In a January blog post, we reported that, per our demands, ACX/Audible was building a new reporting system to offer greater transparency in reporting returns and exchanges, and that system has now arrived. On March 30, 2021, ACX announced that updates to its Sales Dashboard have gone live, allowing users to view and download returns as well as sales and other transaction data.
By way of background, the Authors Guild first contacted the CEO and general counsel of Audible in mid-November 2020 to advise them that its practice of deducting authors’ royalties for books returned or exchanged up to a year from purchase was a breach of contract, and to demand that it stop that practice. Over the course of our subsequent conversations, Audible quickly understood that charging ACX authors and publishers for books returned or exchanged long after purchase and consumption was not a winnable fight, and within days, agreed to stop deducting royalties for books sold if they were returned or exchanged more than seven days after purchase (not two days as we had asked). At the same time, we demanded that Audible show returns in its ACX reports, rather than just a net number of sales, so that authors and publishers could see how many returns had been deducted against sales. Audible readily agreed to provide that information, but advised us that it would take until the end of March to build that capacity into its reporting system.
The new dashboard and monthly reports launched on March 30 do now show “qualified” returns, and those returns are retroactive to January 1, 2021. Qualified returns are defined as those made within seven days of purchase, and they are shown on a title-by-title basis and by type of sale: 1) AL: audiobook units bought by AudibleListener members using their membership credits, 2) ALOP: audiobook units bought by AudibleListener members but not using their membership credits, and 3) ALC: audiobook units bought by customers not in an AudibleListener membership. The dashboards do not show returns made between seven and 365 days. (Audible does still allow members to make returns up to 365 days, but no longer deducts royalties for those returns.) The new reporting system also shows promo code units sold or given away, though no royalties are paid on those. According to ACX, the data visible in the dashboard will be updated daily, but sales may take up to three days to post in the dashboard from the time of the transaction. ACX has updated its FAQs to provide further guidance on understanding the changes.
While the updates to ACX’s Sales Dashboard are a step in the right direction, we are still waiting for Audible to address another major concern regarding its reporting—the complete lack of transparency in how it calculates the AudibleListener Allocation Factor (ALAF), which it uses as a multiplier (a rate of sorts) against the a la carte price of the book to determine the royalty payout that authors receive for books sold through Audible’s membership programs. The accounting reports don not show the ALAF that is used to calculate the royalty rate paid on sales to members, nor do they provide the total sales figures that would enable authors and ACX rightsholders to calculate it on their own, obscuring a critical detail on which royalty payouts for increasing numbers of ACX sales depends. Authors and ACX rights holders are left to rely on Audible’s word that it is calculating the ALAF accurately. The enigma around ALAF is further muddled by Audible’s manipulation of the figures used to calculate the ALAF. Audible advised us about how the ALAF is calculated in practice that departs from the contractual definition in at least two important respects: 1) returns are not deducted a second time under the ALAF even though the contractual definition says that they are, and 2) Audible added a floor in recent years to prevent royalties from falling too low as a result of a dramatic increase in members and a greater number of ALAF-based sales, yet information as to when and how Audible decides to apply the floor, let alone any mention of the floor itself, does not appear anywhere in the contract. These departures from what is in the contract leave open the question of what other unknown factors go into the calculation of the ALAF and the royalty rate paid on books sold to members.
We continue to press Audible for a full explanation of how the ALAF is determined and for full transparency on royalties. Until ACX authors and publishers understand how their royalties are calculated and what they will be paid for sales of their books, there is no true meeting of the minds with the ACX authors and publishers—making the validity of the ACX contract questionable.
We also support the demands of ACX authors for data on returns made and deducted from their accounts prior to January 1, 2021, and for back payment for those returns, which Audible has refused to provide. Audible claims that the returns prior to the policy change were minimal and did not significantly affect royalties, but it has not shared any data to substantiate this claim. Sharing the reports on a one-time basis with authors who have been asking for past returns data would go a long way toward assuaging concerns about its royalty calculation and reporting practices.
We will continue to share updates on these outstanding issues as we work toward increased transparency and fairness in Audible’s terms of service.
 ACX terms define ALAF as: “[T]he 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.”