Digital Music Reseller Partners with Apple iTunes and Artists

ReDigi™, the world’s first online marketplace for pre-owned digital music, made two big announcements yesterday. First, the company has now launched an Artist Syndication™ Program, which they tout as a revolutionary platform designed to directly support artists.  Second, ReDigi also announced that through a partnership with iTunes® users will now have the option of buying new music from iTunes® on ReDigi.com. As a result of this iTunes partnership, in addition to being able to store, stream, buy and sell pre-owned digital music, ReDigi users will be able to conveniently buying new tracks directly from Apple’s iTunes® platform. Furthermore, ReDigi users will be able to fund new iTunes® purchases from the credit they have generated from their pre-owned sales.

ReDigi™ has been the source of scrutiny since it first opened in October 2011.  Capitol Records is suing ReDigi, Inc. in the United States District Court for the Southern District of New York.  Capitol requested a preliminary injunction, which was denied on February 6, 2012, by Judge Richard Sullivan in a very terse ruling that gave no insight into the reasons the motion for preliminary injunction was denied.  The transcript, however, did however elucidate the matter.  Judge Sullivan said: “I think likelihood of success on the merits is something that plaintiffs have demonstrated.”  Notwithstanding, Judge Sullivan was not persuaded that irreparable harm is being caused, saying: “I think the lack of irreparable harm is one that really is the issue that causes me to deny the motion.  It seems to me that money damages should be able to take care of all of this.”

Frankly, I am not sure that ReDigi will be found to infringe copyrights.  The first sale doctrine in copyright law says that once something is purchased the right of the copyright owner is extinguished and the purchaser is free to sell on a secondary market.  The catch with digital items is that it is possible for the purchaser to make copies and distribute, and they could sell on the secondary market and keep a copy for themselves.  This sell and keep transaction would not entitle the original purchaser to protections under the first sale doctrine, but a sell and relinquish transaction should be in keeping with the first sale doctrine.

ReDigi explains on their website that their technology incorporates a forensic Verification Engine that analyzes the users library to tell the user which songs are eligible to be stored in the ReDigi cloud.  ReDigi explains: “We don’t expect you to remember where every single song in your library came from so we make the process simple, telling you exactly which songs we can accept, and ignoring those we cannot.  Currently, only your legally downloaded tracks from iTunes or ReDigi are eligible; songs ripped from a CD or acquired in some other way are not.”

Of course, the devil will be in the technology details for ReDigi, as has historically been the case with digital music lawsuits.  It does, however, seem quite possible that ReDigi could prevail on the first sale issue.

Those who have followed the digital music wars over the years no doubt recall the battles between the Recording Industry and various MP3 file sharing websites.  Through the haze of these legal battles Apple started its iTunes® service as a legitimate and licensed service that offered a mechanism to purchase one song at a time for a reasonable price and without the fear of unknowingly downloading a virus and without the fear of being a copyright infringer that might one day be sued as an example.  A deal between ReDigi and Apple should solve one potential problem for ReDigi, namely whether the resale of songs purchased from iTunes is legal.  It would seem that Apple must be OK with the ReDigi platform, perhaps paving the way for the entire ReDigi business model to solidify as a legitimate offering.

In terms of the newly announced Artist Syndication Program, ReDigi will share 20% of the transaction fee with the artist each and every time their track sells and resells. Unlike the used music sale business where artists are left out of the loop and received nothing for downstream resales of their music, ReDigi is the first secondary market for music that compensates artists for the resale of their work. According to ReDigi, artists may earn more from the sale of a pre-owned track on ReDigi than from the sale of a new track on other sites. ReDigi believes Artist Syndication has the potential to pay up to a hundred million dollars to syndicated Artists in the coming years, which would be a significant new source of revenue for artists and another pot of money for artists and record companies to argue over.

“Artists have always been a great priority of ours. When the digital landscape eroded album sales and bands were realizing only a fraction of what they previously earned–not to mention streaming, which has compounded this problem even more–we knew we had an opportunity to do something big to reverse this trend,” said Founder, John Ossenmacher. “Artist Syndication provides eligible artists the opportunity, at no cost to them, to realize a wholly new and significant revenue stream generated from the resale of their digital tracks.”

Artists or their management can visit artistsyndication.redigi.com and fill out a simple application to join the Artist Syndication Program. Once verified and approved, eligible syndicated artists are paid quarterly as their music resells.  The program will pay artists through a Paypal account with payments made to artists each quarter for earnings over $25.  If earnings in a particular quarter are less than $25 the earnings will be rolled over to the next quarter.

“We worked hard to make the user interface transparent, straightforward, clear, and direct — the way it should be,” said CTO, Professor Larry Rudolph. “Our goal is for any artist in ReDigi’s Artist Syndication program to easily see their share of the profits.”

Later this summer, ReDigi will launch Artist Direct, an extension of its Artist Syndication Program, which will allow artists not currently under contract and who own the copyrights to their music to sell their music directly on ReDigi. Artist Direct will provide a platform where artists can earn the majority of the proceeds from their new unit sales, as well as an ongoing annuity from their resales.  Those interested in Artist Direct can sign up on the Artist Syndication Program page to receive an e-mail notification once the program goes live.