Promo Part II: Universal Music Fighting the Case

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Universal Music Group, one of the world’s largest music companies, has announced its intention to appeal a court decision that allows the resale of promotional CDs. The decision of the court to rule in favour of Troy Augusto, who was sued last year by the label for reselling a stock of “promotional use only” discs, was based on the first sale doctrine, which grants the recipient of a gift or purchased item the right to resell that item in the open market. The judge ruled that promotional CDs are essentially gifts, and therefore subject to the doctrine. “Augusto’s actions are protected under the first sale doctrine,” opined US District judge S. James Otero.

Universal Music Group, however, has indicated that it is not satisfied with the court’s decision. “We intend to file an appeal and we are confident that we will prevail,” a Universal Music representative told Digital Music News. The company is aiming to prevent the dilution of its physical product pool, although digital distribution offers the ultimate dilution of scarcity.

Physical resale is a contentious issue for many manufacturers, particularly in industries where the value of a product is tied up in its scarcity. In the music industry, for example, the value of a CD or vinyl record is often increased by its rarity. As a result, major record labels would prefer a world without physical resale. In a decidedly non-digital 1993, cowboy superstar Garth Brooks withheld shipments to retailers that were offering his albums used, though antitrust concerns and negative press eventually forced Capitol Records to supply the targeted outlets.

The issue of physical resale is not unique to the music industry. Many luxury goods manufacturers have also attempted to prevent the resale of their products, arguing that it dilutes the exclusivity of the brand. In 2018, for example, fashion house Chanel sued the luxury consignment shop The RealReal, claiming that the company was selling counterfeit Chanel products. The RealReal, however, argued that it was simply facilitating the resale of genuine Chanel products, and the case was ultimately settled out of court.

The decision in UMG v. Augusto is significant because it has the potential to set a legal precedent for the resale of other promotional items. In the music industry, promotional CDs are often given to journalists, radio stations, and other industry insiders as a way of generating buzz for a new release. If the decision in UMG v. Augusto is upheld on appeal, it could mean that these promotional items are subject to the first sale doctrine, and could be freely resold on the open market.

While the issue of physical resale is a contentious one, it is not likely to go away anytime soon. As the music industry continues to shift towards digital distribution, however, the value of physical media is likely to decrease, and the issue of physical resale may become less of a concern. For now, however, Universal Music Group is determined to protect its physical product pool, and will continue to fight for its right to control the resale of its promotional items.