California just passed a new law that combats an unethical business practice that results in the “disappearance” of digital purchases.

The bill, which has already been signed by Governor Gavin Newsom, is set to change how consumers (in California) view their digital asset libraries for games, videos, music, and other types of content.

Assembly Bill 2426 (AB 2426), as it is formally known, forces sellers to be more transparent about the extent to which consumers own the content they are buying by informing them that they have not purchased unrestricted access to these digital assets. Terms like “buy” or “purchase” shall not be used unless there is an actual transfer of ownership.

The law requires that digital retailers disclose the list of restrictions that apply to the licenses they sell to customers. These provisions clearly communicate the boundaries of the agreement between the two parties including when their access may be revoked and how their rights could be limited under certain circumstances.

Previously, these stipulations were buried deep into lengthy terms and conditions that intentionally hid these restrictions to avoid scaring off consumers.

However, these new disclosures will now be displayed separately so that users can be adequately informed about what they are agreeing to when they pay for a digital asset. There will be some exceptions to the rule, as AB 2426 will not apply to vendors that sell content via offline digital downloads, provide access to free goods, or offer limited access to a subscription service.

The Catalyst for Change: High-Profile Incidents and Consumer Protection

Recent controversies incentivized legislators to take action. Assemblymember Jacqui Irwin, the main sponsor of the bill, emphasized two incidents that highlighted the importance of passing a clear regulatory framework for this type of transaction.

“As retailers continue to pivot away from selling physical media, the need for consumer protections on the purchase of digital media has become increasingly more important,” she highlighted.

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One of these situations occurred in April 2023 when Ubisoft informed users that they were shutting down a game called “The Crew” and removing it from its services. Meanwhile, Sony announced in 2022 that it will remove all of the Discovery content that users purchased for their PlayStation library. Naturally, this angered droves of customers who thought that they owned that content.

The Japanese company was forced to reverse this decision, but it still raised regulators and lawmakers’ eyebrows and motivated the latter to take action.

In both cases, consumers thought that they had purchased the game but ultimately found out that they were just paying for a revokable license to access it. These licenses, under the terms and conditions that prevailed before AB 2426, could be revoked or altered at the discretion of the content provider. Legally, Sony likely could have removed the content seconds after you bought it because of these terms.

Hence, these companies were free to remove the content from users’ libraries without their consent. As a result, consumers were unable to keep enjoying titles and content that they loved even though they paid to access them.

“I thank the Governor for signing AB 2426, ensuring the false and deceptive advertising from sellers of digital media incorrectly telling consumers they own their purchases becomes a thing of the past,” Irwin commented after Newsom signed the law.

The Problem of “Disappearing Media” and Its Impact on Consumers

Server shutdowns, licensing disputes, and changes in ownership are some of the reasons why content may disappear from users’ libraries unexpectedly.

University of Michigan law professor Aaron Perzanowski, quoted in Assemblymember Irwin’s press release, emphasized the global nature of this issue: “Consumers around the world deserve to understand that when they spend money on digital movies, music, books, and games, those so-called ‘purchases’ can disappear without notice.”

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Although AB 2426 does not name any company directly, the incidents involving Ubisoft and Sony clearly called for the law.

These high-profile cases are just the tip of the iceberg. Many digital storefronts, including major players in the video game, e-book, and digital music industries, have long operated under similar models where consumers’ “purchases” are, in fact, revocable licenses. It’s perhaps most problematic in the video games industry, especially with games reliant on multiplayer infrastructure (server space isn’t cheap).

A large number of consumers are impacted by “disappearances” and are expected to benefit directly from this enhanced transparency.

Industry Response Limited Despite Threat to Business Model

AB 2426 also aims to raise awareness among consumers about the limitations of digital purchases and should help them make more informed decisions about how and where they spend their hard-earned money.

It could also radically change how video game companies and digital vendors market their content and assets (in California) as they can no longer engage in misleading advertising that uses words like “buy.”

The law could also prompt vendors to rethink their pricing models to offer an alternative that results in full ownership of the game. California would be the first state to adopt this kind of rule. They could influence others to take action as well as this is considered a nationwide issue.

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Digital retailers will likely move to block the law’s passage as it will force them to change their business models for their operations in the state significantly. However, thus far, their responses to AB 2426 have been limited.

The California Public Interest Research Group noted the importance of such protections as retailers continue to move away from physical media sales.

“In recent years, acquisitions, mergers and lapsed contracts at various media companies have put at risk the digital media that consumers may have believed they owned,” they said in a note concerning the law’s passage.

The Future of Digital Ownership Could Change After AB 2426

California’s AB 2426 marks a significant milestone in the ongoing debate over digital ownership rights. By forcing companies to be transparent about the extent of digital purchases, the law aims to empower consumers with the knowledge they need to make informed decisions about their digital media consumption.

However, this legislation is likely just the beginning of a broader conversation about digital rights and ownership in the 21st century. As our lives become increasingly intertwined with digital content, the need for clearer, consumer-friendly policies will keep evolving.

While AB 2426 doesn’t solve all the problems associated with digital ownership, it represents a crucial first step toward a more transparent and fair digital marketplace. Other states may keep track of the implementation and impact of this law in California and may ultimately decide to pass similar legislation.

While people may not truly “own” digital content in the traditional sense, laws like AB 2426 ensure that consumers at least know exactly what they are getting into when they click “buy” in a digital store.