Without having read the whole page, I understand form your summary that:
A) amazon alone decides when to float credits and their price
B) authors are promised a certain rate (40%) of the price, but in reality this credit system destroys that %% completely
C) in the end amazon makes always a >60% profit off each book, irrespective of the price sold.
D) Their incentive is thus to sell as many units as they can, underprice all competitors with cheap credits, and overall corner the market to make sure producers can't get around them.
Total monopolistic practices with abuse of market power. In a competitive environment no producer would accept this.
> Total monopolistic practices with abuse of market power. In a competitive environment no producer would accept this.
Hasn't Audible's business model been basically unchanged since its inception? Everyone who puts their books on their knows the price of a credit, which is normally like $15, and so knows they'd get at best $6 per book sold on there. How would Audible become a monopoly if people didn't like those odds?
Furthermore, I don't see much of a "moat" here. Suppose there was a company called BetterBooks, which had the same business model and price per credit, but gave 60% commission instead of 40%. If publishers were genuinely unhappy with $6/book, they could list it on BetterBooks and get $9/book instead. The quality of books on Audible would drop, and nobody would buy them.
Their existing market power means that by not being on audible you’re walking away from most of your potential readers. That bit doesnt seem too bad…
But then - they offer you a very low percentage if you sell your book anywhere else… and a not so terrible % if you go with them (not great, but not terrible).
For an individual seller it is worth taking that deal. So they do. But the consequence is that no other market can achieve comparable power.
Hence it’s an abuse of market power. Individual publishers choices won’t stop it- only government intervention. And further it would need to have international cooperation.
Which also explains why they’re lazy about fixing trivial temporary errors whether they are gaining or losing money — they own the market, and don’t need to worries about pennies.
> But then - they offer you a very low percentage if you sell your book anywhere else… and a not so terrible % if you go with them (not great, but not terrible).
Audible's network effects can only be dislodged by people not listing their books on Audible at all; so this shouldn't have much of an effect.
> For an individual seller it is worth taking that deal. So they do. But the consequence is that no other market can achieve comparable power.
Right; so the approach would be for BetterBooks, before launch, to talk privately to a large number of publishers, with an offer like, "You agree to drop Audible and only go with us for 3 years, if we can get 60% of publishers to agree to do the same." If Audible's deal is really as horrible as this person is making out, it should be easy for any individual publisher to agree to that; and easy to get 60% of publishers on board. Then when BetterBooks launches, they have loads of great titles which Audible is lacking.
> Audible's network effects can only be dislodged by people not listing their books on Audible at all; so this shouldn't have much of an effect.
This isn’t quite right and misses most of what’s going on.
Since a book that’s exclusive to A can’t appear on B - B can never get any network effects and thus can’t compete with A.
And if B did begin to get any network effects - through an innovative technique ( Eg when book depository made ground by offering free shipping) — A would take notice and simply buy B before it was a big enough threat.
Hence again - individuals and normal market forces can’t displace an established monopolist.
> Since a book that’s exclusive to A can’t appear on B - B can never get any network effects and thus can’t compete with A.
Indeed, and it should probably be illegal for a company with a monopoly to buy exclusivity as Amazon is doing. But even if the Justice Department took interest and Audible switched to (say) 35% across the board, that wouldn't by itself be enough to dislodge Audible's network effects.
That's why I described a plan of attack which wouldn't involve the Justice Department: Rather than starting B and asking publishers to list on both A and B, start B and ask publishers to list only on B (or at least, not on A). That would jump-start the network effects on B.
It would require publishers to accept lower profits for a few years while B was getting established and A lost brand; but if the pricing really rises to the level of abusive (as opposed to just less than they think is fair), publishers should be willing to do that.
> And if B did begin to get any network effects - through an innovative technique ( Eg when book depository made ground by offering free shipping) — A would take notice and simply buy B before it was a big enough threat.
Well yes, which is why such acquisitions should be prevented.
Ok I think we’re agreement on some fundamentals here about market manipulation and monopolies etc.
Regarding your idea of a scheme to sneak up on and out-fox the market leader… by simply enacting a secret conspiracy amongst a quorum of suppliers:
I do love and admire the idea, I think it’s good stuff and could for example be an interesting movie.
(Actually- one with a similar plot was filmed in my home town when I was a child- some minor prospectors set up an arbitrage situation that turned a monopolistic evil gem dealer against himself… great stuff, and the mayor of my home town got a cameo in one scene).
Bit in reality - outside of fiction - as an actual serious method for unseating a monopoly, I don’t think the shot is even on the board. I don’t know enough laws to see which ones it would break, but I expect there are dozens. But without pondering legalities, fundamentally I see it failing because the conspiracy, among competing suppliers, is effectively a non-iterated prisoners dilemma. It’s better for any semi popular author/publisher to rat on the conspirators and secure a higher exclusive deal from A, than to be online with the B group.
But the first problem is that to fulfill the claim that the existence of such a remote possibility demonstrates that there is “not much of moat” is where I think it really falls down. If you have a technique for achieving a coup like this without getting out the wallet, then please by all means prove me wrong and simply step forward and achieve this scheme. Schemes that have the predicate “If only and not until everyone agrees to do “X” then it would benefit us all” - is generally not sufficient all by itself to bring about the agreement. It takes capital and lots of it.
if it was easy as you say… it would take a massive investment - and that’s a demonstration of a moat right there.
But it wouldn’t be that easy - because Amazon can afford to give better deals to the top 1% of popular authors and thus the cost to achieve what you’re saying would be far higher.
> A) amazon alone decides when to float credits and their price
Yes.
> B) authors are promised a certain rate (40%) of the price, but in reality this credit system destroys that %% completely
No. They are not promised a rate of the retail price. They are promised a share of the net sales of credits, proportional to how many of the credits were spent on their books. They should know the key parts of the business model here: Audible sell the credits for significantly cheaper than the retail price, and the narrators are being paid based on the actual amount spent on the credits not based on the retail price.
> C) in the end amazon makes always a >60% profit off each book, irrespective of the price sold.
No. The minimum revenue per-book guarantee is being hit every single month. So the narrators are being paid a bigger share than the contract promised, and Amazon is paying that difference from their cut.
> D) Their incentive is thus to sell as many units as they can,
And since the earlier points were incorrect, this conclusion doesn't actually follow.
A) amazon alone decides when to float credits and their price
B) authors are promised a certain rate (40%) of the price, but in reality this credit system destroys that %% completely
C) in the end amazon makes always a >60% profit off each book, irrespective of the price sold.
D) Their incentive is thus to sell as many units as they can, underprice all competitors with cheap credits, and overall corner the market to make sure producers can't get around them.
Total monopolistic practices with abuse of market power. In a competitive environment no producer would accept this.