Rebecca Giblin on chokepoint capitalism

The fourth and final keynote for Everything Open 2023 was given by Professor Rebecca Giblin of the Melbourne Law School, University of Melbourne. It revolved around her recent book, Chokepoint Capitalism, which she wrote with Cory Doctorow; it is "a book about why creative labor markets are rigged — and how to unrig them". Giblin had planned to be in Melbourne to give her talk in person, but "the universe had other plans"; she got delayed in Austin, Texas by an unexpected speaking slot at the South by Southwest (SXSW) conference, so she gave her talk via videoconference from there—at nearly midnight in Austin.

She began by playing the animated teaser video for the book. It describes how the tech and content firms are choking out competition so that they can take the lion's share of any revenue generated before it ever reaches the artists and others who actually did the creative work. The book also has lots of ideas for "how we can recapture creative labor markets to make them fairer and more sustainable", Giblin said in the video.

The book had its genesis in a taxi ride across Melbourne that Doctorow and Giblin took in February 2017. They did not know each other well at that point, but they realized they had a shared vision based on their experiences in the "copyright wars". There is a position being pushed that if you want modifications to the current copyright regime it means "that you hate artists and want them to starve", but it is a false dichotomy.

Flash forward three years after the taxi ride and she was locked down in her apartment in Melbourne; while that was the opposite of freedom in lots of ways, she "decided to take it as a moment of freedom". Normally her work schedule is filled up a few years in advance, she is applying for grants for what she will be doing in four years' time, and so on; "COVID threw that all up in the air".

She quickly realized that what she wanted to do with that time was to tackle the problem of "how big business has stolen creative labor markets and all that we can do to take them back". She worked on it for a few weeks, but it was difficult because she had no one to bounce ideas off of; "I'm just arguing with myself". One day, she thought: "you know what would be better?—if Cory Doctorow wrote this book with me", she said to laughter.

So she sent Doctorow an email and asked if he wanted to write this book with her; "that's a thing you can do, you can write to Cory Doctorow and say 'write a book with me' and he'll say 'yes'", she said to even more merriment. She cautioned that Doctorow was not entirely on board with her joke; "if he were here, he would say 'please don't do that'". But she happened to hit a good time in Doctorow's schedule; working on the book with him was her "lifeline to the outside world during six long Melbourne lockdowns".

Audiblegate

They started looking at the different creative labor markets, since they were mostly only personally familiar with the book industry, and realized that those industries "are all using the same playbook". One of the more egregious examples of that playbook is in the "Audiblegate" scandal, which Giblin said should be far better known than it is. As might be guessed from the name, it involves the Audible audiobook company, which is part of Amazon and the largest vendor of audiobooks in the world.

Audible treats its customers well, with various perks for signing up for a monthly membership. One of those perks is the no-questions-asked return policy that allows readers to buy a book with their monthly credit and then return it for a new credit. Audible gives lots of opportunities to take advantage of that; it is mentioned in an email and app popup when the book is finished, is easily available on the web site, and so on.

Lots of Audible members started treating Audible as a lending library, rather than as a way to purchase audiobooks. The return offer was good for up to a year, so it was often the case that people listened to the book, enjoyed it, and returned it anyway. What they did not realize was that each of those returns would claw back the royalty paid to the author (and others) for that book.

Many authors suspected that kind of thing was happening, but the reporting from Audible did not separately account for returns—it only reported net sales. In October 2020, though, there was a reporting glitch and three weeks of returns data showed up in the authors' accounts. Suddenly authors could see that their books—many quite highly rated—were being returned in enormous numbers. Meanwhile, Audible (thus Amazon) keeps taking in the monthly fee from subscribers.

Amazon has been the master of this playbook, she said; the company even made a diagram to describe it. She showed two minutes from a longer promotional video (starting at the one-minute mark) that she and Doctorow made, which describes the Amazon "flywheel" that the company touts, while exposing what is really going on under the covers. As described by the company, the basic idea is that lower costs lead to lower prices, thus a better customer experience. That, in turn, means that there is more traffic, which attracts more sellers, leading to better selection, which improves the customer experience even more—"and the cycle continues". Amazon calls it a "virtuous cycle", but "it is not 'virtuous', it's anti-competitive", Doctorow said in the video.

What's really happening is that Amazon has always focused on locking in its customers, for example by using DRM on ebooks and audiobooks, "which cements users to Kindle and Audible". Another lock-in is the fast, free shipping it offers to Prime members; "once you pay your annual fee, Amazon becomes your default whenever you need to buy something". Locking in customers allows Amazon to lock in its suppliers as well. Publishers and small businesses cannot afford to give up access to those customers, so they keep listing their goods at Amazon even when it is bad for the business long-term. The lower cost structure that Amazon talks about is "just a euphemism for shaking down its suppliers and workers"; it uses its market power to demand discounts and high fees from those other businesses.

Amazon then uses the money it squeezed out to subsidize prices in order to eliminate competitors who actually pay fairly. As time goes on, that means Amazon's suppliers have even less choice about acceding to its demands; the low prices bring in even more customers who get locked in. "The shakedown grows more merciless and damaging as Amazon's flywheel spins faster and gains ever-more momentum."

After the video snippet, Giblin said that "all of the companies that we look at in the course of the book are doing exactly the same thing". They lock in their users and suppliers, which they can do, in part, because they got lots of "sweet, sweet VC [venture capitalist] dollars with the promise that they will chokepoint their industries" eventually, in order to eliminate competition.

Amazon once spent up to $200-million in a single month when diapers.com looked like it might be a threat in the market for baby diapers, she said. That may sound like an expensive way to corner the diaper ("nappy") market, but it is actually a "very very cheap way of sending a signal" that you are willing to use scorched-earth tactics. For that reason, VCs will not enter the "kill zone of Amazon and these other giants" because they know they will lose everything if a giant "decides that their toes are being stepped on".

Competition?

"Say what you like about capitalism, but competition is supposed to be fundamental to it", Giblin said. What we have seen over the last 40 years is a systematic effort to eliminate competition and enable these chokepoints to form. That came about because of a radical reinterpretation of antitrust law in the US, promulgated by Robert Bork, which said that those laws were not aimed at protecting competition, but were instead targeting consumer welfare. The upshot is that if a single company is dominating a market, it is not an antitrust problem unless consumers are somehow harmed, such as by price increases.

The ideal was that companies that were able to gain a market advantage of that sort would only do so temporarily until a competitor was attracted to the market by the profits being generated. Unfortunately, the 40-year project has successfully found ways to turn these "temporary" advantages into enduring ones. She put up a quote from Peter Thiel ("Competition is for losers."), noting that "they say the quiet part out loud, there's a shamelessness to it [...] 'why would you get into a market where you have to compete?'" Similarly, Warren Buffett is enamored with businesses that have "wide, sustainable moats, so in other words, barriers that stop new competitors from entering the market".

These problems are not only caused by monopolies, but also by monopsonies, which is a lesser-known and sometimes harder to grasp term. For one thing, there is no "family-destroying board game" by that name. Monopsony is the flipside to monopoly; instead of sellers that are overly powerful, a monopsony is made up of buyers that are overly powerful. In Australia, a good example is the two main grocery-store chains that have vast amounts of power compared to the farmers and food producers (other than perhaps the huge multinational producers) that want to sell to them.

So when people started looking at antitrust in this new way, they came to an obvious conclusion: monopoly pricing will hurt consumers, thus get them into trouble, but monopsony buying will not. If the only way to get in trouble is to raise prices for consumers, then the rational thing to do is to "look at the other end of the chain and find ways to squeeze your workers and your suppliers".

The tools used to create the chokepoints are different for the various content industries, but the end result of them being established is the same. Doctorow has coined a new term for this, she said, "which I really love": "enshittification".

Platforms start by directing their services to users in order to attract as many as possible. That leads suppliers to the platform so that they can reach those users. The platforms also start catering to the suppliers, at the expense of the users who are now firmly entrenched. Eventually, the platform finds ways to exploit the suppliers as well—full-on enshittification—putting all of the profits from both sides into the pockets of investors.

"The aim of enshittification is to make the service of the platform as bad as you can but just before the line where people just throw up their hands and give up on it altogether." We are seeing this play out in realtime at Twitter right now, though she thinks "Elon may be on the wrong side of the line", so we may be seeing the final stage: "enshittification death".

What to do?

Giblin said that they were determined that the book "was not going to be yet another 'chapter 11 book'", where there are ten chapters that lay out all of the problems in "excruciating detail" followed by a single chapter that handwaves at some solutions. For her, one unexpected reaction to the book has been readers who report that the first part, where the problems are described, is "utterly rage-inducing"; she has been looking at the problems for so long that she is inured to them to some extent at this point. Some readers may set the book aside (or throw it at the wall) in that first part, but she encourages people to read on, because the second half is all about solutions, which is what she wanted to focus on for the rest of the talk.

Those solutions would generally be aimed at the creative industries, but she invited attendees to look at ways to apply the same kinds of techniques to other types of industries where these schemes are also being deployed. "The 'open ethos' has a lot to teach us about how we can defeat chokepoint capitalism", Giblin said.

Transparency is one of the core values of the free and open-source software (FOSS) movement, but it is also key to other movements, such as open education, open government, open data, and more. Going back to Audiblegate, it is that mistaken revelation of the return numbers that provided the catalyst for the authors to take action, because they no longer only suspected what was going on, they now had hard evidence of it. That small glimmer of light on the underlying data, which Amazon was systematically trying to conceal from the authors, was enough to galvanize authors into action.

That led to an effective campaign to get the word out in the author community. It led Colleen Cross, a former forensic accountant turned author of financial-fraud thrillers, to look into the contracts for the Audible platform, which are deliberately opaque and confusing. She worked out that Audible could not possibly be paying out what they were supposed to be paying to independent authors; "the numbers just didn't add up in a way that that could have been plausible".

For the book, Doctorow and Giblin asked Cross how much money there is at stake; she estimates that there is "hundreds of millions of dollars on the return scam alone" plus an "enormous amount of wage theft". Based on Cross's best information, she thinks that up to 87% of the money paid in for access to Audible audiobooks is going to the platform, so that leaves just 13% to the authors and narrators. It is, of course, not clear whether that's the case because Amazon will not provide that information. "Why won't they? Because 'fuck you', that's why", Giblin said. "They don't have to and they benefit from that lack of transparency."

It is not just Amazon. The major streaming platforms, the major record labels, and others conceal their data from the artists. At a SXSW panel the previous day, a songwriter was describing her royalty statement; "it was 3000 pages long and utterly incomprehensible". This opacity only benefits the record labels, because even if there is only an "honest" mistake, there is no way for the artist to detect it—and the history of outright fraud is vast. One LA-based auditing firm that they talked to for the book had done tens of thousands of audits, mostly of record labels, which had "only once found an error that was in the artist's favor—some kind of isolated probability storm going on there".

Transparency is required for things that might affect investors; companies have all sorts of reporting obligations for things that might affect the stock price, for example. But there are no transparency requirements for artists whose paycheck, effectively, is determined by this opaque accounting. The reason is obvious, and is the same as it always is: "the purpose of the system, as Stafford Beer says, is what it does". Whenever we want to understand why something works the way that it does despite really obvious shortcomings, "the trick is to look at who's winning—and who's losing".

There are some changes that will help to introduce transparency in these markets. In 2019, the EU introduced the Directive on Copyright in the Digital Single Market, which mandates that artists and performers get new rights to find out how their works are being used, how much revenue is being generated from them, and how their share is calculated. Implementation is tricky because each member state is being aggressively lobbied to sidestep the transparency requirements, but it is a step in the right direction, Giblin said.

Interoperability, equity, and more

Another important aspect of the "open" movements is interoperability, which will be critical to defeating chokepoint capitalism. DRM is obviously a tool for locking customers in. Audible requires that all of its audiobooks have DRM, which is why Chokepoint Capitalism was not released there; it is available on all of the other audiobook platforms, however. There is a small part of it available on Audible, though; "we packaged the standalone chapter about their [Audible's] terrible, terrible abuses", she said to laughter and applause. They were surprised that they sold a few hundred copies of that, which she feels a little bad about. They did much the same with the Spotify chapter from the book on that platform.

Nobody wants to split up their libraries, just as they do not want to split up their friend group. Leaving Facebook means you risk losing access to your social and communication networks. She has not been on Facebook since around 2008; "there's a lot of barbecues that you end up just not knowing about".

We need more than just the right to bypass DRM, however, she said. We need positive rights as well; rights of access and the freedom to exit a sinking platform while continuing to stay connected to the community you are leaving behind. That means you can still enjoy the media and data you bought and have access to the content you created.

The open ethos has a strong focus on equity, Giblin said; there's little room for predatory middlemen that sit between creators and audiences—or buyers and sellers. Open access promotes equity without regard to socioeconomic standing, which is something that is lacking in the creative industries. There are only a few superstars who have the standing to negotiate equitable contracts (e.g. Taylor Swift in the music industry). The EU directive provides some hope in the form of a kind of "minimum wages for creative workers" in the form of rights to reasonable remuneration. In the new Australian cultural policy there is talk of giving creative workers employment rights in order to "treat arts workers as real workers", which is also a good step.

Many creative workers, as well as programmers, are required to sign away their copyrights to their employer, but the copyrights last for three generations or more, which is nearly always well beyond the life of the commercial interest in the work. The EU has a "use it or lose it" policy that allows creators to claw back their copyright if the work is not in use. That can help maintain access to works that have gone out of print, for example, as is being done by another project she worked on during lockdown: Untapped.

Self-determination is a critical aspect of the open ethos; people can look inside and tinker with things to make them work in ways that are better for them. The corporations that are chokepointing their industries "are deliberately depriving us of the ability to do exactly that", by locking us into their walled gardens and eliminating competition that might provide us with other choices that might work better for our needs, she said. "If we've learned anything from the open movement it's that people have a lot of very different needs."

Giblin does not think humans are good at "figuring out what are the conditions for a good life"; if we were, "we would definitely not have email", she said to laughter. There is an apocryphal idea that frogs will not jump out of a slowly warming pot of water before they get boiled to death—it's not true for frogs, but she is not so sure for humans. It seems clear that too much of our lives are not being spent on making things work well so that we can flourish as people, but is instead spent on maximizing profits for investors. The ability to change those conditions "seems critical to widening chokepoints out".

The part of the book on "collectivity" was her favorite "and certainly the most inspiring and hopeful part". There are multiple stories that they found about powerless people collectively taking on and even flipping the tables on the powerful corporations that they were locked into. For example, Uber drivers were contractually barred from bringing class-action lawsuits against the company, which meant they had to bring financially impractical individual suits or use the mandatory arbitration offered by the company. That kind of arbitration works well for companies when there are just a few cases, but thousands of drivers all brought complaints at the same time, forcing the company to eventually settle with the drivers—probably for more money than if it had been a class action.

The 2019 Writers Guild of America strike was another example of collectivity at work. Four large agencies had cornered the market on Hollywood writers, but were "feathering their own nests" at the expense of the creators they were supposed to represent. The writers realized that the agents only had the power that the writers gave them; "you can have Hollywood without agents, but you can't have Hollywood without writers". In a single week, 7000 writers fired their agents; the strike ended up lasting 22 months, but eventually "everyone rolled over" and the onerous terms were eliminated.

Movement

The open movement is broad and encompasses disparate areas like software, government, education, hardware, access to collections in museums and libraries, and more, all of which were represented at Everything Open in various ways. She believes that the open movement needs to see itself as part of an even larger movement against corporate concentration; "this too is part of the same fight".

The "strip mining of creative workers" is part of a larger project "in service of oligarchy"; it is something we are all subject to, she said. "It's not just independent creators and producers who are being screwed over here", it is nearly everyone; "if they haven't come for you yet, it's just because they haven't had time". There is a part near the end of the book where it says that the tech industry treats its workers well, because it has to; once those conditions change, the techies will find themselves in the same position as the creative workers. That feels a bit prescient, Giblin said, given the large layoffs that have rolled through the tech world since the book was written. "We're all part of the same fight."

She is often asked: "How do we start to change?" It feels like a huge project, which is "absolutely right". If you want to get to a "sustainable, fair world where there is enough for everybody" versus "violent extraction by a very few over the very many", you "wouldn't start from here, but we have to start from here, and we are starting from here". One key piece is already underway, which is to "build connection and community".

The current system is "designed to isolate us from one another", so that we have that "hollow emptiness inside of us" and we will want to fill it with ever-more production and consumption. That's not a bug of the system, it's a feature, she said. Building community and understanding how others' fights fit in with your own are "the first bites toward eating the elephant". She said that she is grateful for everyone who is working on the many different parts of the problem, including by attending the conference to see where those parts are and how they fit together. There was a lengthy round of applause for Giblin and her talk.

It was a thought-provoking keynote that will likely resonate, at least in parts, with many. While Giblin seemed optimistic about finding our way out of this hole that we have dug for ourselves, some may have to be forgiven for despairing of seeing any substantial progress in the near, or even distant, future. Beyond that, some, perhaps many, people see things rather differently than she does, so they may find her analysis and prescriptions to be off the mark. The video of her keynote is available for anyone who wants to delve into her ideas more deeply.

[Thanks to LWN subscribers for supporting my travel to Melbourne for Everything Open.]