DRM's missed opportunity: Digital resales

Here's a story via Digital Music News about a new service, Bopaboo*, that lets people sell their "used" MP3s.

Artists and music labels have long hated used record and CD stores because the labels don't participate in the resale revenue. Part of the DRM strategy was keeping the first sale rights, and preventing any second sale. A few services like the defunct WeedShare and PassAlong attempted to emulate digital redistribution, but weren't true second sale enablers.

But the missed opportunity for the labels and for DRM providers was allowing a service to act as a second sale clearinghouse, where the labels could have participated in a share of the resale revenue. (Though I'm sure their margin demands would have killed any market even if labels welcomed the concept.) This provides an opportunity for the service to benefit from a captive market for second sales since the service holds the secret DRM keys that are needed to revoke the license. No other service could revoke the license.

Through license revocation, DRM can guarantee that a digital track is no longer playable for a seller. A service that made a DRM first sale could revoke the license from the seller, and grant a license to the buyer. Most labels even included a set number of burns for a first sale. The selling service could keep track of how many burns were used, and issue the new license with only the remaining burns available. If no burns were left, a non-burn license could be delivered - the buyer could play the song on his computer or a portable player, but couldn't burn it to CD.

The number of burns remaining would surely affect the market value for the second sale. Imagine a DRM service with a product page similar to Amazon's physical product pages that include a price for "new" from Amazon, or "used" from any number of sellers:

The Cinematics - Race to the City
New: $0.99 (5 burns)
Used: 4 burns left, $0.80 (4 available)
Used: 3 burns left, $0.65 (1 available)
Used: 2 burns left, $0.50 (2 available)
Used: 1 burns left, $0.35 (6 available)
Used: 0 burns left, $0.25 (12 available)

Labels could still participate at some percentage of the second sale value.

The seller could have burnt a song to CD once, then rip it back to her computer to keep. But nothing, even with DRM, is preventing her from doing that now and sharing the copy freely. Why not incent her to make a little of her investment back rather than giving the file to strangers for free? If she gives it away free, she's destroyed her own opportunity to sell it.

Of course all this so far still depends on DRM being more user friendly! And any owner who had lost her download or DRM database couldn't resell the song because revocation would be impossible. But she can't resell a CD she lost either.

Even without DRM, a second sale service could guarantee the destruction of the MP3 file on the seller's computer before delivering it to the buyer. Again, the seller could have made any number of copies elsewhere. Again, nothing's preventing that today, with no option for any second sale revenue to the labels.

* Domain name scarcity is destroying natural language!