The dirty little secret of the digital marketplace long has been that buyers of e-books, MP3 songs and movie downloads aren’t really acquiring anything that resembles traditional ownership.
How secret is this? According to a study scheduled to be published shortly by two law professors at Case Western Reserve University and UC Berkeley, it’s very secret. The vast majority of buyers on such digital marketplaces as Amazon or Apple’s iTunes Store, they say, have no understanding of how limited their ownership rights are, even when they’re paying full price for something the sellers imply they will own.
“The multibillion-dollar digital media marketplace is built, in part, on a lie,” Aaron Perzanowski of Case Western Reserve asserts in a recent piece at Slate.com. (He’s co-author of the study with Berkeley’s Chris Jay Hoofnagle.) “Companies like Apple and Amazon entice their customers to ‘buy now’ and ‘own it in HD.’ But consumers don’t own anything at all, at least according to the license agreements that accompany those sales.”
This mismatch between the language of e-commerce and the reality, the authors say, costs billions of dollars a year to consumers who are misled. They say it’s time for the Federal Trade Commission or other agencies to step in and end the deception.
The multibillion-dollar digital media marketplace is built, in part, on a lie.
Perzanowski and Hoofnagle surveyed 1,200 consumers to determine what they thought they were acquiring when clicking on a fictitious website’s “Buy Now” button. The sample button was designed to mirror the “Buy” buttons on Amazon.com, the iTunes Store and other digital marketplaces.
The vast majority of respondents — 78% to 86%, depending on the digital format — thought they were acquiring ownership, though they were a little vague about what that meant legally. Almost all assumed their ownership was permanent and irrevocable. About as many reckoned that they could use their purchases on any device of their choice. Smaller but still significant percentages believed they could lend, gift or bequeath their purchases to others, and small percentages thought they could resell or copy the material.
But the truth is that in most cases, “buying” digital content doesn’t confer any of those other rights. Rights to digital content or items have been revoked abruptly by Amazon, Apple and Barnes & Noble for a variety of reasons. Amazon stealthily removed versions of George Orwell’s “1984” and “Animal Farm” from customers’ Kindle e-readers after copyright issues arose with those versions; iTunes has removed albums from users’ accounts after the albums were withdrawn or changed by the artists or their labels; Barnes & Noble shut down a customer’s access to an e-book after the user’s credit card expired, even though the book already had been paid for.
Even rights to hardware or services are conditional in this world. “Google, Major League Baseball, MSN Music, Sony, Virgin Digital, Walmart, and Yahoo have all shuttered digital media services, or at least threatened to do so,” Perzanowski and Hoofnagle report. Earlier this year, Google announced it would shut down smart-home hubs made by Revolv, a company it acquired in 2014, so it could focus on Nest, another of its smart-home subsidiaries. The action would turn Revolv’s $300 units, which remotely controlled lights, alarms and doors, into useless bricks.
These limitations aren’t always anti-consumer in themselves, and some can be justified as safeguards for content providers. When a physical book or CD is resold or loaned, it’s unavailable to the original owner permanently or at least for the term of the loan. That creates an inherent limitation on competition for sales of the original. A digital version, however, can be copied ad infinitum while the original remains intact and in the original owner’s possession, so some restrictions unique to digital content are reasonable.
The problem, Perzanowski and Hoofnagle observe, is that most consumers aren’t aware that they’re buying conditional access. They’re flagrantly misled by the terms “Buy” and “Own.”
Sellers of digital content claim that most consumers understand that, in essence, “buying” doesn’t mean “buying” in the traditional sense. An official of the Motion Picture Assn. of America recently told the Commerce Department’s Internet Policy Task Force that customers “understand that you’re not actually buying the copyright. … You’re purchasing or buying a license which permits you to do certain things.”
This is plainly false. The participants in the author’s study “believe that when they Buy Now, they acquire the same rights … that they acquire in physical goods.” Moreover, “these rights matter to consumers,” and some would be willing to pay more to secure them.”
It wouldn’t take much to communicate the difference between flat-out ownership and the conditional variety inherent in digital downloading. Customer confusion declined significantly in their sample, though it didn’t vanish completely, when the “Buy Now” button was replaced by a “License Now” button — and even more so when the “License” button was accompanied by a short graphical notice stating explicitly what could and couldn’t be done with the licensed material.
Digital merchants obviously have a vested interest in keeping their customers in the dark. They’re not going to change their practices voluntarily. And the longer the deception persists, the more likely it is that the very concept of ownership will wither away, to the consumer’s disadvantage. Ending the deception should be on the FTC’s front burner.