A showdown over the meaning of ownership in the digital world between online retailers and content creators is on the horizon. The US Patent and Trademark Office recently awarded Amazon a patent titled Secondary Market For Digital Objects, wherein the mega-retailer describes a marketplace for the transfer of used digital objects, whether ebooks, audio, images, video, and even apps. As stated in the patent, "transfers may include a sale, a rental, a gift, a loan, a trade, etc."
Amazon already has a thriving marketplace for used physical objects, but this signals the first time a major online retailer intends to introduce a means to resell digital objects.
The patent specifically addresses the architecture for the software that would support this secondary digital marketplace. But what remains unknown is how much users would receive for transferring their digital goods, what Amazon will charge for the service, and whether the originators of the content would receive any compensation.
Though this may seem like a natural progression in the transition from the physical to the digital world, a multitude of businesses and content creators are calling foul on Amazon's move. The issue at hand is rooted in how we think about physical objects. When we purchase something new, we expect that it has come directly from the manufacturer and is free of any kind of damage, aging, or wear-and-tear. If someone else has owned it, we typically place less value on it, even if it is in pristine state (unless its value has increased because it is rare).
So the question is, how does a digital file become "used"?
Amazon's answer to this question is best understood with the "preowned" label rather than "used". Specifically, Amazon wants a system to keep track of how many times a file has been transferred between users. The patent describes accomplishing this through a series of personalized data stores.
Consider User A and User B. Once User A has purchased the object from a vendor, the digital object is stored in a "first data store" to indicate that it was the first time the object had been transferred away from a vendor. If User A wanted to sell or gift the digital object to User B, the file would be removed from User A's first data store and placed in User B's second data store. User B then has ownership of the file and can do whatever with it. By having a finite number of data stores, a cap would exist on the number of times a file could be transferred, as a way of controlling the secondary market.
One positive of this kind of system is that resale prices could be much more gradual than often happens with used items. For instance, looking at the used physical books that Amazon already sells, the difference in price between a new book and book in very good condition can be significant while the difference between books in very good and good condition may be marginal. But if an ebook was deemed eligible for four transfers, for example, the difference in prices between each transfer should be much more tiered.
In other words, a fair and quantitative depreciation can be established in the secondary digital marketplace.
So why would anyone stand opposed to this move? For one, it will only accelerate the end of your local neighborhood bookstore. But a bigger issue is that the creators of the content will likely not receive any compensation for the transfer. After all, they don't receive anying for selling used physical copies, though the difference is that a preowned ebook is identical to a new ebook in terms of quality. With a bunch of used copies floating around, the potential for a dropoff in the number of new digital objects sold is real. At the same time, lower prices could mean greater exposure as consumers on the fence might opt to buy at preowned prices.
Amazon, who has benefited enormously from the adoption of digital objects, would likely only launch such a service if it can charge enough on transfers to make up for what it loses on new sales. Currently, the closest thing it has is the ability to borrow an ebook on a Kindle device, though the ebook can only be borrowed once.
But as John Scalzi, best-selling author and president of the Science Fiction and Fantasy Writers of America, noted on his blog, this means that content creators will get paid less but Amazon will make more. Astutely, he added:
I would rather you pirate the eBook than buy it used. Because if you’re not going to pay me, the guy who wrote the book (or also the folks who edited it, did the cover art, marketed it and put it out there in the first place), why the hell should Jeff Bezos get paid? He doesn’t need the money; he’s a billionaire. Amazon doesn’t need the money either.
To be clear, what I would like for you to do is pay for the eBook new...but if you’ve determined you won’t, please don’t give Amazon (or whomever) money you won’t give me. That’s just mean.
Amazon is not the first to think of profiting in a secondary market of used digital files. Launched in 2011, ReDigi is a preowned digital service that lets users upload iTunes files that can then be purchased by others. Users are compensated with credit, not cash, so it isn't a way to make money. In response to the patent, ReDigi issued a statement saying it "takes no position on the legality" of Amazon's service described in the patent, but noted that the copy-and-delete method "has been central to the music and publishing industries' skepticism and opposition to a 'used' digital marketplace." Since it's launch, the stratup has fought its case in court against a number of record companies
Interestingly, rumors are circulating that the next generation of gaming consoles from Microsoft and Sony will prevent playing secondhand copies of physical games. If this is the case, then a means for selling used digital copies would be in great demand, something Amazon may very well have foreseen back in 2009 when the patent was filed (watch out, Gamestop).
Clearly, a secondhand marketplace for digital objects is coming. How extensive it is, what limitations will be built into it, and who will be the major and minor players are still unknown. Regardless, it is just one more way that the digital world is trumping the physical and changing the consumer landscape.