2024-10-21
Chokepoint capitalism is a model of economic activity where goods flow from creators to consumers via a tightly controlled, corporate-owned channel. Chokepoints exist across a range of industries, but the current state of cultural markets in a ubiquitously digital world sees us in a situation where much of everyday life has been captured by big business.
This post contains my notes from reading _Chokepoint Capitalism_ (2022) by Australian scholar Rebecca Giblin and writer/activist Cory Doctorow. It’s not a rundown of the entire book, just personal takeaways I didn’t want to forget. If anything here interests you, I’d recommend getting a copy of that book. It’s a compelling read.
Antitrust laws protect trade and commerce from unlawful restraints and monopolies or unfair business practices. Between 1940 and 1980, US wages tracked with increased worker productivity.
In the 1980s, Robert Bork and the Chicago School of Economics introduced the idea that antitrust regulators should focus instead on maximising short-term consumer welfare mostly in the form of lower prices. This led to smaller businesses folding or being bought over by larger businesses that have greater capacity to sell stuff cheaply.
This in turn has transformed our culture markets into an oligopoly: a small number of very powerful players controlling most of the market.
precious little of the vast wealth generated by art and culture is shared with the people who actually make it. (Chapter 1: Big business captured culture)
Tech giant Amazon calls their flywheel a “virtuous cycle”, where lower cost structures lead to lower prices, which create better customer experiences. This generates more traffic and attracts more sellers, which mean better selection for customers.
Chokepoint Capitalism video about how the corporate flywheel works
However, this is not virtuous at all when “lost cost” effectively translates to a shakedown: a giant corporation anti-competitively forcing smaller players into tighter and tighter margins. First they lock in users, then they lock in suppliers, then eliminate the competition, then force workers & suppliers to accept unfairly low prices (“your margin is my opportunity”).
This flywheel means Amazon is both a monopoly (to customers) and a monopsony (to sellers), making them a recognisable chokepoint in the culture economy.
Monopsonies are harder to regulate against due to false positives – they can weaponise antitrust law to harm smaller and less powerful marker players. Amazon actually did this in retaliation to publishers who banded together with Apple to negotiate agency pricing as an alternative to Amazon’s forced platform pricing (Chapter 2: How Amazon took over books).
Capitalism without competition isn’t capitalism at all; it’s a ‘command economy’ structured around the whims of corporate boardrooms. (Chapter 1)
Chokepoints aren’t unique to culture industries, but are especially pervasive in creative labour markets because humans can’t help but create and are thus vulnerable to exploitation. Creative workers are canaries in the coal mine for labour markets.
“Platforms” aren’t the problem, nor are “multi-sided marketplaces” – it’s the predatory middlemen, who can create hourglass-shaped markets, that hold the power to threaten livelihoods. This is why more copyright, locks and filters won’t help because powerful players will just exploit those too, using a portion of their own revenues to lobby politicians and government for corporate-favouring policies.
Amazon started as an alternative to a consolidated bookstore market dominated by B&N and Borders at a time where smaller bookstores and mass-market book retail was going under. After the attractive “challenger” era of their flywheel had captured a large enough share of buyers, they then used their sales data to target the sellers dependent on them.
Non-compliance with Amazon’s proposed terms meant penalties like having BUY buttons and preorder capabilities removed (eg. Melville House Publishing, Hachette, Macmillan).
when companies are forced to give greater discounts to their most powerful buyers, they tend to find the money by ‘exercis[ing] their power over their workers to further depress wages and other workplace investments.’ (Chapter 2)
This ends up with authors and culture workers covering Amazon’s margins: Amazon shakes down publishers who in turn shake down their workers and authors. More copyright is useless without ways for creators to hold onto and exercise those rights.
Digital rights management (DRM) is touted as a form of privacy protection, but those software locks can easily be broken. DRM’s main function is keeping honest customers locked to a particular chokepoint through high switching costs (“but all my books are on XYZ platform”) and threat of legal action (it’s illegal to crack DRM even when no copyright infringements occur).
The “true heart of surveillance capitalism” is the abuse of monopoly/monopsony power to deprive us of choice.
When digital technology brought on the decline of print news and magazines, many newspapers were targeted for leveraged buyouts, ie. purchases where the buyer borrows against the value of the business to cover the sale, then has to recoup the funds to pay back the loan. They often do this by cutting costs and selling off property, such as plant and equipment used for producing work.
In response, newspapers had to establish themselves online and monetise through advertising. But the online ad industry, dominated by Google, Facebook and major adtech firms, is opaque with a track record of publisher devaluation (where advertisers can reach high-profile audiences for low-profile prices because of how the underlying tech works), fraudulent reporting, and other scams (eg. Uber ad click scam, click farms, domain spoofing).
Advertisers tend to favour safe lowest-common-denominator choices, so avoid buying ad space associated with controversial topics like Black Lives Matter, LGBTQI+, etc. This translates to such topics bringing in less revenue despite being of greater relevance and importance to society and humanity.
A small number of major record labels/publishers control the majority of the music industry by amassing copyrights and licenses, and binding artists to exploitative contracts. An artist can sell millions worth of records but only see a couple thousand in royalties, their earnings truncated by “breakage” and “recoupment” clauses that favour the label and deprive the artist of money. Artists take up these deals because there’s nowhere else to go. They effectively have to choose between a shit deal or no deal at all.
The internet was meant to democratise music, but both labels and tech companies use their power to maintain chokepoints through unfair remuneration terms (eg. shared revenue pool), “most favoured nation” contract arrangements (eg. indies lost out when Spotify reduced royalty payouts before IPO), and sketchy definitions that change to benefit certain parties (eg. digital music cases are called “licenses” so consumers can’t deprive a publisher of revenue through reselling, but called “sales” so musicians earn a lower royalty rate overall).
USA, Rwanda, Iran and North Korea are some of the only countries in the world who don’t pay royalties for radio airplay. In these regions, Big Radio operates differently to Amazon, record labels, and streaming platforms, which rely (respectively) on high switching costs, aggregated copyrights and licensing duplicities.
Instead, it weaponises regulatory capture, where regulators look out for the interests of those they’re meant to police rather than those of the public. It’s a vicious cycle — Big Radio uses their regulatory advantages to accrue huge audiences and revenues, then uses those monopoly profits to strengthen their hold over regulation. This keeps the cost of entry high for smaller players and makes it hard for unfair rules to change.
In the US, three poultry processors control almost the entire chicken industry. They bought up everything to do with chicken production, then insisted farmers use the goods they supply, and dictated how chickens were to be raised (vertical integration). Because they control the entire industry across the country, farmers are stripped of their bargaining power. This extreme centralisation due to vertical integration is rampant in agricultural markets. The term for it is “chickenisation”.
Live performance and event ticketing is being chickenised, thanks to Live Nation Entertainment, an entertainment company that manages artists, bookings, venues and ticketing (especially since its buy-up of Ticketmaster). It has made itself the tollboth and gatekeeper of the live music world. Live Nation has shaken down and bullied small venues into contracting, screwed over artists and fans by enabling the secondary scalper’s market, and held small market players hostage to the point where they would only be interviewed for Giblin and Doctorow’s book on the condition of anonymity.
Creative agencies representing Hollywood writers tried to become chokepoints in their market, where instead of representing their contracted writers to Hollywood production studios, they began offering agency “packages” that bundled key actors, writers and directors for each project. These agencies would also own a stake in production houses which would then happily pay the “negotiated” packaging fees. All this saw more profits for the agency at the cost of value realised by the people who were actually doing the work.
Taking collective action in 2019, seven thousand Hollywood writers fired their agents in protest. The Writers’ Guild of America sued the Big Four agencies for breach of fiduciary duty and established a new code of conduct abolishing packaging fees and prohibiting agencies from owning too large a stake in production houses. They set union rules requiring members to terminate relationships with any agents who didn’t sign onto this code of conduct.
A certain giant App Store is an example of an anticompetitive flywheel, with so many users locked in, gatekeeping powers over iOS software installations, and an imposing DRM system. The platform’s percentage cuts and anticompetitive conduct reigns virtually unchallenged. What’s more, their chokepoint feeds other chokepoints through exclusive arrangements with market players big enough to pose competitive threat.
When Epic Games ran up against the garden wall with *Fortnite*, Epic activated a hidden feature allowing users to pay directly rather than go through the App Store. This goaded the platform in question into banning *Fortnite* from the store, which gave Epic grounds to sue on the basis of antitrust violation. The App Store proprietor eventually made changes in response to the bad press, but its new terms were of little material value to creators and people whose digital goods aren’t covered by the subsequent discounts.
Allowing big corporations to control gateways to audiences means there is always a risk of this kind of behaviour.
YouTube’s Content ID system has led to a dogpile of copyright and DMCA cases, due to the prevalence of false positives and the difficulty with which a content creator can challenge them. The system can match known audio and video patterns, but cannot apply discretion to the context in which they’re used (eg. fair use). The process for challenging false positives is so unwieldy that even copyright law experts have trouble navigating them, so most people don’t bother since this can put their whole account at risk of deletion. Any benefits from YouTube’s system are beholden to YouTube’s terms, because YouTube now controls access to video and content — and like with music labels, some benefit is considered better than no benefit.
Many creators are now reliant on YouTube’s recommendation algorithm to the point where the algorithm shapes creative decisions. And there isn’t really anywhere else to go, even though technologically and behaviourally superior platforms exist. YouTube has too much of a monopoly and has captured too much of the internet video audience.
“The first step in avoiding a trap is knowing of its existence.”
— Thufir Hawat, *Dune* (Frank Herbert)
Understanding how chokepoints and anticompetitive flywheels work can help us realise and appreciate how to brake and dismantle them. Rebecca Giblin and Cory Doctorow have identified high-level ideas and actions that can shift us towards a better, fairer market shape:
Mandating that authors, creators and performers are permitted easy access to relevant, comprehensive and timely information about how their works are being exploited, the revenues they generate, and the compensation they are due. This would make it harder for chokepoint platforms to hide predatory behaviour.
Rallying together in organised movement against predatory behaviour. Historically, collective action has worked in the film and television industry, the rideshare and delivery industry, the audiobook market, and in labour industries. Additionally, we need to fight for a pluralised, decentralised, human-centric digital world where we can continue to organise and fight back.
This would prevent corporations from accumulating copyrights over decades, using their monopoly and disproportionately large bargaining power to deprive creators and workers of their dues. The need to renegotiate copyright contracts periodically would force copyright exploiters to offer more attractive terms.
This lowers switching costs, allowing audiences and creators more freedom to decide how they use technology and consume content. It lowers the level of centralisation and reduces the any single entity’s power to abuse. Such interoperability is summarised by the term “comcom”, short for “competitive compatibility”.
One suggestion for achieving this is statutory licensing over private contracts. Statutory licensing is a system whereby providers are given the right to use copyrighted material for a set fee and compliance with licensing conditions. Correctly calibrated, this could help level the playing field for creative newcomers and artists who create high-quality work that doesn’t fit the mould for high-engagement and mindless consumption. It would contribute to reducing conflict of interest and facilitate smoother flowing of works and royalties between international markets.
Banding together under co-ops – participant-owned organisations – to promote and advocate for the interests of the people involved. Under a “rising waters lifts all ships” model, collectively owned initiatives could support meaningful alternatives that would help free culture from the iron grip of chokepoints.
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