procurement (it takes seconds to get a Kindle book), and the ability to search a book.
That said, I’m concerned about two things if Ryan’s vision comes to pass:
[1] What happens to old books that no one is buying any more? There’s a treasure trove of out of print material that we shouldn’t lose. Ryan addresses this in his post.
[2] Access for those who can’t afford it. The first sale doctrine enables libraries, but there’s no such parallel (yet) for digital works. The flourishing of the web (and sites like Wikipedia) ameliorates this problem to some extent, but it’s still important to remember the public value of access to information.
if physical media and the right of first sale go away then expect consumers to stop buying media and prefer to rent at a low price of $10 or so a month instead. I've done the media hoarding thing and learned my lesson.
at one point i maxed out at close to 300 CD's. sold some along the way, others got scratched and still have a lot. few years ago someone gave me 50GB of music that i haven't listened to all of it yet. i have over 8000 songs in my itunes collection.
there is too much music to buy for me, especially if i can't sell off what i don't want anymore. I listen to music from the 1960's up to modern times. buying thousands of CD's or songs on itunes is useless since i will listen to a song once a year or so. i prefer to rent now. free spotify and pandora and maybe will pay $10 a month again.
same with movies. i maxed out at 250 DVD's at one point and most i never watched more than once a year. no way i'm going to pay $10 – $30 per disc now except in extreme cases. and if i can't resell old movies i don't want anymore than my expectation of the price i'm going to pay for it will drop even more. i'll just pay $8 a month to netflix, hulu and maybe keep my cable next year
summary: no first sale right, a lot less money from me via Google+
It seems to me the answer is two pricing models, one for first-sale and one for licensed. Let the market decide.
My sense is that first-sale goods will die pretty quickly if licensed goods are priced economically. via Google+
+Ryan Barret What a giant mess that would be. Our current system protects consumers from excessive bureaucracy. How would I pay royalty after a garage sale? And, do you REALLY think prices for media would come down? When CDs came out (with a lower manufacturing cost than previous medias), did the record companies pass their savings on to the consumer? No, they didn't. They actually raised the prices … .because they could. They will charge whatever they think they can get away with charging! And, if non-resalable media is the law, they won't have an incentive to lower their prices.
However, we are seeing lower prices with digital books. Why is that? It is because both physical books (which can be re-sold) and electronic books (which cannot be re-sold) are competing against each other. If the laws prevented all media from being re-sold royalty fee, the prices would not come down. Why bother? People are already used to the inflated prices. And, they would have no choice otherwise.
And, if they allowed personal sales like garage sales and personal peer-to-peer selling to be exempt from a droit de suite law, then it would just invite another mess like we have today with technologies like Napster and Limewire where they try to make online services look like individual sharing (but in this case, selling).
The current American model works well. Consumers (and publishers, for that matter) have choice. They can choose between the following options with different prices:
Seems to me when these digital media products are release into the stream of commerce the content creators will receive their just benefits; but so will others as they are sold and re-sold. I don't believe the case has been made those future transactions should be arbitrarily limited. via Google+
Not sure that is a good argument. What about Artwork? If I hang an original painting on my wall and then decide to sell it should the original artist get the $$ or me? If something becomes a collectors item, should I, the collector, get the benefit of the sell or the original creator? What about comics? There is just no argument you can make that would make music, et cetera, any different. As long as you are legally selling the media the benefit should be to the holder of the physical media – not the producing artist – their benefit came at the original sale. When it's Vinyl, and a collectors item, is that any different than a CD/DVD/BR? via Google+
+Ryan Barrett
I'm afraid you are wrong and that for. Many reasons.
First of, droit de suite only applies in France and only on auction sales. It is actually about to be reformed.
In all other art forms, we Europeans use first sale: although it isn't a law specific to art: you bought something? Then it's yours. The only difference is if you start to make a business out of it.
Many Eastern Europeans relied heavily on second hand cds, books and so on at the Millennium turn to discover culture, and artists and so on. You're biased due to the microcosm you live into. The there's a whole world out there that demand, a
That even need to be able to enjoy resale. via Google+
I have an interesting trade-off proposal. Ban resale, but limit copyright to say, 5 years. As noted, the vast majority of copyrighted work is out of publication and can't be found, and used resale only surfaces some of it. If content gets used up once viewed, let's just possible that maximum profit is reached after some minimum sale time, and that any use after that time is free. No more 100 year copyright. Get all your profits in the first 5 years, then the marginal returns are gifts back to society for building such a wonderful system for distributing the products of your mind. via Google+
hell no. Especially when you have a screwed up market like we have today, where an ebook can cost more than a physical hardback (New – not consignment or second hand sale). via Google+
Physical media could very well disappear in the future though. In which case, sales would have to go through a DRM layer, and there it starts to get a little hairy, because it's so obvious it's a non-rival good, and selling rights to transfer bits doesn't seem as intuitive as selling manufactured LPs. via Google+
+Ray Cromwell will never fly as long as Disney is around. via Google+
I was thinking in the pass that right of first sale should apply to the paper on MUNI fair tickets… which are apparently 'illegal' to sell.
I get that MUNI wants people to not cheat the system but making it illegal to sell a piece of paper seems like a slippery slope via Google+
+Eric Eldridge You missed #5: Buy media that is unlocked. I have spent literally close to a thousand dollars on non-DRM'ed ebooks. $15 on Steve Jobs, DRM'ed in ibooks, and that is it. via Google+
It’s fun to re-read this in light of the recent PlayStation 4 and Xbox One announcements heralding the next console generation.
Microsoft confirmed that Xbox One games will attach to individual user accounts, which deals a mortal blow to used games as we know them today. It sounds like you may be able to sell your license for a game back to Microsoft, but probably not for cash, and maybe not even to third parties like Gamestop. Sony’s been tighter lipped so far, but they’ve made similar noises that used games on PS4 won’t be business as usual.
At the same time, the inexorable shift toward digital media grinds on, with both paid models like app stores and Steam and subscription models like Netflix and Spotify growing healthily. It’s unclear whether either will be the panacea for creators that we hope, but regardless, the consumer market has clearly spoken.
I don’t always love the idea that technology treats (some) laws as damage and routes around them, but that may be exactly what’s happening here.
CliffyB agrees with me, even after Microsoft’s reversal on the Xbox One’s DRM policy.
Adrian Hon’s thoughts on whether and what media he pirates are also similar.
Looks like this part is indeed coming true:
Gamestop reported their 2018 fiscal year results last week, and the biggest story was a $673M loss due to shrinking used game sales. Key quote:
Yuuuup.
interesting recent press cycle around G2A, a marketplace for digital game keys. much of the debate is around criminals using it for money laundering by buying digital games with stolen credit cards and then selling the keys on G2A. the victims then chargeback the purchases, so the game publishers don’t get the proceeds, but the criminals can still happily sell the keys. people also worry that some of the keys come from press, demos, and other places not intended for sale.
the more interesting part to me is that G2A is a flourishing marketplace for used digital game sales! i didn’t expect platform holders to allow this. i get the utility of distributing keys that can be redeemed for games, so maybe they did that without expecting they’d also provide a secondary market? hard to believe they didn’t foresee that.
the EU strikes back! well, France at least, which is not so surprising. French court rules that Steam’s ban on reselling used games is contrary to European law
The recent rise of NFTs adds an interesting wrinkle here: they can be configured to automatically pay the artist/creator a royalty every time they’re resold.
It’s still not an obvious fit or solution, since NFTs are primarily aimed at the original art market, not mass produced media. There’s also the question of whether the creator or owner should get the majority of the proceeds from any resale. Still, definitely a useful new technique to consider!