Subscription-Based Ownership: The End of Property?
Pierson v. Post might not be a household name in the United States, but it is a foundational decision for the field of American property law in establishing that one must have dominion or control over a thing to establish individual property. Today, this principle seems obvious, and ownership of items seems to be a straightforward proposition. But what happens when the ‘fox’ is replaced by a subscription to Fox Sports?
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It’s not about the fox. This phrase will cause the ears of first-year law students across the country to perk up, either from fond remembrance of their first Property course, or from the dread of their Property final. Either way, they will likely recognize this phrase in relation to two hunters’ early 19th-century dispute over ownership of their shared quarry: a single fox. Pierson v. Post might not be a household name in the United States, but it is a foundational decision for the field of American property law in establishing that one must have dominion or control over a thing to establish individual property. Today, this principle seems obvious, and ownership of items seems to be a straightforward proposition. But as we shift into an increasingly digital world filled with subscription services and intangible assets, ownership becomes less clear. What happens when the ‘fox’ is replaced by a subscription to Fox Sports?
Who Owns What?
The subject matter of Pierson v. Post might be outdated, but the principles resulting from the decision formed an important foundation in American property law. Prior to the 19th century, multiple theories of property and ownership began to emerge, largely in response to the decline in the feudal system across Europe. Previously, the monarchy was the owner of all land, and simply granted the right to use it to its subjects, but as the monarchy declined, property began to enter the hands of its citizens. As a result, different concepts of ownership emerged, such as property as a reward of one’s labor, or the more modern concept of property as personhood. These various theories have generally coalesced into the common “bundle of sticks” concept of property rights. This “bundle” includes the right to possess, the right to exclude, the right to use, and the right to convey property.
These concepts make sense when referring to physical property. Simply put, you have a right to use the things you own as you please. Pierson addresses these rights in terms of a “first-in-time” question: the first person to exercise control over a thing gains the “bundle” of rights over that thing. Put another way, “the race for each resource is assumed to have a single winner.” The basic assumption made in Pierson is that there was no original owner of a fox in the wild, so the first person to control it was the first person to receive the bundle of rights associated with property, and has the ability to convey those rights to subsequent owners through the concept of derivative title.
While fox hunting has declined in the digital age, ownership of physical property certainly has not. In 2020 alone, Amazon shipped 4.2 billion parcels to buyers around the world. Here, however, there is no question of “first in time” ownership, but rather the derivative title of ownership of a thing being conveyed to a subsequent owner. These are generally referred to as bona fide purchasers. Although the nature of acquiring goods and products has evolved alongside the internet, the basic principles of property rights have endured. But what about Amazon’s other services, such as video streaming or eBook rentals? Do subscribers have a bundle of property rights in subscription services?
The Rise of the Subscription Model
Subscription-based services have been on the rise over the past decade. Spearheaded by giants like Netflix, Hulu, and Spotify, revenue from subscription-based companies has grown by 437 percent, with an estimated 78 percent of adults currently having one or more subscriptions in their name. The trend and sharp rise in subscription-based business models has companies jumping on the trend, seeking consistent recurring revenue over more traditional ‘one-time’ revenue. Streaming services are the first to come to mind, but other industries like educational services, alcohol suppliers, and even legal services are adopting this model. Subscription-based services also have benefits to the consumer: easy access to goods and services, cheaper costs, and the opportunity to spread payments over time, rather than larger one-off purchases.
Users, despite paying a subscription fee or for various digital services, do not have extensive ownership rights in the services they receive in the “subscription economy.” A user does not own property rights in Squid Game by paying for Netflix, nor do they own Harry Potter by paying for a Kindle subscription. Instead of transferring ownership of the property itself, the subscription services provide users with a license to view the property of third parties. While no property bundle is being transferred to users, the owners of that property are in fact exercising their right to allow others to use the property, and the terms and conditions of that license reflect their right to exclude.
Few– if any–Netflix subscribers are making ownership claims to as to the movies and series they are watching, but the ‘subscriber’ versus ‘owner’ distinction becomes blurred when a subscription model ventures into a product traditionally associated with a buyer-owner transaction. This initially occurred in the digital space with products like Adobe Photoshop, that were once for sale outright, but have since become subscription-only services. Under traditional property theories, the bona fide purchaser of a product derived rights to use that product as they saw fit. The subscription model has effectively destroyed that transfer of rights by never passing derivative title of the product, but instead simply offering a license to use it.
This effect is rather benign for most services as consumers still receive a benefit of lower costs and greater access to certain services. But the proliferation of the subscription model has led to its implementation into features of otherwise owned products. BMW, for example, has announced their intention to implement subscription fees for certain features in their new cars, including a fee for the use of the seat warmers. Selling cars with upgraded features is not a novel concept, but selling a car with upgraded features locked behind an additional paywall seems to infringe upon the ownership rights of the buyer. Can BMW pass ownership of a car to a bona fide purchaser while still withholding certain use rights?
I agree to the terms and conditions
Under theories of property, subscription-based features of this nature appear to be an unfair limit on the right to use an otherwise exclusively owned property. In practice, this looks like being forced into a licensing agreement for a product you have otherwise purchased. The foreseeable problem, it seems, is not one of property law, but one of contract law. Generally, under the doctrine of freedom of contract, parties can agree to terms as they see fit, without additional government oversight of the terms. In short, if you agree to terms to buy a car with certain features hidden behind paywalls, haven’t you agreed to waive your property claims to it?
In theory, a contract is a contract, and you are bound to whatever terms you and the contracting party agree to. A contract is comprised primarily of an offer, acceptance of that offer, and consideration, or a benefit in exchange for something given up in the agreement. In many contractual agreements, it is clear that the parties discussed, negotiated, and agreed on the terms of their agreement before entering into a contract. However, in many digital subscription agreements, the contract in question, generally a “terms of service” agreement, is not the subject of negotiation or debate, but rather a one-sided “offer” that must be accepted by the user as-is. Put another way, there is an offer and there is an acceptance if the user chooses to agree, however proving considerations in a one-sided offer could be difficult to do. This is relatively minor in a streaming service like Netflix, but could become a larger issue when features that might be assumed to be included–like a car seat warmer–are in fact locked behind a paywall.
Whether or not these terms of service agreements are enforceable or not is becoming a point of contention in the digital age. Terms and conditions are everywhere. The terms of service have become so prevalent that subscribers and buyers have little choice but to click “yes” and accept. Buyers have little say in this process, and companies have the definite upper hand in consumer transactions. We can circumvent our property rights via contract in theory, but if those contracts are not valid, it is possible that subscription services infringe on our right to use our own property. In allowing too much ground to corporations in subscription-based personal property, we could be reverting to a form of digital feudalism: corporations own everything by default, and we are only given permission to use it.
