* With sufficiently large and entrenched companies.

There's a semi-common meme on Twitter where people share their most X opinion, where X is a group the poster doesn't identify with; or sometimes my least X opinion, where X is a group they do identify with.

In that spirit, my least libertarian opinion is that exclusivity deals with sufficiently entrenched companies^[1] are bad and should be illegal^[2].

To make it even less libertarian, I think it should be an unfair playing field and their competitors should be allowed to pay for exclusivity^[3]. If you're a new entrant to a market, an exclusivity deal might be the only way you can break in, and more competition is good^[4].

Exclusivity Deals With Monopolists Have Asymmetric Costs

The problem with exclusivity deals with a company that already has a monopoly is that the cost is much higher for a new entrant than the monopolist.

I hunted down some stats for market share and  some royalty rates for the top platforms:

Note that you can get Audible's exclusive rate by being exclusive to ACX^[6], an Audible-owned company which also distributes to Apple and Amazon.

Your Choices

So, say you want to sell $10,000 worth of audiobook to a market where customers are 100% loyal to the platforms they used in 2021. Your choices are:

So the choice for users of this market is:

• Do the easy thing and publish with the monopolist.
• Do a ton of work using multiple distributors and make 8% less.

Note that the non-monopolists are already paying 10% more than the monopolist's exclusive rate! To break even, the last 19% of the market would need to offer an average royalty rate of 64%. For a company like Google to offer a worthwhile exclusivity deal, they would need to offer a royalty rate of 324%^[8].

This Seems Bad

The idea behind free-markets is that on a fair playing field^[9], businesses will compete to provide the best deal. Any company that provides a bad deal will be out-competed by someone else. Unfortunately, this depends on sellers being able to compete on costs, and exclusivity deals don't have that property: It costs Audible significantly less to buy exclusivity than it costs their competitors, in ways that their competitors can't compete with, even in theory^[10].

So, I think we should ban it.

1. ^{^}

   I have a truly marvelous definition of a sufficiently entrenched company which this margin is too narrow to contain.

2. ^{^}

   I propose the Abolishing Uncompetitive Distribution Imposing Barriers and Licensing Exclusivity Act.

3. ^{^}

   If you think I'm making this case too strongly, please argue against it. I would be so owned if someone forced me to have completely consistent libertarian beliefs with no cognitive dissonance.

4. ^{^}

   Citation needed.

5. ^{^}

   Apple allegedly pays 70%, but you can't publish with them directly and have to use a publisher like ACX which keeps most of your earnings.

6. ^{^}

   A company owned by Audible.

7. ^{^}

   Optimistically assuming 50% royalty rates for the long tail.

8. ^{^}

   Ok, so this might be too strong, since some people will switch platforms to listen to an audiobook, but I expect you're not going to get enough people to switch to bring this rate below 100%.

9. ^{^}

   Where everyone has their private property protected by the police and contract law.

10. ^{^}

    You might assume from this that I support a much more general form of anti-monopoly law. I don't want to argue against it here, but I'll just note that I'm not convinced that bigger companies are automatically more efficient, and markets in monopolized physical resources encourage technological advancement.