Audiblegate 2: The Emperor's New Clothes Policy, Pot Theory, Unicorns & Pirates
Prior Blogposts on Audiblegate: Audiblegate! The incredible story of missing sales
Welcome back to Audiblegate, the place where things just keep getting weirder and weirder. Settle in, this is a long one but ends, no less, in Brussels after we visit the Emperor's New Clothes Policy, the pot theory, unicorns, pirates and so much more. If you haven't read my first blog post on Audiblegate, start here first. Everything, of course, is all ALLEGED. One of my favorite stories is Hans Christian Andersen’s The Emperor’s New Clothes. You know, the tale of two swindlers masquerading as tailors who trick the vain Emperor into believing that the new clothes they've created for him are only visible to those who are clever and competent? Nobody's going to admit they couldn’t see these clothes, not him, nor his most trusted minister, the courtiers, or those in the crowd as he parades by, nobody! That is until a young child calls out “but he hasn’t got anything on.” Still the Emperor continues with his parade even though he suspects the boy is correct and he has indeed been tricked. Who wants to admit they’ve been conned?
Well, we authors, Audiblegate whistleblowers, are not happy to be swindled, but we're not ashamed to admit we were conned. After all, the swindle was well played and though some out there, including Audible and ACX, still want you to believe this isn’t as bad as it seems or that it's part of business in the modern age, don’t you believe it.
The swindler in our story, Audible/ACX (both pretty much acting together and residing in the same building, so let’s call a spade a spade) wrote to all those trapped in contracts with them on the 12th November, apologizing and offering “to show our appreciation for your continued support of ACX, for the month of December 2020 we will pay an additional 5% royalty on all sales of your ACX audiobooks through Audible, Amazon, and iTunes.”
They end with a heartfelt, “ACX would be nothing without you, the creators of more than 200,000 audiobooks that have delighted listeners for the past nine years.”
Gee, that’s nice, glad you feel that way guys. Please pay for those books then and provide transparency while you're at it. This email arrived following more than three weeks of an avalanche of emails from authors, rights holders and narrators asking that we receive our returns data separated out from our reports. We replied immediately repeating our request for transparency and what with all the advertising of their returns "benefit," we certainly felt as though the days of trust were behind us, and we'd appreciate seeing how much we were actually worth to them.
But something's not right here with your offer, we added, because our math tells us that 5% of nothing, which is what we’ve been receiving for up to fifty to sixty percent of our audiobooks is, well, a big fat 0% nothing.
So, our emails continued with us even more determined to prise our returns data from their clutches and stop this "Easy Exchange" policy to which they seem so committed.
Our pleas and social media campaign caught the attention of some wonderful allies. The Authors Guild and Alliance of Independent Authors certainly saw that indeed the clothes we'd been sold were pretty close to threadless, and made their own statements to the fact. By now though most of the replies to our emails to ACX, which had previously been copy-and-pastes of each other, were now being ignored. Until...
“A Note from ACX”
Arrived in our inboxes on 11/24/20.
This one extolled the virtues of ACX, but those virtues didn't extend to providing one extra column breakdown for our returns data.
The intent of this program is to allow listeners to discover their favorite voice, author, or story in audio. In instances where we determine the benefit is being overused, Audible can and does limit the number of exchanges and refunds allowed by a member. But as designed, this customer benefit allows active Audible members in good standing to take a chance on new content, and suspicious activity is extremely rare.
We hope this helps convey perspective to our valued writers and ACX partners as to the impact of our current returns policies. However, in recognition of these concerns, moving forward and effective as of January 1, 2021, Audible will pay royalties for any title returned more than 7 days following purchase. This adjustment does not impact our customers' current benefits of membership, and we look forward to continuing to welcome millions of first-time listeners, enabling our members to discover new content they enjoy and growing the audience for our valued creative partners.
Oh, gee, that’s nice Audible, except for a couple of things.
No mention of returns breakdowns, so we STILL have no idea, in fact, how many audiobooks are returned in seven days or thereafter to know if this helps us in any way. Authors believe from anecdotal evidence that more readers hit the exchange button in seven days than after.
Why are you waiting until after Christmas, the busiest retail time of the year, Audible? Why not now?
Where’s the promise of repaying money you’ve already funneled out of our royalties for all these years?
And, wait, there’s a little problem with those returns you're paying for after seven days, a little something we call the “pot theory,” which could mean that authors and narrators are still going to be paying.
THE POT THEORY
Now this one involves some math. So, bear with me. Author Olivia Atwater read through the pages and pages of our non-negotiable contract and teased out how ACX calculates the royalties paid on those credits most members use to buy their audibles.
When an Audible subscriber spends a credit, authors and narrators are not certain of the exact royalty dollar value they'll be paid. We are not privy to HOW Audible calculates the variable worth of credits each month, but we know it is related to how much monthly subscription income is placed in the entire pot, based on ACXs contract.
This is how they describe their system, and read A La Carte as sales to non-Audible-members. I’ve left out a lot of gobbledygook so that nobody will be injured during the reading of this. What I will say, though, is many authors were harmed in the creation and implementation of this system.
Their contract states:
Royalties for each Unit will be calculated by multiplying the Royalty Rate for the Unit set forth in the chart above by “Audible’s Net Sales Receipts” which consist of: (i) A La Carte Net Sales Receipts (as defined below) for all a la carte sales of the Audiobook, and (ii) Membership Net Sales Receipts (as defined below) for all sales of the Audiobook to customers who are members of one of Audible’s membership programs.
What we think this means is that all members pay their membership fees each month, then Audible/ACX add that to all the one-off sales to members, and that’s what we authors have called the “pot”. We call it the “pot” because in the Amazon world there’s an eBook library program, Kindle Unlimited, where Amazon does a similar thing and we are paid per page read, not download. That per page read amount is worked out monthly based on subscriptions, which they call the “pot.” Just like this program (which supposedly isn’t a library, even though Kindle calls theirs a library), we share in the “pot.”
Now this is where it gets interesting. Stay with me. More gobbledygook.
“A La Carte Net Sales Receipts” means the monetary amount received by Audible from a la carte sales of each Unit, less any cash incentives, promotional discounts, sales or use taxes, excise taxes, value-added taxes, duties, and returns.
“Membership Net Sales Receipts” means, for each Unit, the monetary amount obtained by multiplying the AudibleListener Allocation Factor (as defined below) by Audible’s a la carte price for the Unit at the time the AudibleListener Allocation Factor is calculated.
The “AudibleListener Allocation Factor” means the total of all membership sales receipts derived from sales of all content sold by Audible in the applicable accounting period, less any cash incentives, promotional discounts, device subsidies or rebates, sales or use taxes, excise taxes, value-added taxes, duties and returns, divided by the total a la carte value (as determined by Audible’s applicable a la carte price for the Audiobook at the time the AudibleListener Allocation Factor is calculated) of the membership sales of all content sold by Audible in the applicable accounting period.
Now, you're probably asking what the heck is an Audible Allocation Factor? Yeah, good question. I think that’s Amazon speak for we put numbers in a hat, low numbers mind you, and that’ll do as a multiplier. What I want you to focus on though is highlighted in red.
Focus. On. The. Returns.
This is how we think it works...
Under the original returns policy, a subscriber could "exchange" an audiobook to recoup their monthly credit and spend it on a new book. They could do this up to 365 days after first spending the credit. In this case, Author #1 loses a sale up to 365 days later, while Author #2 where they spend that credit again gains a sale.
Under the new returns policy, the Emperor’s New Clothes Policy, a subscriber can still "exchange" an audiobook in the exact same way, up to 365 days later. The only difference is that if a user exchanges a book after 7 days, both Author #1 AND Author #2 will receive the royalty for their sale.
Ooh, that seems good, and even if most of them are returned in the first seven days, that’s still something, right?
Well, no, because these returns after seven days are still potentially deducted from the exact same pot of money we all share. It's still lost to authors and not being worn by the oh, so, magnanimous Audible, the party with the overly large share of the profit split.
If one assumes that Audible is dividing this “pot” in order to pay out on credits spent, then the two returns policies (VERY simplified) would result in math that looks something like below. These amounts are for example only and really the pot will have less in it because Audible deducts a lot out of that $15.
Original Returns Policy (Audible makes $10, Author on 40% royalty makes $6)
10 subscribers at $15 a month = $150
Pot gets 40% of that, so $60 to split
Each subscriber originally buys one audiobook with their credit; Audible divides the pot by ten books and gives each author 40% of that: each author paid $6
1 subscriber returns an author's book and buys another author's book with the same credit
The pot stays the same, the division stays the same, but one author loses $6 and another author gains $6.
NEW Emperor’s New Clothes Policy (Audible makes $10, Author 40% royalty makes $5.45)
10 subscribers at $15 a month = $150 pot to split
Pot gets 40% of that, so $60 to split
Each subscriber originally buys one audiobook with their credit
1 subscriber returns an author's book and buys another author's book with the same credit, but Audible does NOT claw back "royalties" from the first author. Instead, the second author is also credited with a sold book.
The pot stays the same because returns are deducted from the whole "pot", but there are now 11 books bought and paid from the same pot. Each author now earns ($60 / 11) leaving $5.45 per author.
Now instead of authors being hit with returns (and keeping in mind we are all still going to be hit with returns in the first seven days, when returns are probably highest), all authors now share in the losses incurred from the "readers' benefit" for the rest of the 365 days.
No wonder Audible/ACX still insisted on keeping their “benefits” for their members. Now members will feel okay returning books because, Hey, Audible/Amazon is owned by the world’s richest man and he’s not going to miss a few bucks, right?
Yet again, here we are, the "valued writers and ACX partners" still wearing the cost of the Audible’ library system. Nothing changes. Still wearing no clothes, I’m afraid. Now we have new questions to ask of Audible/ACX like how do you calculate this “pot” and what in the flipping heck is an “AudibleListener Allocation Factor”?
Who even came up with that? So, don’t be fooled by these fake clothes. This is a fake offer!
While we’re talking about fake. Audiblegate has been reported in a few trade papers like Publishing Perspectives, and even in mainstream media such as The Guardian (UK). On social media much discussion has ensued about whether the December extra 5% and the Emperor’s New Clothes amendment are a win. Some think they are, but they're not. Just so you’re not left there during the parade admiring the beautiful threads that don’t exist let me break some of these down.
Authors overestimate the misuse of the returns “benefit”
Let’s keep in mind this Easy Exchange "benefit" has been advertised everywhere you turn: on Audible sites all over the world, on the Audible app, via emails and even in surveys to see how well aware members are of this bonus. So, we know it isn’t something you’d accidentally stumble upon, hidden in the fine print. This is in BIG PRINT!!!
Audible says, “as designed, this customer benefit allows active Audible members in good standing to take a chance on new content, and suspicious activity is extremely rare.”
Readers, who have availed themselves of this “benefit” and even respected industry articles have quoted Audible members as pointing out that Audible removes your ability to keep returning books directly from the simple “exchange” app button after a certain number. One user even said, "who bothers once you hit that number to then call and continue with the return spree? One even mentioned a whole book club had hit their limit. Hmm, that sounds rare, a whole book club!
Well, we have plenty of evidence showing returning is still simple after you hit the nine limit, if you don't already think nine returns from one credit is a big number, that is. You can email or chat if you don’t want to spend a precious two minutes calling their center. Chat’s easy. Takes just a minute. One of our testers says you don't need to even talk. You just open a chat, say you want to return a book and then close the chat and a few minutes later they send the credit.
Yes, about the rumor that we’ve tested this system and returned twenty-eight books in five days with some read all the way through or past 75% (all on mute and not listened to). True! And just in, we've had someone return fifty! Five Zero. We’ve run multiple tests, including someone joining for the free membership, cancelling their membership two days later, and still returning twelve books even though they hadn’t paid a cent and were no longer a "member in good standing."
Oh, and for all those wondering what the limit is—if I had a dollar for every time, I read that speculation, I’d be rich. I’m certainly not getting rich from selling audiobooks—but here’s the answer. It’s nine returns on the app hitting that little button. After nine, you just contact Audible reps and they’re happy to return for you because if they said, no, they might get a bad rating.
And this isn’t “suspicious activity,” at all. It’s a “benefit,” advertised as "return any book, for any reason, no questions asked." So, I think there’d be a few consumer and advertising laws you could quote to them if they tried to say no.
Now, at this point after revealing all this and sharing the worst kept secret in publishing, I would like to pause to beg any readers who’ve made it this far, to please don’t return books because you’ve learned all this now. It’s simply not fair to authors. Very few of us are rich and if you want more books turned into audiobooks in the future, please allow us to be paid fairly. In fact, why don't you join us in our fight at our fight group at Facebook.
Returns are rare?
No they're not! Authors who keep daily records of their sales recorded anything up to fifty to sixty percent of losses during the 20th October glitch that saw three weeks of returns clawed back in one day. Below one percent is rare. Anything above two or three is an issue, but fifty to sixty percent, well, that’s rampant. That’s a disease that’s going to kill the host. Trust me, on that one.
So, if you read anywhere about authors, even well known authors, quoted as saying they are unconcerned about the impact on their income stream and quote their returns as “small”, I’d love to know how they came up with this calculation. Unless they’re very, very special and maybe know the Emperor's swindlers really, really well, where’d they get their returns reports?
Similar to pirating is another claim. These readers wouldn’t have bought the same quantity of books if they couldn't listen for free.
Wrong! Sorry, two different things.
Pirating is illegal. This returning here isn’t even fraud or naughty-naughty behavior by members. Readers are legitimately returning books under a program created by a company owned by the world’s richest man, who enjoys a dominant position in the marketplace—due in part to this quasi-library creation.
Pirates, on the other hand, profit from stealing the intellectual property of rights holders and selling it illegally on websites (usually hosted in some small European country where they can’t be sued). These sites pop up, and when they are caught, disappear and then pop up again somewhere else. In every developed country this behavior is illegal.
In this case, Audible is an affiliated company of a publicly listed company misusing market position and incorporating what appears to be deception to not pay for content. This, sadly, is not illegal, at first glance. Amoral and possibly a breach of contract and copyright with the remedy being a class action lawsuit, which can be brought in countries in which the company operates. Unfortunately for us authors and narrators our contracts prohibit us from a class action lawsuit, so we're kind of stuck unless a smart lawyer looks over our contracts and figures out what we can do.
Audiobooks' Unicorn Qualities
Audible works on a credit system where supposedly listeners may take sometimes months to get around to listening to an audiobook they’ve chosen. So, some out there suggest it may be good business to support the longer returns window.
Interesting how audiobooks are somehow magically, unicorn special compared to other digital products. I don’t always get around to immediately watching films I’ve purchased, or read books, or even wear new clothes for awhile, but my window for returning those is noticeably less, forty-eight hours for films and can't have been watched, and seven days on Amazon for books. In a book store, I doubt I can take back a book after nearly a year with the claim that I’ve been busy.
Then there’s the line peddled ad nauseum by Audible and ACX that “the intent of this program is to allow listeners to discover their favorite voice, author, or story in audio.”
Let’s think about this, friend, what they are saying is that this is the only reason readers will take a risk on us untalented, unknowns. The company who can’t supply us with basic data hasn't delivered any evidence to support this though, so I say, patently not true!
Does nobody purchase non-blockbuster, well-known branded films or books? Or pay for a ticket to a film which doesn’t star household name actors? Are audiobooks so prohibitively expensive that no one will take a risk unless they’re granted a year to work out if they like an audiobook or not?
Common sense needs to prevail here. This is a company hailed as a leading tech operator in the world, masterful in their ability to track behavior and anticipate consumer desires in order to recommend products that most suit and, thus, that a customer is more likely to buy.
Yet, when Amazon or Audible recommend an audiobook, somehow, despite utilizing all their marketing power and A.I. programs, they are unable to deliver just the right one. The consumer then is so befuddled they are unable to consult the reviews, listen to the sample, read the first ten percent of the eBook should they still remain uncertain, and then make an adult, informed decision. They, according to Audible, require a safety net of 365 days, then the reading of the entire book if they so require, to be sure that they gained enough value. If they can’t avail themselves of all this support, all other authors except household names, supposedly, would never sell a book. Gee tell that to all the breakout authors who have become household names. This anomaly in consumer behavior must be limited to only audible books and the consumers of them have evolved into a different kind of book lover, one who is paralyzed with fear of making the wrong choice. Thank goodness Audible is taking care of these listeners, otherwise this fragile audiobook industry would be doomed and not continue to grow at a rate of near 25% per annum.
Are we really “valued creative partners?”
They keep saying this in all their emails and it sounds so fluffy and warm. Yet, they don’t treat us that way. If what I’ve laid out here isn’t enough to convince you that these are not companies to be trusted, that they play accounting sleight of hand, while promoting unfair returns “benefit” to their readers, who are, also, our readers, then this next one will surely alarm you.
On the 28th November 2020, authors began to report receiving a new email. This one, not so fluffy and warm. It also appears to have arrived more so in the inboxes of those author/narrators who’ve written to ACX asking for their returns data. Some even received this as a returned reply to requests for a returns audit of their accounts.
We are reaching out to let you know that we have flagged the following titles for suspicious free trial activity. These title(s) have been removed from sale on Audible, Amazon, and iTunes due to “suspicious free trial activity. They go on to say that “the fraudulent transactions will be cancelled, and these titles will remain out of store permanently. You will receive royalties accrued for legitimate purchases on the on the (typo here, ACX, you’re welcome) these titles with your ACX payment at the end of November 2020.
We will continue to monitor your account, and if additiona