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ReDigi pledges to pay cut of resale revenue to artists

By CMU Editorial | Published on Thursday 14 June 2012

Controversial MP3 resale website ReDigi announced three new initiatives earlier this week, none of which are likely to placate the major labels who would rather see the digital start up fail, though two of the innovations might appeal to the artist community, so perhaps the aim is to cause a split in opinion within the wider music industry.

As much previously reported, opinion is already divided as to whether a platform that enables consumers to resell digital content is allowed under copyright law. ReDigi’s founders insist that the American copyright rule that allows music fans to resell their used CDs also applies to MP3s. The record companies, however, disagree, arguing that ReDigi is enabling copyright infringement, even if its system can, as the company claims, verify the origins of the MP3 being sold (ie check it didn’t come from a file-sharing network) and ensure that the original digital file is deleted after sale.

As previously reported, EMI is leading the legal challenge on this one. The major had hoped to win a summary judgement in its favour, but the judge hearing the case said that the matter should get a full court hearing which, he reckoned, could result in some “fascinating” debate on copyright issues, and the application of physical world copyright rules in the digital domain.

In the meantime, it’s business as usual at ReDigi. The most interesting of the firm’s new initiatives is definitely the so called Artist Syndication Program, which pledges to give artists 20% of the transaction fee ReDigi charges every time one of their songs is resold via the resale platform.

Says ReDigi chief John Ossenmacher: “Artists have always been a great priority of ours. When the digital landscape eroded album sales and bands were realising 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. Artist Syndication provides eligible artists the opportunity, at no cost to them, to realise a wholly new and significant revenue stream generated from the resale of their digital tracks”.

ReDigi points out that artists never benefited from the resale of CDs, making this offer revolutionary. But more than that, many artists don’t benefit directly from the first sale of their CDs, in that their label will likely take 100% of the money until they have recouped on their original record contract, and even then most artists will often only receive a minority share of record sale revenue. So you can see that the artist community might respond favourably to this new offer, though for the labels it will be just another reason to want ReDigi to fail.

The record companies wll almost certainly argue that, as they own the sound recording copyrights in most of the tracks being resold via ReDigi, if anyone gets a cut of the digital firm’s transaction fee it should be them. Not that they’d accept it anyway, given that doing so would legitimise the resale company’s business model.

Of course even within the artist community, the proposed Syndication Program will likely have critics. Although artists registering to receive their cut of the money are asked to provide photo ID, managers can also register on their artists’ behalf, and it’s less clear how their legitimacy will be verified. And what about defunct bands whose back catalogue still sells, can each member register individually, and if so who is to decide the split, and who identifies which former band members were involved in which recordings? And what about session musicians, guest artists and – particularly once you start reselling hip hop tracks – the artists whose work has been sampled? And if this is about winning favour with the artistic community to help in a fight against the rights owning corporates, what about the songwriters? All in all, even on the creator side of the music business, this programme could piss off more people than it pleases.

The other announcements made by ReDigi this week were less innovative, but therefore less potentially controversial. First, the company has joined Apple’s affiliate programme, meaning that its platform now also includes links to where users can buy tracks in a more conventional way via iTunes (with a slightly complicated system inbuilt that means money generated by a user’s resales can be used to buy new tracks from the Apple store). And second, ReDigi has announced plans to launch a direct-to-fan download platform – Bandcamp and ReverbNation style – later this year for self-releasing artists.

Though the much more interesting event due to happen later this year will be the EMI v ReDigi court case, which will decide the long term future of digital start-up’s business. One would assume labels will put off getting hot and bothered about the Artist Syndication Program until after that court hearing. Though perhaps not.