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Amazon.com, Inc. (AMZN), eBay Inc. (EBAY): The Coming Revolution in Digital Content Reselling

The motivation for content distributors like Apple, Google, Amazon.com, Inc. (NASDAQ:AMZN) of such a system is that it would increase the number of transactions hosted by the distributors’ servers, and presumably boost revenues through the added transaction fees. And of course, the content providers would get their cut as well. You may wonder if this is just a glorified form of renting. It is, but it’s more flexible in that it allows consumers to pay proportionally to their actual usage.

Last quarter, Apple generated about $3.7 billion in revenue from iTunes and App Store sales, up 22% year-over-year, and Google generated about $800 million from Google Play, up over 100% year-over-year. For all of 2012, Amazon generated about $20 billion in media revenues, up 15% year-over-year. In all three, the exact amount of revenue from digital content is unknown, but it’s apparent that it’s a growing business for all three companies.

Legal monkey wrench

Even though content creators are protected by copyright law and the contract law behind licensing, every once in a while they’re dealt a blow by the American legal system. In a recent case decided on March 19 of this year, the court sided with Supap Kirtsaeng in Kirtsaeng v. John Wiley & Sons, Inc. Kirtsaeng had created a lucrative business importing used textbooks into the United States, and Wiley tried to put a stop to it. The Court upheld Kirtsaeng’s right of first sale, which means that once a copyrighted work is purchased, the work can legally be resold without obligation to the copyright holder. Copyright law only bans unauthorized duplication and sale of the copyrighted work.

If the U.S. court system ever decided that digital content consumers should be accorded a similar right of first sale, the contemplated online markets for “used” content would be the ideal way (from the content creators’ standpoint) to accommodate that right while blocking illicit replication of the digital content. The U.S. courts would probably see that as a suitable solution that protects the rights of all concerned. Thus, companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Apple may be pursuing these digital marketplaces as a kind of insurance against any legal monkey wrench that might be hurled into their burgeoning digital content businesses.

The article The Coming Revolution in Digital Content Reselling originally appeared on Fool.com and is written by Mark Hibben.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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