Investment Janetta McKenzie Security, Trade and the Economy Technology

The New Age of Used Data

In January of 2014, mega-retailer Amazon was awarded a patent from the US Patent and Trade Office for the development of what Amazon calls a “secondary digital marketplace”.  The patent permits Amazon to set up an electronic marketplace where users can sell their digital copies of e-books, audio, and video files. As our consumption of books, movies, television, and music has moved from the physical to the digital, the second-hand market has dwindled, and so this patent comes at a crucial time not only for Amazon but also for the whole of the media industry, which has been completely transformed by our shift to digital consumption.

In an age where smart and sustainable consumerism is all the rage, many may not want to put even more millions into Jeff Bezos’ pocket and watch their favourite creators go broke.

The development of a secondary digital marketplace would enable Amazon to collect revenue multiple times from a product, not just from the initial sale.

Amazon Slate
The development of a secondary digital marketplace is something of a promised land for web-based retailers, and Amazon’s patent will likely open the floodgates for other companies. Courtesy of Slate.

Through a secondary digital marketplace, data (for instance, an e-book) would be transferred from a seller’s account to a buyers and then deleted from the seller’s account. Much like a physical secondary marketplace, the seller would not be able to keep a copy of the file after they had sold it. In addition, Amazon will likely place a limit on the number of times a product can be sold; this would help combat piracy as there would only be a fixed number of items in the marketplace.

Unlike the physical second-hand marketplace, the value of a digital file does not depreciate over time. Instead, prices will be determined by quality; for instance, an HD movie will cost more than one in standard definition, or a newer version of an e-book will cost more than an older. However, these price differences already exist and so would not cause much uproar in the consumer base. In addition, a buyer in the secondary digital marketplace no longer has to worry about the condition of a second-hand video file. Quality control will be easier to maintain and will give the buyer more peace of mind when purchasing second-hand material. It would also be easier to control the gradual price decrease of a used item; when one buys a physical copy of a used book, the price difference may not reflect the condition of the book. In contrast, if an e-book is capped at five transfers, price tiers will be much more gradual to ensure fair and quantitative depreciation.

Of course, shipping costs will also be eliminated, much as they are with the purchase of new digital content. However, in the case of a secondary digital marketplace the lack of shipping costs is crucial, as it will engage more sellers who no longer have to take on any shipping and handling costs.

Ease of purchase, guarantee of quality, and the ability to make some of your money back by re-selling content- what’s not to like?

For one, the content producers themselves don’t make anything off the secondary marketplace. Of course, they don’t get reimbursed for the re-sale of physical copies of their work either, but in the context of books and e-books in particular the creation of a secondary digital marketplace could be troubling for an author. The quality of a second-hand e-book is almost identical to the original, meaning that a potential buyer would be more likely to buy a second, third, or fourth-hand e-book for cheaper than buying it new, with no discernible loss in quality. In essence, content producers would get even less compensation than they do now; all of the profits would go to Amazon, and in an age where smart and sustainable consumerism is all the rage, many may not want to put even more millions into Jeff Bezos’ pocket and watch their favourite creators go broke.  For similar reasons, the creation of a secondary digital marketplace would further accelerate the decline of locally-owned businesses that are already struggling to compete against the leviathan that is Amazon.

Amazon would be the largest company to engage in digital re-sale, but it would not be the first. ReDigi, launched in 2011, is a service that allows users to upload their iTunes files for purchase by online buyers. ReDigi has branded itself as “the legal alternative to piracy and file-sharing” , and unlike most other secondary marketplaces (including Amazon’s), the original content producer does get a share of the profit every time the product is sold. ReDigi currently only provides a platform to re-sell music, but they are planning to expand into e-books and other forms of digital media.  However, ReDigi has been embroiled in legal battles with various record labels since it’s founding.

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Apple Inc. has also applied for a patent similar to Amazon’s, but is soothing corporate social responsibility advocates with a proposal that an unspecified portion of the profits will go to content producers. Since Apple has just applied for this patent, it is unlikely they will be able to move forward with a secondary digital marketplace for years. Amazon applied for its patent in 2009 and just received it in January 2014.

The development of a secondary digital marketplace is the logical next step in a world where everything is available with the click of a mouse. While it may take some time for Amazon to roll out the software to support such a forum, its arrival is inevitable. Until then, consumers have to decide what is most important to them- supporting their favourite creators, or getting the lowest price.

Janetta McKenzie
Janetta McKenzie is the Program Editor for International Business and Economy at the NATO Council of Canada. She is a recent graduate of the London School of Economics with an MSc in Conflict Studies. Prior to that, she completed a BA in political science with a minor in classical studies at the University of British Columbia. During her studies, she focused on alterative governance strategies in a post-conflict context, and extractive resource industries in North Africa. She has previously interned in the energy industry in Alberta and has worked in a research capacity for the School of Public Policy in Calgary.