Audiobooks were booming, but sales of their own books – which were produced at great expense and were well reviewed – plummeted.
Some of their royalty statements reported negative as readers returned more books than they bought. This was difficult to understand, as Audible only reported net sales and refused to disclose the sales and refunds that made up them.
Writer from Perth Susan May wondered if those revenues could be the reason for its declining net sales. She pressed Audible to tell her how many of her sales were wiped out by returns, but the company blocked.
Then, in October 2020, an outage caused three weeks of returns data to be reported in one day, and authors found that hundreds (and even thousands) of their sales had been wiped out by returns.
Suddenly, the scam came into the picture: Amazon-owned Audible had offered an extremely generous return policy, encouraging subscribers to return books they’d had on their devices for months, even if they’d been listening to them the whole time, even if they had loved them – no questions asked.
Encouraged by the policy, some subscribers treated the service like a library: handing in books for new credits to exchange for new ones. Few would have realized that Audible claimed royalties from the book’s authors every time a book was returned.
It was good for Amazon — it helped Audible gain and retain subscribers — but bad for the authors and the artists who made the audiobooks, who were barely paid.
If we understand Amazon’s motivation, we can understand a phenomenon we call choke point capitalisma modern plague for the creative industry as well as for many other industries.
Orthodox economics tells us not to worry about companies dominating the markets, because that will attract competitors, who will bring things back into balance.
But many of today’s big business and billionaire investors have perfected ways to make those supposedly temporary benefits permanent.
Warren Buffett drools over companies with “wide, sustainable canals”. Peter Thiel mocks that “competition is for losers”. Business schools teach students how to engage customers and suppliers and eliminate competition so that they can shake off the people who make what they deliver and buy what they sell.
Include customers and creators
Amazon is the epitome of chokepoint capitalism. It shows off its “flywheel” – a self-described “virtuous cyclewhere the lower costs lead to lower prices and a better customer experience, which leads to more traffic, which leads to more sellers and better selection – which further drives the flywheel.
But the way the cycle works isn’t virtuous – it’s mean and anti-competitive.
Amazon openly admits to doing everything it can to retain its customers. That’s why Audible encourages book returns: the generous offer applies only to ongoing subscribers. Audible wants the money from monthly subscribers and wants them to be subscribed to prevent them from shopping elsewhere.
It is not Amazon’s priority to pay the people who made the product it sells a fair share of the profits. Because Amazon founder Jeff Bezos’ famous maxim is:your margin is my chance”, the director who figured out how to make authors pay the subscriber retention bill probably got a bonus.
Another way Audible brings in customers is by making sure the books it sells are protected by: Digital Rights Management (DRM), meaning they are encrypted and can only be read by software with the decryption key.
Amazon claims that DRM prevents listeners from stealing from creators by copying their books. But tools to remove those locks are available online for free, and it’s easy for readers who can’t or won’t pay for books to find pirated versions.
While DRM does not prevent infringement, it is is doing prevent competition.
Startups looking to challenge Audible’s dominance — including those willing to pay fairly — must convince potential customers to give up their Audible titles or clumsily maintain separate libraries.
In this way, laws that were intended to protect against copyright infringement have become tools to protect against infringement of corporate dominance.
Once customers are locked up, suppliers (authors and publishers) are locked up as well. It’s incredibly difficult to reach audiobook buyers unless you’re using Audible. When the suppliers are locked in, they can be shaken off for an increasing share of what the buyers give up.
How a few big buyers can control entire markets
The problem is not with middlemen as such: bookstores, record labels, book and music publishers, agents and countless others provide valuable services that help keep the creative wheels turning.
The problem arises when these middlemen become powerful enough to bend markets into hourglass shapes, with the public on one side, multitudes of creators on the other, and themselves as a bottleneck in the middle.
Because everyone has to go through them, they can determine the terms on which creative goods and services are exchanged — and get more than their fair share of value out of it.
The companies that create these bottlenecks try to ‘monosonize’ their markets. “Monopsony” isn’t a pretty word, but it’s one that we need to become familiar with to understand why so many of us feel stuck.
monopoly (or near monopoly) is where there is only one big seller, leaving buyers few other places to go. monopsony is where there is only one big buyer, leaving sellers with few other places to turn.
In our book, we quote William Deresiewicz, a former professor of English at Yale University, who notes in his book The Death of the Artist that “if you can only sell your product to one single entity, it is not your customer; it’s your boss.”
For example, the creative industry is increasingly structured. There’s Audible for audiobooks, Amazon for physical and digital versions, YouTube for video, Google and Facebook for online news ads, the Big Three record labels (which the three major music publishers own) for recorded music, Spotify for streaming, Live Nation for live music and ticketing – and that’s just the beginning.
But as corporate concentration increases across the board, monopsony becomes a problem for the rest of us. To get a glimpse of what happens to the job market when buyers become too powerful, take a look at how monopsonistic supermarkets bully food producers and farmers.
A fairer deal for consumers and makers
The good news is that we don’t have to get involved.
Chokepoint Capitalism is not one of those “Chapter 11 books” – ten chapters on how awful everything is, plus a conclusion with a few vague suggestions about what can be done.
The entire second half is devoted to detailed proposals to expand these bottlenecks, including transparency rights, among others.
Audible’s cunning trick only came to light in the end because of the glitch that allowed authors to see the scope of the returns.
That glitch allowed writers, led by Susan May, to stage a campaign that eventually forced Audible to reform some of its more egregious practices. But we need more light in dark corners.
And we need contract law reforms to level the playing field in negotiations, interoperability rights to avoid platform lock-in, better copyright protection for creators rather than publishers, and minimum wages for creative work.
These and other things we suggest would do a lot to empower artists and get them paid. And they would provide inspiration for the ever-expanding rest of us who supply our goods or labor to increasingly powerful corporations that can’t seem to keep their hands out of our pockets.
Chokepoint Capitalism: How Big Tech and Big Content Conquered Creative Labor Markets, and How We Reclaim Them, is published on tuesday 15 november by Writer.
- Rebecca Giblin, ARC Future companion; Colleague Professor; Director, Intellectual Property Research Institute of Australia, The University of Melbourne and Cory Doctorowvisiting professor of computer science, The Open University
- 0.1 Good for Amazon, bad for authors
- 0.2 Include customers and creators
- 1 How a few big buyers can control entire markets