Many internet business models seem to take advantage of the confusion between online and offline contexts. Social networks make strangers and mere acquaintances your “friends.” Privacy policies borrow from offline norms of confidentiality. Websites have our “trust” yet act in ways that contravene basic principles of the pre-internet idea of trust. My most recent paper with Professor Aaron Perzanowski looks as the context confusion between physical and digital products. In What We Buy When We “Buy Now,” forthcoming in volume 165 of the Pennsylvania Law Review, and covered today by David Lazarus in the LA Times, we present data from the first-ever survey of consumer expectations in digital media products. Here are the highlights:
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First, we surveyed nearly 1,300 internet users using a mock up of a website that is similar to Amazon.com where one could purchase physical books, mp3s, ebooks, and digital movies. The resulting data reveal a number of insights about how consumers understand and misunderstand digital transactions. The switch to a digital platform offers convenience but also makes consumer access more contingent. Unlike a purchase at a book store, a digital media transaction is continuous, linking buyer and seller and giving the seller post-transaction power impossible in physical markets. Although DRM technologies have had some setbacks in the music space, content control mechanisms are alive and even thriving in other contexts, such as games and movies. Yet we found that a surprisingly high percentage of consumers believe that when they “buy now,” they acquire the same sorts of rights to use and transfer digital media goods that they enjoy for physical goods.
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One should expect some confusion in any marketplace. But the confusion surrounding digital media rights is a big deal–the marketplace for digital media is a 11-figure business. At least some of that business is based on the misconceptions surrounding the affordances of digital technology. In its recent White Paper on Remixes, First Sale, and Statutory Damages, the Department of Commerce noted that the “the record before [/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][it] is devoid of any actual evidence as to what consumers understand when they click on the ‘buy’ button.” Nonetheless, it expressed concern that “it does not appear that consumers have a clear understanding whether they own or license the products and services they purchase online due in part to the length and opacity of most EULAs, the labelling of the ‘buy’ button, and the lack of clear and conspicuous information regarding ownership status on websites.”
So what to do about it? Aaron, who has no training in design, created this short notice, and we tested it to see whether it could improve consumers’ understanding.
Overall, we found that the short notice was more effective in reducing consumer misperceptions of their rights. Despite just seeing the short notice once, affirmative responses to the ownership question (do you own the media?) dropped significantly for each of the three media types we tested—23% for ebooks, 20% for mp3s, and 13% for movies.
Presumably, if consumers knew of the limited bundle of rights they were acquiring, the market could drive down the price of digital media or generate competitive business models that offered a different set of rights. Respondents said that digital media rights were important to them, that they would be willing to pay more to enjoy them, and that some were willing to result to streaming services or even piracy. 
Although our short notice could undoubtedly be improved through testing alternative designs, placements, and interactions, it is a remarkably low-cost intervention. And where false consumer perceptions can be avoided at little cost, we might be especially inclined to impose a legal obligation to do so.
Thus, in the final part of the paper, we turn to legal interventions such as state false advertising law, the Lanham Act, and federal unfair and deceptive trade practice law as possible remedies for digital media deception. Because of impediments to suit, including arbitration clauses and basic economic disincentives for plaintiffs, we conclude that the FTC could help align business practices with consumer perceptions. The FTC’s deep expertise in consumer disclosures, along with a series of investigations into companies that interfered with consumers’ use of media through digital rights management makes the agency a good fit for deceptions that result when we “buy now.”
A final note for the methods geeks. Aaron came up with an innovative idea that I have never seen in advertising copy testing experiments. To give more meaning to the idea of materiality, Aaron set up the survey so that the respondent got to choose among a set of popular products. The respondent chose among a bevy of books, movies, and music, and that product followed the respondent through the survey. This may be a better way to make materiality more palpable and have the respondent more engaged in the testing.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]