Jerry Brito

Rip, Mix, Sell?

We can all agree how pernicious the DMCA is when it’s used by the MPAA to put out of business Load ‘N Go–a small company that sold iPods preloaded with movies along with the DVDs of those movies. Piracy was not an issue here because consumers had to buy the DVD of every movie loaded onto their iPod. The reason MPAA acted, of course, is because Hollywood wants us to pay twice for movies–once for a DVD and again for an iPod or PC version.

Sometimes, however, the content industry has a point. Today Todd Dominey posted on his excellent blog his experience getting rid of his 3000-CD collection and going completely digital. He ripped everything to his computer and then sold all the CDs on the Amazon Marketplace. Today’s post is a great howto for folks with big collections. The thing is that he kept the music, but every used CD he sold is arguably one new CD the recording industry didn’t sell. (There’s probably not a one-to-one correlation there, but probably pretty close.) As more folks move to digital, this practice will only grow.

As far as I can tell this is plain and simple copyright infringement. I don’t think DRM coupled with the DMCA is the solution. Given the new reality of the internet, the only choice the content industry has is to change its business model. But when you see something like this, you have to feel their pain. I believe ripping your CDs or DVDs for use on your portable devices is fair use, and I think the Copyright Office should have issued a DMCA exemption for the practice. That said, you can’t have your cake and eat it, too.

December 13, 2006 | Comments |

Viewing 20 Comments

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    Yeah, that's sleazy. The thing is, anyone who's willing to break the law by ripping and selling 3000 CDs is also going to be willing to break the law by downloading HandBrake, so the DMCA/DRM isn't going to have any real effect on this sort of behavior. I wonder if the recording industry has considered suing him?
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    Value is an abstract concept and depends on the interaction of supply and demand. Certain things which used to have zero value, such as water, have gained value as a result of demand and shortages. Other products, because of technology, have lost value because they can be easily reproduced to meet demand, such as music CD's. The correct response (if we believe in a free market) is not the passage of laws to "protect" the value of the product, but the creation of a new business model that recognizes that the product now has low value.

    The New York Times, had an article on Dec. 11, 2006, titled "Squeezing Money From the Music". The Times writes: "As a recording that has sold modestly, but in an array of forms, Akon's music illustrates the new definition of a hit in pop music � instead of racking up sales of half a million CD's or more in the first week, it arrives with solid if less impressive sales, but with several revenue streams. ...It is an example of the business model that the retrenching music industry is embracing as sales of the CD, its mainstay product for two decades, slowly decay. ... Lately, the major labels have in effect tried to move into the talent management business by demanding that new artists seeking record contracts give their label a cut of concert earnings or T-shirt and merchandise revenue � areas that had once been outside the labels' bailiwick."

    Times change, economics change, the music industry must adapt to this new reality. Furthermore, they should not be allowed to subvert the government into passing legislation that protects them. If they can't compete, too bad.
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    Are you saying that the resale of ripped CDs is copyright infringement? Following the first-sale doctrine (which I think applies to more than just books), one should be allowed to sell the CD collection.

    Then, the only question is ripping the CDs for personal use and I've seen nothing which has tried to stop this fair use.
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    Kevin,

    When you sell a CD, you are selling your right to own and enjoy the content on that CD. The problem comes if you don't delete the associated MP3s from your hard drive after selling a CD.

    If that weren't the case, would it be legal for me to "buy" my friend's CD collection for a dollar, rip it all to my hard drive, and then "sell" it back to him for the same price? That certainly doesn't sound legal to me.
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    I thought we were assessing what is or isn't appropriate, and what rules ought to be in place, not what is or isn't currently legal. Steve R. has it exactly right. Why should the law be structured around prosecuting the simultaneous eating and having of cake in order to lock in business models? First off, the sky isn't falling: Dominey *doesn't* quite still have his cake; he now has MP3 files of everything, but no longer has hard-copy backups. He could burn some, obviously, but they won't be genuine original CDs; and if you think that's a trivial distinction then much of the art and culture market, where authenticity is highly prized, will be thoroughly baffling to you.
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    To frame this issue, I prefer the hypothetical situation with the technologies reversed:

    "Should it be legal to buy music in the digital format, burn it on CD and sell the CD yet keeping the electronic file?"

    Obviously not. The converse should not be true either. If you sell the CD, delete the files.
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    Finally, a technical point: those 3000 sales directly cut into *used CD sales*, from which the record companies and artists would have received nothing anyway. The only connection to new-CD sales is through a complicated general equilibrium model of expectations: on the one hand, a thriving used-CD market lowers new-CD demand by acting as a substitute good; on the other, it *raises* new-CD demand by providing the buyer with extra value (the potential resale value). It's not straightforward *at all* what the net effect is, especially once you throw in the endogenous nature of musical tastes.
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    X. Trapnel,

    I don't see how you're right. So what if I make an iso image of the latest CD I bought, sell the CD and then burn myself a new CD? Same quality, then. You could argue that, yes, I don't have the little cover book and maybe the fancy case, but I think you'd have trouble convincing anyone that a music CD without the case becomes worthless.

    I just can't accept your argument about music quality. It would stem from your argument that a 28kbps mp3 is not theft, a 128kbps mp3 may not be theft, a 320kbps mp3 might be theft... Where do you draw the line? It is already accepted that parts of art works are still valuable. That's why copying the first three chapter of a book and distributing them is illegal. Equally, distributing the music and claiming it's worthless without the case doesn't stand if you ask me.
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    Charles: should it be legal to buy seeds, grow corn, keep some for next year's crop but sell the rest to others? Obviously not. We must outlaw this disastrous cake-eating-and-having.
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    X. Trapnel,
    I've always argued that what should be illegal is not circumventing DRM or transfering music from one format to the other to use on a different device. I've always argued that the really illegal act is distribution without paying rights to the author. By distribution, I mean that you start with one person who's capable of enjoying an art work and you end up with more than one person capable of enjoying the same art work.

    So if you buy a CD, then sell the CD, you start with one person enjoying the work (you) and you end up with one person enjoying the work (the person you sold it to).

    If you buy a CD, rip it, sell the CD and keep the files, you start with one person enjoying the work (you) and you end up with two people enjoying the work (you and the guy who bought the CD).

    I think we would both agree that if you bought a CD, ripped it (let's say you make an iso, so there's no loss of quality) and started making copies on CD that you would sell, that would be illegal if you, say, make 10 000 copies. Then what about 1000 copies? What about 500? What about 100? What about 10? And finally, what about just 1 copy? Somewhere you have to draw the line. If you ask me, distribution is distribution and it's illegal whether you sell 1 copy or 10 000 copy. The only difference is that in one case its worthwile for the copyright holder to sue and in the other it is not. Lawyer costs would be more than whould you lost. Hardly a criterion to base the distinction between what is legal and not.
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    I'm not claiming that only the original pure form has any worth; that would be absurd. I merely state the obvious: the two things are not identical. If the industry can't leverage that into profit, that is there own problem.

    As for where I draw the line: it's pretty simple, actually. None of the things you list are theft. Walking into the store and taking the CD without paying for it--now *that's* theft.

    I refuse to accept that 'property' entails having all rights that may be necessary to extract *maximal profit* from a given thing. But then, I'm one of those abolish-copyright extremists.
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    There's actually law here, so simply saying something is illegal just because it's seems unfair is going to fall short.

    Reversing the case won't work, because downloads are classified differently than CDs under copyright law.

    Tim, your interpretation of the first sale doctrine is wrong. CDs are not licensed, so you're not selling "your right to own and enjoy the content on that CD." You are selling the physical object, which is your right to do under the first sale doctrine.

    The copying might be covered by fair use, the law's not totally clear on audio home taping, but copying just so you can sell the original is probably infringement. The issue, of course, is that copyright law traditionally hasn't cared about this kind of private copying.

    Whether or not we want it to is an open question, but personally I'm not ready to move to an access right, the DMCA is bad enough.
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    X. Trapnel,

    I won't respond to the corn example. It made me smile, I know they're two different situations, but I just can't articulate how, right now.

    Well, if you want to abolish all copyright, then your argument is consistent at least. I still think that viewpoint is wrong in the sense that it doesn't encourage artistic creativity. Especially with modern technologies where it would be very easy to make copies of many art works (not only music, you could reproduce digital images, scan physical images and reprint them,...) one has to define exactly and carefully what should be legal and not with respect to copyright. My claim has always been that we should carefully define what distribution is and make that illegal. My best bet is to define it as previously: "You start with x people able to enjoy an art work and you end up with more than x people enjoying the same art work." Obviously within the limits of fair use, so that it's not illegal to show a picture you bought to friends or watch a movie with your lover.

    I'm not saying the present copyright system is perfect. I'm a proponent of a strict limit of copyrights in time. They should expire and it shouldn't take 100 years. Or there should be some mechanism for certain works to expire if they're not valuable to the copyright holder anymore.

    So I'll try only one argument to convince you that your viewpoint is misguided. You say

    "I refuse to accept that 'property' entails having all rights that may be necessary to extract *maximal profit* from a given thing."

    Do you realize that in today's age where you increasingly buy more and more things that are stored digitally, it becomes trivial to make copies that are true to the originals. In 1552, if you made a copy of a painting, you had to paint it yourself. It took months and the copy was not exactly like the original. There, yes, authenticity was very valuable. Today, if you buy a movie on DVD, it is possible to take the DVD, make a copy, put it back on a different DVD and, when used, there will be no difference. Absolutely none. Both copies are identical. Not granting rights to copyright holders for different digital formats of the same thing doesn't amount to limiting their profit to "less than maximal." It amounts to saying you can make absolutely "no profit."

    That doesn't encourage creativity if you ask me. Yes there will be creators left creating even if you do that, but there would be far less creators than if you assure them profit for a certain time.
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    X. Trapnel,

    I won't respond to the corn example. It made me smile, I know they're two different situations, but I just can't articulate how, right now.

    Well, if you want to abolish all copyright, then your argument is consistent at least. I still think that viewpoint is wrong in the sense that it doesn't encourage artistic creativity. Especially with modern technologies where it would be very easy to make copies of many art works (not only music, you could reproduce digital images, scan physical images and reprint them,...) one has to define exactly and carefully what should be legal and not with respect to copyright. My claim has always been that we should carefully define what distribution is and make that illegal. My best bet is to define it as previously: "You start with x people able to enjoy an art work and you end up with more than x people enjoying the same art work." Obviously within the limits of fair use, so that it's not illegal to show a picture you bought to friends or watch a movie with your lover.

    I'm not saying the present copyright system is perfect. I'm a proponent of a strict limit of copyrights in time. They should expire and it shouldn't take 100 years. Or there should be some mechanism for certain works to expire if they're not valuable to the copyright holder anymore.

    So I'll try only one argument to convince you that your viewpoint is misguided. You say

    "I refuse to accept that 'property' entails having all rights that may be necessary to extract *maximal profit* from a given thing."

    Do you realize that in today's age where you increasingly buy more and more things that are stored digitally, it becomes trivial to make copies that are true to the originals. In 1552, if you made a copy of a painting, you had to paint it yourself. It took months and the copy was not exactly like the original. There, yes, authenticity was very valuable. Today, if you buy a movie on DVD, it is possible to take the DVD, make a copy, put it back on a different DVD and, when used, there will be no difference. Absolutely none. Both copies are identical. Not granting rights to copyright holders for different digital formats of the same thing doesn't amount to limiting their profit to "less than maximal." It amounts to saying you can make absolutely "no profit."

    That doesn't encourage creativity if you ask me. Yes there will be creators left creating even if you do that, but there would be far less creators than if you assure them profit for a certain time.
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    Sorry for the double posting (especially such a long and boring post).

    @anonymous: I agree, there is law. I'm commenting here more from a political standpoint than a purely legal one. I'm not so much after interpreting the current law than about asking the questions: "What should the law really be?" and "Are the current laws adequate?"

    You're right that it's not clear whether, presently, the originally described situation is legal. I still contend that, given modern technology, not counting such a situation as illegal distribution, amounts to depriving copyright holders of any profit at all.

    I do believe that when the technologies evolve, the copyright laws have to evolve as well to further the good of the creative arts. (Or however it is originally phrased.)
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    Tim, your interpretation of the first sale doctrine is wrong. CDs are not licensed, so you're not selling "your right to own and enjoy the content on that CD." You are selling the physical object, which is your right to do under the first sale doctrine.

    The copying might be covered by fair use, the law's not totally clear on audio home taping, but copying just so you can sell the original is probably infringement. The issue, of course, is that copyright law traditionally hasn't cared about this kind of private copying.

    You're right about this. You have a right to sell the original under the first sale doctrine, and the question is whether the copying is fair use. And it seems to me that all of the factors cut against you if you're making a copy and then selling the original. In particular, it's clearly not transformative, and it clearly has a negative effect on the market for the original work.

    There's likely not much precedent here because record companies don't like to sue individual consumers. But if this did ever wind up in court, I would be shocked if it were ruled legal.
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    I agree that what Mr. Dominey is doing is probably illegal. However, I doubt there's anything like a one-to-one correspondence between sales Mr. Dominey makes on Amazon Marketplace and lost sales to the label. The reason is that the price points of the CDs on Amazon Marketplace is certainly lower than the price points of equivalent new CDs. So there is some percentage of the Amazon Marketplace sales that simply would not occur if a new CD at the higher price point were the only option.

    I'll also point out that Mr. Dominey isn't exactly getting all that music for free - even leaving out the time involved in ripping and selling his collection, the mone he makes reselling on Amazon is probably not even close to the original price he paid for all those CDs. If his activity is a scam, it's a money-losing scam.

    What about someone who rips one or two songs off a CD and then sells the CD? Might there be a fair use argument there? 20 years ago when I was a fairly broke college student, I more than once ripped the best songs of a not-so-good LP to tape, then took the LP to the used record store. I wouldn't do anything like that now (though I probably still have a few of the cassettes buried away somewhere), but I wonder if my behavior back then would be considered illegal or unethical.

    Glad to see Mr. Brito acknowledges that DRM+DMCA isn't the answer. DRM consistently fails to stop piracy, and I'd go farther and say that even if DRM+DMCA did work, it's not worth the cost in terms of limiting people's freedom. Maybe a better approach might be for record companies to see what price those used CDs are fetching on Amazon marketplace, and then release high-quality MP3s of the same music at approximately that price point.
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    The first sale doctrine just means that you have a right to sell the original of a good you bought, the underlying copyright of which is owned by someone else. That is, if you buy a book from a book store, you are allowed to sell that book to a friend. The owner of the copyright over the work in the book can't sue you saying that only he has a right to sell copies of the book. That's the extent of the first sale doctrine.

    To analogize to what Dominey is doing, he is buying a book new, photocopying the entire book, then selling the original. Selling the original is covered under the first sale doctrine, it's the photocopying that's infringement. In the case of digital files, such as music files, I believe it should be considered fair use to rip your content to different format for personal use on portable devices or for backup. However, when you sell the original, the basis for the fair use is gone. What you're left with is simply an infringing copy (i.e. you keep a photocopy of the book you sold).

    This is all pretty tangled because we're trying to apply historic copyright doctrines to the new digital reality at internet speed, and this is why I empathize with Dominey. I'm sure it doesn't feel like what he's doing is wrong.
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    If you burned a copy to an "Audio CD-R", which is more expensive because it contains within the price a fee which is supposedly distributed to rights holders (whether artists receive this or whether folks at the RIAA use this money to light their cigars, I know not), then have you not made a non-infringing copy under AHRA? If so, then would you not be free and clear to sell your original CD? If burning a copy to a normal CD-R is fair use, then why the fee for an audio CD-R? What exactly is that fee paying for, if not the right to own a legal copy? Or, to put it another way, the right to make a non-infringing copy? The AHRA says nothing about the fate of the CD you copied it from.

    Doesn't this muddy the water?
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    The AHRA is awful awful legislation, also. First government-mandated DRM (in the form of SCMS), I believe. See how well that worked out.

    I agree, its royalties/infringement suit exemption scheme seems to cut against the idea of fair use for home taping of audio recordings. Though it does explicitly authorize analog home taping. Go figure.

    It's about time to do a 1976-style review of copyright law, but not quite yet. We need a couple more years of business model experimentation and DRM skepticism.

    One of the big questions for me is whether or not the subsequent sale at reduced price is a lost sale in the first sale market. (Again, this is another problem with the AHRA: its royalties scheme assumes that copies equal lost sales.) One of the neat things about subscription models is the way in which they reduce the risk associated with trying new music, and in a sense secondary sales of reduced price CDs do the same. It's not for certain that someone who would pay $8 for a used CD would pay $18 for that same CD. An artist might actually make more money in the long run with subsidiary revenues (concert tix, adv. supported online video viewing, merchandise, etc.). I think this is a little dubious, but not impossible.

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