Online Community Fights Big Tech’s ‘Chokepoint Capitalism’

Nerdy. Sharp. Radical. That’s how the Financial Times described Cory Doctorow and Rebecca Giblin‘s book Chokepoint Capitalism, published in September. Its theme? “Creators aren’t getting paid.”

“That’s because powerful corporations have figured out how to create “chokepoints”, that let them snatch up more of the value generated by creative work… before it reaches creative workers,” the book’s Kickstarter page further explained.

“The reception has been incredible,” said Giblin, a professor at Melbourne Law School researching the intersection of law and culture, told me of the book last week. Giblin is also the director of the Intellectual Property Research Institute of Australia. “People around the world have been picking up the term “chokepoint capitalism” to describe what’s happening in their own industries, and to explain it to others.

“While we focused on creative labor markets, we argued the same phenomenon is hurting folks across a huge variety of others, too, and that’s exactly what readers have been telling us. One that particularly sticks in my mind is a note from someone telling us that our theory exactly explains the torment of his own industry — the international market for ornamental plants. Wild!”

Our problems start with an unusually high consolidation of power, the book argues.

The competition-crushing chokepoints, Giblin warned in a recent interview, happen when corporations amass “hourglass-shaped markets that have consumers at one end and suppliers at the other, and themselves squatting at the neck — where they’ve distorted this in a way that forces everybody to go through them so that they get to mediate access, and they get to extract more than their fair share.”

Facebook falls into this category. So does Amazon. Both have large user bases and a large supplier base (Facebook for ads, and Amazon for pretty much everything else). And increasingly, they squeeze both ends for their own profit.

Craigslist’s founder Craig Newmark has applauded Doctorow and Giblin for demonstrating that “Capitalism doesn’t work without competition. Giblin and Doctorow impressively show the extent to which that’s been lost throughout the creative industries, and how this pattern threatens every other worker.”

Or, as the Atlantic puts it, the two authors “make a convincing case that taking on Big Tech and Big Content — seemingly a lonely and demoralizing endeavor — is, in fact, an opportunity for community.”

And looking to the future, Doctorow sees a real opportunity for making a real impact — if not sparking a bonafide movement. “Our theory of change here is that ‘anything that can’t go on forever will eventually stop,'” Doctorow told me in an email last week, “which means that the busted entertainment/tech economy will continue to lurch from crisis to crisis, and when those crises strike, ‘ideas lying around’ at the fringes can move swiftly to the center.”

“So the next time there’s a debate about link taxes or mandatory copyright filters, we will have these widely socialized, well-developed plans to inject into the discourse as more productive proposals — moreover, they’re proposals that recognize audiences and creators as class allies with a mutual class enemy in both Big Tech AND Big Content,” Doctorow wrote.

People Are Listening

When I asked Giblin about their own collaboration, it sounded like a natural fit — and the timing was right. “Cory and I have been screaming into the void on these issues for so many years, but this moment feels different — people are listening, they’re angry, organizing, and demanding action more than I’ve ever seen before.”

Doctorow explained that businesses start by sharing their surplus to their users — like Amazon’s early free shipping and losing money on books. But then they focus surpluses on business customers — who eventually also depend on the platform.

In November the Washington Post calculated that when Amazon shows you search results, more than 50% of the first five screens are either Amazon touting its own products — or products that paid for a higher featured position. “Amazon has a $31 billion ‘advertising’ market. It’s not ads; it’s payola to go to the top of the search results — to put something at the top of the page when you search for something that isn’t what you searched for!” Doctorow wrote.

And the end result? “Once we’re locked in, and once we’ve locked in the business customers, then they start to take that surplus and they give it to their shareholders!”

So while some may argue that strict copyrights will empower creators, Doctorow notes that more-concentrated markets distribute that benefit elsewhere. “Once there’s a chokepoint — once you have to deal with a handful of companies — then giving the creator extra copyright is like giving bullied kids extra lunch money.”

As Doctorow sees it, a “structural intervention” is needed…

Just One Distributor

Doctorow provided specific examples of how today’s concentration truly is worse than in the past. In the 1970s there were 300 mass-market paperback distributors nationwide servicing independently-owned grocery stories and pharmacies — but now there’s only one. (“If you are reading a book, Ingram Content Group is probably behind it,” brags the company’s website.) Publishing has also consolidated into a Big Five, “so you can see how consolidation has produced these brittle points.”

“I also can remember a wonderful time when the internet wasn’t just five giant websites filled with screenshots and text from the other four,” Doctorow wrote.

If you ask what’s behind this trend, Doctorow believes you can trace it back to a common phenomenon. For example, “Almost every successful product Google has ever marketed is a product they’ve bought from someone else — on terms that historically would’ve been prohibited, until we started deregulating the mergers and acquisitions market, and produced this incredibly concentrated industry.”

Giblin even argues that the practice is now virtually institutionalized. “The orthodoxy now being taught in business schools is that competition is for losers… What you want to do is create a business that gives you a moat against competition, that stops other people from entering the market. And that rather than making something or providing a service that people need or that makes the world better, what you should be aiming to do is to position yourself around or between the people who are making those things and the people who need them, in order to extract value from other people’s work without actually necessarily providing meaningful value yourself.”

Giblin notes that this doesn’t lead to a technological utopia. “We keep getting told that all the money generated by these monopolies will lead to more innovation, but that’s not-at-all borne out by the evidence, and in fact it’s an inverse correlation. If we’re going to be fixing this — if we’re going to be fixing all of the biggest problems that are confronting us right now, unregulated markets are not the way to do it.”

What we have instead, Doctorow argues, is a world of power perpetuating itself. In the past, “Even though there have been great consolidations at various times in art, those consolidations were periodically overturned” by disruptive technologies like CDs and MP3s.

“It’s not true anymore. One of the stories we tell in the book is how the big three [music] labels, by dint of owning 70% of all the recordings, required Spotify to give major chunks of equity to them as a condition of allowing it to have any of their catalogs. And then they decided how Spotify would work.”

The Right to Exit

Giblin actually has a healthy skepticism about heavy-handed regulatory regimes — and the government’s ability to keep up with fast-moving industries. “I think you have to be very careful about unintended consequences of regulation,” Giblin warns.

So what does work? “Anything that directly regulates buyer power, that encourages countervailing power in workers and suppliers, or that encourages new entrants into the market. Those are the kind of interventions that will actually make a difference, to allow us to start widening these chokepoints out.” (Although Giblin acknowledges “these are not individual solutions either…. We are going to need to work together to demand changes in all of these…”)

Doctorow points out there’s also one simple technological factor that can force better treatment of creators: interoperability. “If you can leave a platform, the platform has to earn your business.”

“If Apple was legitimate when they reversed-engineered Microsoft Office and made iWork, Pages, Numbers, and Keynote — then it would be equally legitimate for me to reverse-engineer iOS and make my own app store.”

Giblin points out another advantage of interoperability and “the right to exit.” If customers could take their purchases to another platform, it would be easier to create competing platforms — perhaps offering greater compensation to creators.

“That’s exactly the kind of intervention that’s going to encourage that countervailing power in workers and suppliers that we’re talking about as being essential to widening out these chokepoints.”