Authors Battle Amazon Over Audiobook Monopoly
If you're anything like Weezer, you may enjoy rocking your Audible. But while the platform is convenient, there may be a dark side to the market practices at play, according to a recent lawsuit against Audible’s parent company, Amazon.
Independent authors are looking to take the e-commerce Goliath to court, accusing the company of wielding its market dominance to strong-arm self-published authors into exclusivity deals. Authors claim the practice stifles competition and innovation in the rapidly growing $2 billion audiobook industry.
Amazon dismissed the allegations as "far-fetched" and just asked a federal judge to dismiss the case. What can we expect? Well, let’s take a look at the arguments on both sides.
Amazon Dominates Audiobook Market
Since it purchased Audible for about $300 million in 2008, Amazon has been the dominant retailer of audiobooks in the United States, accounting for over 60% of domestic audiobook purchases. This dominance is further bolstered by Amazon's ownership of the Audiobook Creation Exchange (ACX), an online marketplace for audiobook production and distribution. ACX serves as a critical gatekeeper for authors who wish to sell their audiobooks on Audible and Amazon.
Amazon's influence in the audiobook market is not limited to its own platforms. It also has a significant relationship with Apple Books, historically through an exclusive deal that made Audible the sole audiobook provider for iTunes. Although this exclusive arrangement ended in 2017 after antitrust investigations in Europe and a lawsuit in Canada, Amazon still uploads audiobooks to Apple Books via ACX, effectively maintaining a de facto exclusive relationship. When combined with Apple Books, Amazon controls approximately 80% of the market.
Consequences for Authors and Readers
This market dominance allows Amazon to impose high distribution fees on authors — at least 60% for exclusive distribution and at least 75% for non-exclusive distribution. These fees are significantly higher than Amazon's actual costs for distributing audiobooks, which are estimated to be around 5% to 10% of the sales price.
Amazon's market power also enables it to enforce various penalties on non-exclusive audiobooks. For example, Amazon may decide to give those books reduced visibility and promotional opportunities on its retail sites. Another hitch for authors is that exclusivity is permanent; Amazon allows authors to switch from exclusive to non-exclusive distribution but does not allow them to revert back to exclusive distribution. This policy allegedly discourages authors from experimenting with different sales channels and methods.
Amazon's practices have significant implications for competition in the audiobook market. According to the authors who filed the lawsuit, by locking up content through exclusivity restrictions and imposing high distribution fees, Amazon effectively forecloses competition, preventing rival platforms from gaining a foothold in the market. The plaintiffs claim that this conduct has led to reduced output, lower market activity, and higher costs for authors, ultimately harming consumers by limiting their choices and access to audiobooks.
Romance Writer Tired of Monopoly
The named plaintiff in the case is the romance author known as CD Reiss, which is the pen name under which Christine DeMaio has published and created her books and audiobooks. CD Reiss is a national bestseller who has been self-publishing for more than a decade and started producing audiobooks in 2016, and a winner of an Audie award.
Reiss has distributed audiobooks through Amazon on both an exclusive and competitive basis during the last four years. She is filing the class action complaint on behalf of herself and all others similarly situated. For exclusive distribution, Amazon charges her at least 60% of the sale price set by Amazon, and for her non-exclusive titles, Amazon charges her at least 75% of her audiobooks’ purchase price.
Despite those high fees, Reiss continues to distribute her past audiobook titles through Amazon. Her argument is that Amazon’s high market share forces authors like herself to continue using Audible — even with the exorbitant fees — to avoid losing significant revenue and market visibility.
Reiss Files Lawsuit
As a result of Amazon's monopolistic practices, Reiss claims that authors like herself are financially harmed by being forced to pay what she calls “supracompetitive” prices for distribution. They are also allegedly harmed by having their potential earnings reduced due to the penalties imposed on non-exclusive titles. Reiss also argues that Amazon’s policies result in market foreclosure. By locking up content through exclusivity restrictions and imposing high distribution fees, she claims that Amazon effectively prevents rival platforms from gaining a foothold in the market. This limits competition and prevents authors from seeking better distribution deals elsewhere.
Reiss further claims that Amazon’s tactics result in reduced output in innovation. Due to the high fees and restrictive policies, authors are less incentivized to produce new audiobooks or invest in their existing works. This leads to reduced output and innovation in the audiobook market. This reduces the availability or range of literary content, which harms readers (or “listeners”) in addition to just harming authors.
Along with alleging injury to herself and other authors in her position, Reiss is also claiming antitrust violations by Amazon. She claims the company has engaged in anticompetitive conduct in violation of the Sherman Act, specifically through monopolization and attempted monopolization of the audiobook retail distribution market.
Overall, Reiss’s class action complaint claims that Amazon's conduct has harmed competition in the market for audiobook retail distribution, reduced overall market activity, and caused antitrust injury to audiobook authors in the form of supracompetitive distribution prices. She seeks monetary recovery for herself and other class members, including treble damages under the Sherman Act, as well as a nationwide injunction to terminate the ongoing violations.
Amazon Tries to Dismiss Suit
But earlier this week, Amazon filed a motion to dismiss Reiss’s complaint, giving the judge two main arguments for why the lawsuit should be stopped in its tracks. The first is a procedural failing: Amazon argues that Reiss and the other class members have no standing to bring an antitrust suit. It argues that an author like Reiss cannot claim to be a direct victim of the allegedly anticompetitive conduct. Rather, the direct victims would be Audible’s distribution rivals, such as Google and Spotify.
Furthermore, Reiss voluntarily entered into the exclusivity agreements and received higher royalties as a result. Amazon argues that argue that any injury claimed by her is speculative. On top of that, calculating damages would be “exceptionally complex.”
Even if Reiss did have standing to sue, Amazon argues that the 90-day exclusivity term is too short to support a claim of anticompetitive effect. It cites precedents indicating that “short, easily terminable exclusive agreements are of little antitrust concern.” It further points out that the exclusive titles by self-published authors using ACX don’t make up a “competitively significant” share of the overall audiobook market. It claims that Reiss falls short in her complaint because she doesn’t allege facts showing that these exclusive titles are “essential inputs” for competition in audiobook distribution.
What to Expect
The outcome of Amazon's motion to dismiss will hinge on whether the court finds merit in the authors' claims of antitrust violations and monopolistic practices.
If the judge accepts Amazon's argument that the exclusivity provisions are reasonable and the audiobook market remains competitive, the lawsuit may be dismissed. Otherwise, if the case goes to trial, it could lead to significant implications for not only Amazon's business practices but the broader audiobook industry.
Of course, Reiss and Amazon may just call an ... audible ... and settle at the last minute.
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