ReDigi, a US company that labels itself as the world’s first legal online marketplace for “used” digital music, is preparing to launch in Europe and expand into areas including ebooks and video games.
The move may prove highly disruptive for media groups. Consumers have acquired billions of dollars of music, ebooks and films from services such as Apple’s iTunes andAmazon
in recent years, but have so far lacked an easy way to sell them.
The group has already caused controversy in the US, where it was last year accused of copyright infringement
by Capitol Records and is awaiting a judgment from a New York court.ReDigi’s push into Europe is likely to prompt debate over copyright laws and the right of consumers to buy and sell secondhand digital goods in the same way that they trade physical goods, such as printed books, CDs or handbags.
John Ossenmacher, who founded ReDigi in 2011, told the Financial Times the group plans to launch in Europe this quarter, first with music and books, before expanding to video games, software and films. The company employs several former researchers from Massachusetts Institute of Technology and its investors include Boston-based technology lawyers.
ReDigi takes a small cut from every transaction made on its site. Songs sell for an average of about 60 cents, compared with a typical 99 cents on iTunes.
The 43-year-old entrepreneur is adamant that ReDigi operates within the law: “Property laws the world over have always been that if you buy something, you have the right to resell it.
“Companies like EMI [which owns Capitol Records] are trying to change the status quo by trying to take away people’s property rights and their rights to resell their goods just because they happen to be digital.”
When someone sells a song on Redigi, the company moves the music file to its own servers and removes copies from the user’s computer. The buyer can then access the song through the Redigi app, and sell it on whenever they like.
Capitol Records, which represents artists such as Coldplay and Lily Allen, declined to comment on ReDigi or its court proceedings. Many people in the music industry fear that a “used” or second-hand market would enable piracy and lead to a catastrophic loss of sales.
Unlike physical books or CDs, “used” digital goods are just as good as “new”. And thanks to the internet, copying files and sharing them is easy. Rights holders are terrified of digital piracy, after sales were hit by the rise of illegal file-sharing sites such as Napster in the early 2000s, and more recently, peer-to-peer torrent networks.
Whatever happens to ReDigi in the US, lawyers say there is good reason to believe that its business model is legal under European law. Last July, the highest court in the EU ruled that UsedSoft, a German company, was entitled to resell software that it had licensed from Oracle – even though the terms and conditions of the licence prohibited a resale.
The implication of that ruling
, says Tony Ballard, a partner at law firm Harbottle & Lewis, is that “where ebooks, music, films and other content are distributed online on a download-to-own basis, the copyright owner’s rights . . . could not be used to prevent onward sales of the content by its customers.”
Less clear, says Mr Ballard, is how Redigi plans to deal with European laws against the circumvention of “technical protection measures”, the technologies that restrict the use of copyrighted goods including those sold through iTunes.
For online retailers like Apple
and media groups like Vivendi
, which owns EMI, the consequences of a market for second-hand digital goods “may be dramatic”, says Mr Ballard. With music download revenues alone growing to $4bn in 2012, the stakes are high.
But Mr Ossenmacher plays down industry fears about his business model, saying that ReDigi only allows people to sell music files they have purchased legally. The company also scans users’ computers and devices for illicit files and asks them to delete them.
Mr Ossenmacher argues that ReDigi will in fact help the industry, by spurring a virtuous circle in which the emergence of a secondhand market encourages the sale of “new” goods.
“People use the money and the value created from selling a used book to buy new books,” he argues. “What used does is bring more people into the marketplace to expand the market for everybody.”
To win artists over, ReDigi allows them to register with its site and receive 20 per cent of all sales of their music through its platform. Another innovation that could win the site more fans, says Mr Ossenmacher, is that a “major, multibillion-dollar charity” will soon be collaborating with ReDigi.
“There are hundreds of billions of dollars of lawfully downloaded digital goods sitting on people’s computers the world over,” says Mr Ossenmacher. “ReDigi unlocks that.”