|Title:||iTunes: How Copyright, Contract, and Technology Shape the Business of Digital Media – a Case Study|
|Citation:||Gasser, U. (2004) iTunes: How Copyright, Contract, and Technology Shape the Business of Digital Media – a Case Study. Berkman Center for Internet & Society at Harvard Law School Research Publication No. 2004-07|
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|About the Data|
|Data Description:||The study consists of a case study of Apple’s iTunes store, including an analysis of licensing terms, digital rights management, and business model more generally. Detailed consideration is also given to the interplay between these areas from both a United States and international perspective with regards to both the first sale and fair use doctrines. In combination, this study provides data on the relationship between the iTunes business model and its users.|
|Data Type:||Primary data|
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|Cross Country Study?:||Yes|
|Government or policy study?:||No|
|Time Period(s) of Collection:|
In this paper, the Berkman Center's Digital Media Project has conducted an exploratory case study on Apple's iTunes Online Music Store from a legal and business perspective. The objective of this analysis is twofold: First, it seeks to gain advanced knowledge of the relationships among copyright law, contract law, digital rights management schemes and business modeling processes in the Post-Napster world. Understanding such interactions is crucial when attempting to balance the divergent interests of consumers, artists, the entertainment industry, and technology manufacturers through regulatory mechanisms such as law, code market mechanisms, and adjustment of social norms. Second, the paper is intended as a further step toward expanding the knowledge base of the Digital Media Project beyond U.S. law to include a more detailed coverage of the legal and regulatory frameworks of other countries. The focus of the comparative law analysis conducted in this initial study is on European jurisdictions and selected nations in the Asia-Pacific.
Main Results of the Study
Services such as iTunes use two main strategies to regulate users' behaviour, namely through a combination of licensing agreements and DRM. Some examples include:
• Limits on the amount of computers digital content can be available on, as well as limiting the number of times playlists can be physically burned to CD’s.
• Lack of interoperability with other digital music services (such as Microsoft Windows), resulting in Apple brand hardware tie-in.
• Licensing agreements which prohibit re-selling, renting, leasing etc. of any digital content (contracting out of the first sale doctrine). Similar contractual limitations apply for reverse engineering and creation of derivative/transformative works (contracting out of certain exceptions).
Using a comparative law analysis, the author concludes that these limitations, on a potentially global scale, result in a marked imbalance in favour of copyright holders’ interests over the user; this is observed at both legal and regulatory levels.
Policy Implications as Stated By Author
The author gives particular attention to iTunes (or services like iTunes) which rely on network effects, and conclude that DRMs which limit interoperability and reverse engineering can harm overall optimal welfare goals. The author suggests that by making stronger and clearer exceptions to these uses, this could limit the application of similar competition-reducing business models outside of the United States.