Record company executives can wipe the sweat off their faces now. Threatened with a lawsuit by a company looking to build a "used” digital songs marketplace, Capitol Records has triumph in a U.S. District Court against ReDigi Inc.
If things would have gone the other way, recording artists and record companies had the potential to lose billions in future revenue, reports Billboard. Basically, a win for ReDigi meant that consumers could purchase "pre-owned" digital music at a significant discount from iTunes, Amazon and other digital outlets. Unlike the current set up, which sees the labels making 70 percent of each digital sale, a win for ReDigi would mean no revenue share to the labels. The company claimed it set aside 20% of each sale into an “escrow account” for artists whose works were sold.
In his ruling, Judge Richard J. Sullivan dismissed ReDigi’s claims that the “first sale doctrine” that allows consumers to legally resell CDs and DVDs also allowed them to resell digital copies. The judge concluded that the doctrine did not apply to digital media.
ReDigi priced the "used" songs between 49 cents and 79 cents.
With platinum-selling artists like Rihanna and Katy Perry earning an enormous amount of revenue from digital sales, this would have been very detrimental.