Chokepoint Capitalism

Metadata

Author: Rebecca Giblin and Cory Doctorow
Full Title: Chokepoint Capitalism
Category: #books

Highlights

News publishers once got almost all the money from ads on their content, but that’s fallen to as little as thirty cents on the dollar.
When Bezos decided to create Prime, he was very clear about his intentions: “I want to draw a moat around our best customers.”21 He succeeded. One in two American households are now members, and they’re practically welded to the site: a recent study found just 1 percent of paid Prime members are likely to comparison shop elsewhere before making a purchase.22
After all, a whopping 66 percent of online shoppers bypass search engines and search for products directly from the Amazon search box. For customers who already know what product they want, the figure rises to 74 percent.26 Third-party sellers pay dearly for Amazon’s predations: Amazon’s cut of their income has risen to an average of 40 percent—tripling in just a few years.
In chokepoint capitalism, the aim is to create enduring barriers to competition that enable corporations to monopolize or monopsonize their markets. We learn about monopolies from the first time we “pass go” as kids. Eventually, in every game, someone acquires enough properties to squeeze the other players dry. Monopolies form when a single seller controls the supply of some good or service to everyone else. The word oligopoly is used when a small number of companies control an industry, but monopoly is colloquially used in those situations too, and we use it to refer to both. What’s less examined or understood is how chokepoints create monopsony power. While monopolies occur when sellers have power over buyers, monopsonies are when buyers have power over sellers.
As William Deresiewicz points out in The Death of the Artist, “If you can only sell your product to a single entity, it’s not your customer; it’s your boss.”29
Indeed, the original US antitrust laws were in large part a response to monopsony power, created after farmers got fed up with being exploited by grain elevator operators and meat-packers.
Chicago School economists view monopolies as inherently self-destructive, claiming monopoly conditions always rapidly attract new entrants who will chip away at that dominance.38 After all, if a massive office complex offered just a single caf’ at which to buy lunch, taco trucks would inevitably begin to congregate downstairs. But it’s not always that simple. What if regulators passed new food safety regulations that the caf’ could comply with, thanks to its fancy kitchen, but that the trucks could not? (Big Business prefers power without responsibility but will take power with responsibility as a second choice.) What if the caf’ proprietor could turn the elevators off at lunchtime, making it so inconvenient to get downstairs that most people stayed put? What if they bought up the trucks with the most interesting food just to shut them down? And what if the caf’ could make it illegal for trucks to park there?
Capitalism without competition isn’t capitalism at all; it’s a “command economy” structured around the whims of corporate boardrooms.
However, humans are driven to create, even when there’s no prospect of any financial return. Cultural economist and professor Ruth Towse, who spent her career analyzing creative labor markets, has documented how corporations “free ride” on the human desire to create, exploiting the oversupply of labor and precarious work conditions endemic to artistic labor markets to secure most of the financial benefit for themselves.44
If we’re right, it makes sense that tools like more copyright, internet filters, and better locks would make no meaningful difference to creators’ abilities to share in the proceeds of their work. In fact, giving more copyright to creators who are struggling against powerful buyers is like giving more lunch money to your bullied kid. The bullies who were taking his money every day will just take that too. The upshot? The bullies now have enough money to pay the principal to look the other way, and your kid still goes hungry.
Instead of lending our support to whichever variety of Big Business looks like it’ll throw us more crumbs, we need to be thinking about how to fight their dominance.
People’s passions are weaponized to facilitate their exploitation. This is why simply giving creators more copyright doesn’t actually help, unless it also comes with ways of holding on to the value of those rights. The more authors have to give, the more there is for publishers—and, ultimately, Amazon—to take.
But DRM was never actually going to prevent music piracy: in part because music could be easily ripped and shared from CDs, and partly because any lock can be unlocked. However, it did have another effect: it locked customers in to listening to their music with products made or authorized by Apple. Apple refused to license its DRM technology to potential competitors, which meant people who bought songs on iTunes could only play them on Apple devices.
Amazon understood that even though DRM is the enemy when you’re trying to break someone else’s monopoly, it’s the best friend you can have when you’re trying to create your own. The Kindle ebook store, launched mere weeks after Amazon launched its Apple-busting DRM-free music, featured exactly the same kind of DRM that enabled Apple to become so powerful in the music download space. Every book was shackled to Amazon’s platform. Amazon wouldn’t even permit publishers who wanted to release their titles without DRM to do so. Holdouts like the tech publisher O’Reilly, which understood the danger, weren’t permitted to release their titles as DRM–free ebooks on Amazon’s platform until Kindle’s supremacy was safely established.
Random House, the one major publisher to have balked at joining the conspiracy, initially stayed on wholesale terms with Amazon, and sought a similar deal with Apple. But Apple was only willing to enter into an agency deal, effectively locking Random House out of the lucrative and fast-growing market of iPhone and iPad readers. Random House tried to create its own app, but Apple refused to approve it. Just as Amazon made itself a gatekeeper between publishers and readers, Apple became a gatekeeper between app developers and its users. That forced Random House to finally reach its own agency agreement with Apple in 2011, about a year after the other major players.
Amazon long refused to license the titles it publishes to libraries on any terms at all. In 2020, however, as the COVID-19 pandemic spotlighted the crucial importance of remote access to books, some US states passed legislation to require publishers to license titles to libraries on reasonable terms, and Amazon was finally forced to bend. Some publishers, like Hachette, make their books available to North American libraries but refuse to license them to libraries throughout the UK, Australia, and New Zealand on any terms at all. In other words, as more and more value gets siphoned further up the food chain, there’s less and less for everyone else.
Ebooks were a perfect fit for Amazon’s extractive mindset, because they cost us more in terms of privacy than physical titles ever could. Amazon knows what we search for, what we read, and what we listen to—when and for how long. This “actionable market intelligence” allows it to poach authors, market its own titles to readers, and cross-sell non-book items to readers. The combination of surveillance and vertical integration means that Amazon vastly outpowers both publishers and other retailers, cementing its dominance, and giving it more opportunities to spy on readers.
Amazon tracks the phrases we highlight, the words we look up, who else is reading from the same address. All this allows it to deduce the most intimate information about our lives: whether we’re struggling with our gender identity or sexual orientation, if we think our partner is cheating or that we might be depressed, if we’re having money problems or struggling to get pregnant or considering leaving our jobs. Public libraries have some of this same information, and they guard it fiercely. But Amazon feeds it into an insatiable machine designed to extract maximum profit. If you, as a reader, feel uncomfortable with this, that’s too bad: DRM makes it illegal for you to read or listen to the books you’ve purchased on surveillance-free platforms.
The money Amazon squeezes out all along the supply chain funds its famous “kill zone.” Anyone who enters Amazon’s territory (or that of Facebook, Google, and other giants) knows they’ll be bought or destroyed. Amazon threw away $200 million in a single month when it went after the company behind diapers.com, first weakening it by bribing away its customers with impossibly low prices, then acquiring it for a fraction of its previous value. At that point Amazon shut down its new acquisition and put its own prices back up.50 That was an expensive way of capturing the diaper market but a cheap way of teaching everyone else to stay out of Amazon’s path.
Because the law doesn’t distinguish between lock-breaking for legal and illegal purposes, all companies need to do is add a thin skin of DRM that has to be bypassed for a customer to do anything that might lower their profits. General Motors uses DRM to prevent independent mechanics from diagnosing problems with their cars. Volkswagen used it to prevent independent researchers from discovering that they were cheating on emissions tests. Philips uses it to make sure you only buy Philips light bulbs to go in your Philips sockets. HP used it to plant a time bomb in its printers, which prevented printing with any cartridges that had been refilled or supplied by third parties. A Johnson & Johnson patent promises to use DRM to force people with artificial pancreases to buy proprietary insulin. John Deere wields its DRM to stop farmers from fixing their own tractors. Voting machine manufacturers use it to stop security researchers from publishing information about critical vulnerabilities.54 None of this has anything to do with copyright enforcement. Instead, the DMCA creates a new cause of action—felony contempt of business model—that’s available to anyone who can use software to control what you do with the things that you own.
anticircumvention law
Say you visit the Washington Post. Dozens of brokers bid on the chance to advertise to you. All but one loses the auction. But every one of those losers gets to add a tag to its dossier about you: “Washington Post reader.” Advertising on the Washington Post is expensive. “Washington Post reader” is a valuable category: a lot of blue-chip firms will draw up marketing plans that say, “Make sure we tell Washington Post readers about this product!” Here’s the thing: the companies want to advertise to Washington Post readers, but they don’t always care about advertising in the Washington Post. And now there are dozens of auction “losers” who can sell the right to advertise to you, as a Post reader, when you visit cheaper sites.
One known technique for maximizing profits is for Google to buy up ad space from publishers at a discounted rate and sell it on to advertisers for a huge and undisclosed premium. When the Guardian purchased some of its own ad inventory and followed the money, it discovered that up to 70 percent of revenues were siphoned off before ever reaching the publisher.9 Middlemen were snatching most of the value, leaving news providers with as little as 30 cents of each dollar spent on ads attached to their content. Back in 2003, by contrast, almost the full dollar went to the publishers.
Figuring out how to get your program played on a phone without paying a toll to the phone maker isn’t a copyright violation, but it is a business-model violation.
The GDPR offers many benefits to citizens, but these unintended consequences harm more than they help. The fatal mistake was in regulating invasive tracking, rather than banning it altogether. The result is that tracking continues, but at such a high operating cost that only the biggest companies can participate.