Audiobooks were booming, but sales of their own books – produced at a high cost and well reviewed – plummeted.
Some of their royalty statements reported negative sales, as readers returned more books than they bought. This was hard to understand because Audible only reported net sales and refused to disclose the sales and refunds that made them up.
Writer from Perth Susan May wondered if those revenues could be the reason for her declining net sales. She pressed Audible to tell her how many of her sales were being wiped out by returns, but the company blocked it.
Then, in October 2020, a glitch caused three weeks of returns data to be reported in one day, and authors discovered that hundreds (and even thousands) of their sales had been wiped out by returns.
Suddenly the scam entered the picture: Audible, owned by Amazon, had been offering an extremely generous return policy, encouraging subscribers to return books they’ve had on their devices for months, even if they’d been listening to them all along, even if they had loved them – no questions asked.
Encouraged by the policy, some subscribers treated the service like a library, returning books for new credits to exchange for new ones. Few would have realized that Audible reclaimed royalties from book authors every time a book was returned.
It was good for Amazon — it helped Audible get and keep subscribers — but bad for the authors and artists who made the audiobooks, who were barely paid.
Understanding Amazon’s motivation helps us understand a phenomenon we call bottleneck capitalisma modern scourge for creative industries and many other industries as well.
Orthodox economics tells us not to worry about companies dominating 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, durable moats”. Peter Thiel scoffs at that “competition is for losers”. Business schools teach students ways to engage customers and suppliers and eliminate competition so they can shake off the people who make what they provide and buy what they sell.
Lock down customers and makers
Amazon is the poster child for bottleneck capitalism. It flaunts its “flywheel” – a self-described “virtuous cyclewhere the lower cost leads to lower prices and a better customer experience, which leads to more traffic, which leads to more sellers and better selection – further driving the flywheel.
But the way the cycle works is not virtuous – it is mean and anti-competitive.
Amazon openly admits to doing everything it can to bring in its customers. That’s why Audible encourages book returns: the generous offer only applies to current subscribers. Audible wants the money from monthly subscribers and wants them to be subscribed to avoid shopping elsewhere.
Paying the people who actually made the product it sells is not Amazon’s priority. Because the famous maxim of Amazon founder Jeff Bezos goes:your margin is my chance”, the director who figured out how to make authors foot the bill for retaining subscribers probably got a bonus.
Another way Audible retains customers is by making sure the books it sells are protected 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 doesn’t prevent infringement, it can is doing prevent competition.
Startups that want to challenge Audible’s dominance—including those that would pay fairly—have to convince potential customers to give up their Audible titles or clumsily maintain separate libraries.
In this way, laws 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 also locked up. It’s incredibly hard to reach audiobook buyers unless you’re on Audible. If the suppliers are tied up, 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 intermediaries 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 intermediaries become powerful enough to bend markets into hourglass shapes, with audiences on one side, masses of makers on the other, and themselves operating 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.
The companies that create these bottlenecks are trying to “monopsonize” their markets. “Monopsony” isn’t a pretty word, but it’s one we need to familiarize ourselves with to understand why so many of us feel trapped.
Monopoly (or near-monopoly) is where there is only one major seller, leaving buyers few other places to go. Monopsony is where there is only one major buyer, leaving sellers few other places to go.
In our book we quote William Deresiewicz, a former professor of English at Yale University, who states in his book The death of the artist that “if you can only sell your product to a single entity, it is not your customer; it’s your boss”.
It’s increasingly how the creative industries are 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 (who own the three major music publishers) 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 we don’t have to deal with it.
Chokepoint capitalism isn’t one of those “Chapter 11 books” – ten chapters about how awful everything is, plus a conclusion with some vague suggestions about what can be done.
The entire second half is devoted to detailed proposals to expand these bottlenecks, including transparency rights.
Audible’s cunning trick only came to light in the end only because of the glitch that allowed authors to see the scope of the returns.
That glitch enabled writers, led by Susan May, to organize 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 prevent lock-in to platforms, more secure copyrights for creators rather than publishers, and minimum wages for creative work.
These and the other things we’re suggesting would go a long way toward empowering artists and making sure they get paid. And they would be an inspiration to the increasing rest of us who supply our goods or our 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 will win them back is published on Tuesday Nov 15 by Writer.
This article has been republished from The conversation under a Creative Commons license. Read the original article.
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