To buy or to license? That is the question that’s stumped a lot of e-book and other digital media consumers over the years, recently culminating in an author’s lawsuit against Simon & Schuster over sales versus licensing revenue. But just how badly has it stumped consumers? A pair of law school researchers undertook to find out, and the 60-page report on their study is fascinating reading.
Called “What We Buy When We ‘Buy Now,’” the study of almost 1,300 online consumers divided its participants into four groups, presenting each of the four with a different purchase option from a fictitious Internet retail store: a “buy now” button for digital media, a “license now” button for digital media, a notice listing the various things they could and couldn’t do with the digital media, and a “buy now” button for physical media. Afterward, the participants answered some questions about what rights they believed they had in the media they bought: the rights to keep, sell, gift, lend, copy, etc. said media.
The results are too complex to describe in any great detail here, but in brief, customers presented with all three digital media purchase options by and large believed they had considerably greater ownership rights in their digital media than they actually do, though the ones who got the list of rights had the lowest level of misunderstanding. Conversely, the people who bought the physical media had the best understanding of the rights they had in it, but many of them believed they had fewer rights than they did. The researchers concluded that getting online stores to move to a rights list rather than a misleading “buy now” button would work best from a standpoint of reducing those misunderstandings. It’s an interesting study, and reminds me of the survey on teenager understanding of copyrights I brought up in my first-ever post for TeleRead. There’s been a lot of misunderstanding of ownership rights since digital media entered the mix.
Another part of the report looked at how much consumers value these ownership rights, and whether they would be willing to pay extra for them. It concluded that many consumers do value ownership rights enough to pay extra for them, and would use streaming services or even illegal peer-to-peer to obtain media instead of “buying” it if such rights were not provided. This doesn’t surprise me—though the article didn’t discuss the particular illegality of breaking DRM, I know many people already do that in the name of exercising greater “ownership” rights over their digital media. But even digital media that are provided free of DRM by the seller often have license terms that say purchasers are not permitted to transfer them, even if the lack of DRM isn’t stopping them.
The final part of the report looks at the possibility that Internet media stores using a “Buy Now” button could constitute false advertising, and the potential remedies that consumers might have against such stores. Lawsuits in state courts run into the issue that many of these stores have arbitration clauses in their end-user agreements, and by and large such clauses have stood up in court for anything short of outright fraud. Furthermore, the amount that individual consumers might recover from such stores is small enough as not to be worth the hassle—it would take something on the order of a class action suit to have any hope of a major recovery.
Remedies in federal law, such as the Lanham Act, run into the problem that those laws aren’t meant for the use of consumers, but rather for competitors—and all the competitors in those spaces are using the same or similar “Buy Now” options because they sell more media that way, so what competitor even would be capable of filing such a suit? The researchers conclude that the best hope of any kind of corrective legal action would have to come from the Federal Trade Commission, as part of its mandate to prevent the use of “unfair or deceptive acts or practices in or affecting commerce.” The report lays out the reasons that “Buy Now” options would fall under “unfair and deceptive acts or practices,” and lists instances where the FTC has intervened for similar issues.
As an FTC official explained in 2009 conference concerning DRM, “A company’s marketing materials must be consistent with the nature of the product being offered. It’s not enough to disclose the information only in a fine print of a lengthy online user agreement…. If your advertising giveth and your EULA taketh away don’t be surprised if the FTC comes calling.”
The FTC investigated Sony BMG for the great CD rootkit fiasco of 2006, and also looked into cases where Microsoft, Walmart, and Major League Baseball were about to shut down their DRM servers, depriving customers of the digital media they’d purchased from them. The researchers also note that the FTC has the power to address the “Buy Now” matter via enforcement actions and public workshops.
But will the FTC take such action? The answer seems unclear. By and large, “Buy Now” has become the de facto method by which customers purchase (or believe they purchase) digital media. Will a survey of 1,300 people constitute sufficient proof to get the FTC to take action? That much is uncertain.
But it’s interesting to observe the differing effects that different presentations of the buy option have on consumers’ perception of their purchase. Perhaps John Villasenor was right when he advocated for e-book sellers to inform consumers more clearly about the rights they are and aren’t getting with their purchase—at least from a standpoint of giving consumers greater understanding of what they’re giving up with a digital purchase. But I don’t think any of those stores are actually going to want to do so unless the FTC forces the issue.
It’s also interesting to observe that many consumers do want the rights they take for granted enough to be willing to pay extra for them—or to obtain the works for free (either via a streaming service or illegally) if they can’t get those rights. Though the survey didn’t address the matter directly, it’s not a great leap to suppose this means many consumers would choose not to buy digital media at current prices if informed clearly that they’re not getting those rights—and those stores do want to sell more media. So, even though Mr. Villasenor thinks it would be a good idea, I don’t think Internet retailers will add such a notice voluntarily any more than cigarette manufacturers voluntarily added the surgeon general’s warnings to their packaging.
The Simon & Schuster lawsuit may very well fizzle—especially since S&S apparently didn’t actually publish the book that the author is suing over. But perhaps it will spark greater awareness of the issue, and that plus this survey could lead to an investigation by the FTC? We can only hope.