Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 1 of 25
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
`
`Case No: ____________
`
`
`GOLDEN UNICORN ENTERPRISES,
`INC.; and BIG DOG BOOKS, LLC, on
`behalf of
`themselves and all
`those
`similarly situated,
`
`
`
`Plaintiffs,
`
`vs.
`AUDIBLE, Inc.,
`
` Defendant.
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`)
`)
`)
`)
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`)
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`)
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`)
`
`COMPLAINT
` (Class Action)
` (Jury Trial Demanded)
`
`
`Plaintiffs Golden Unicorn Enterprises, Inc., and Big Dog Books, LLC, by and through their
`
`
`
`
`
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`undersigned counsel and on behalf of themselves and all those similarly situated, complain of
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`Defendant Audible, Inc. (“Audible”), as follows. Plaintiffs, by way of this Class Action Complaint
`
`(the “Action”) make these allegations on information and belief except as to the actions of
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`Plaintiffs, which are based on Plaintiffs’ own knowledge.
`
`INTRODUCTION
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`1.
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`This Action seeks to recover royalty1 payments owed to Plaintiffs and class
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`members for audio distribution rights in their works (hereinafter, the “Works”) that Defendant
`
`
`1 In this Complaint, “royalty” refers to payments that were contractually due and/or paid to self-
`published authors and copyright holders based on actual or purported revenue realized by
`Defendant Audible. In some contexts, “royalties” denotes residual payments made to an author or
`initial copyright registrant by a party to whom copyrights have been sold or otherwise assigned.
`The use of the word “royalty” in this Complaint is not intended to imply that any Plaintiff or Class
`member sold or otherwise assigned any copyrights to Audible; rather, the Authors licensed to
`Audible only the rights to distribute recordings of the Authors’ Works.
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`Audible systemically withheld from thousands of authors, in bad faith, and in violation of its
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`contracts with those authors.
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`2.
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`Audible is a distributor of audio recordings (“Audiobooks”) of over 200,000 novels
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`and nonfiction books that are written by thousands of authors. Audible has maintained a secret
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`system of accounting for distribution of the Audiobooks that results in authors and/or copyright
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`holders (collectively, the “Authors”) being paid far less than 25% to 40% of the value of the
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`Audiobooks it distributes, the percentages for which they contracted. This central feature of this
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`accounting subterfuge is that Audible provides its customers and subscribers with far more
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`Audiobooks than are reflected in the terms that it reveals publicly and the numbers it reveals to
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`Authors. This course of behavior breaches the terms of the contracts between Audible and the
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`Authors, as explained in greater detail below, unjustly enriches Audible, and breaches the duty of
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`good faith and fair dealing that a party to any contract owes to its counterparty.
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`3.
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`The gap between the value of the actual Audiobook distributions and the value on
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`which Audible calculated royalties was revealed to Authors on or around October 19, 2020, by a
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`glitch in the software that Audible used to report sales and royalty numbers to authors. Without
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`this chance occurrence, Authors would still be in the dark.
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`JURISDICTION AND VENUE
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`Plaintiffs and Defendant are domiciled in different states.
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`On information and belief, the members of Plaintiffs’ proposed Class number in
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`4.
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`5.
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`the thousands and include residents of every state or nearly every state in the United States.
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`6.
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`The matter in controversy in this Action exceeds $5,000,000, exclusive of interest
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`and costs.
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`7.
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`The contracts to which Plaintiffs and Defendant are parties provide that any dispute
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`between the parties be adjudicated by a court or courts located in the County of New York, New
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`York State. Similarly, the respective contract(s) to which Defendant and each member of the
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`proposed Class are parties provided that any dispute between the parties be adjudicated by a court
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`or courts located in the County of New York, New York State.
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`8.
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`9.
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`By their own terms, these contracts are governed by New York State law.
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`Through the venue and choice-of-law provisions of these contracts, Defendant and
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`all Class members have submitted to the jurisdiction of the courts of New York State and to all
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`federal courts located there.
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`10.
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`Through these contracts and pursuant to 28 U.S.C. § 1332(d), venue is proper in
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`this Court, and this Court has jurisdiction over the subject matter of this action.
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`11.
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`To the extent any of Plaintiffs’ and the Class’s legal claims under the law of any
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`state are not deemed subject to the contracts’ venue and choice-of-law provisions, this Court may
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`nonetheless exercise pendent jurisdiction over such claims pursuant to 28 U.S.C. § 1367(a)
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`because they are part of the same case and controversy.
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`PARTIES
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`A. Plaintiffs
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`12.
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`Plaintiff Golden Unicorn Enterprises, Inc. (“Golden Unicorn”), is a Colorado
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`corporation with its principal place of business located in Parker, Douglas County, Colorado.
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`Plaintiff Golden Unicorn Enterprises, Inc., is thus a citizen of Colorado. Plaintiff Golden Unicorn
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`Enterprises asserts both individual and representative claims.
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`13.
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`Jan M. Bonthu is the sole shareholder of Golden Unicorn. For all purposes relevant
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`to this lawsuit, Bonthu writes under the pseudonym or pen name “J.S. Scott”.
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`14.
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`Bonthu is the author of approximately forty novels. These include the “Billionaire’s
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`Obsession” series and several other romance series.
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`15.
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`Defendant Audible has distributed approximately twenty-two of Bonthu’s self-
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`published Works in Audiobook form, directly and/or in partnership with Audible’s affiliated
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`companies, since February 2014. Substantially all of these books were distributed pursuant to
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`agreements between Audible and Plaintiff Golden Unicorn.
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`16.
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`Plaintiff Big Dog Books, LLC (“Big Dog Books”), is a North Carolina limited-
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`liability company with its principal place of business located in Raleigh, Wake County, North
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`Carolina. Elizabeth Leone Noble is the sole member and sole manager. Elizabeth Leone Noble is
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`a citizen and resident of Raleigh, Wake County, North Carolina. Plaintiff Big Dog Books is thus
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`a citizen of North Carolina. Plaintiff Big Dog Books asserts both individual and representative
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`claims.
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`17.
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`For all purposes relevant to this lawsuit, Noble writes and has written under the
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`pseudonyms or pen names “Sawyer Bennett” and “S. Bennett”.
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`18.
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`Noble has authored more than eighty novels. These include the “Cold Fury” series,
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`several other romance series, and several works of general fiction.
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`19.
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`Directly and/or in partnership with affiliated companies, Defendant Audible has
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`distributed approximately forty-three of Noble’s self-published titles in Audiobook form pursuant
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`to the Contract since Audible began to distribute Audiobooks of self-published Works in or around
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`2011. All of these forty-three books were distributed pursuant to agreements between Audible and
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`Plaintiff Big Dog Books.
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`20.
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`Plaintiffs and other Class members are authors and other copyright holders
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`(collectively, “Authors”) who granted Audible audio distribution rights in exchange for “royalty”
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`payments, which per contract are to be calculated as percentages of Audible’s revenue from
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`Audiobooks that are actually distributed to customers, net of contractually specified amounts for
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`items such as taxes, promotional discounts, and returns of Audiobooks.
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`B. Defendant
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`21.
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`Defendant Audible is a Delaware corporation. Its principal place of business is at
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`One Washington Place, Newark, Essex County, New Jersey 07102. Audible is therefore a citizen
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`of Delaware and New Jersey.
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`22.
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`Defendant Audible owns and operates an online platform, www.acx.com (“ACX”),
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`to which Authors can upload Audiobooks that they have produced or whose production they have
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`separately arranged. As an alternative, ACX allows Authors to upload their Works in text form to
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`facilitate narration and production by producers who use the ACX platform.
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`23.
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`Audible is a wholly owned subsidiary of Amazon.com, Inc. (“Amazon”), the giant
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`online retail and media company, having been acquired for approximately $300,000,000 in March
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`2008. While Amazon does not report financial data for its Audible unit, Amazon as a whole
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`reported $21.3 billion in net income on net sales of $386 billion in fiscal and calendar 2020. It
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`reported book value – assets net of liabilities – of $114.8 billion as of June 30, 2021. Amazon’s
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`market value approached $1.7 trillion as of August 13, 2021, based on 506,440,520 outstanding
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`shares and a closing share price of $3,293.97.
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`FACTS
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`The Audiobook Business.
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`Books and other written works have been recorded for listeners for nearly a century.
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`I.
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`24.
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`Many of the original users were blind, and they depended on the recordings as their only means of
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`consuming written literature. Such recordings gained broader popularity in the 1980s as “books on
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`tape” – cassette tapes – and in the 1990s were delivered by compact disc. These mediums, of
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`course, were tangible and, while they could be copied, such a process was cumbersome.
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`25.
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`The market for audio versions of fiction and non-fiction alike began to grow much
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`more swiftly in the 2000s with the advent of portable media players such as Apple’s iPod. At this
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`point, the recordings were audio files that a customer could swiftly and easily download from the
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`websites of Audible and similar companies and then easily transfer from one device to another.
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`26.
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`The market for Audiobooks and similar recordings has exploded since around 2010
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`as mobile telephones have become more sophisticated and gained storage capacity. “Smartphones”
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`are mobile phones that accommodate software programs, also known as “applications” or “apps”,
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`with all of the features of 2000s-era portable media players and additional, newer features. More
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`than 80% of Americans have smartphones. Revenue from Audiobooks and similar recordings grew
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`to an estimated $1 billion in the United States and $3 billion worldwide in 2020.
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`27.
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`Audible’s Audiobooks account for as much as 90% of sales for recordings of some
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`genres, and Audible is the dominant distributor for virtually every genre aimed at consumers.
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`28.
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`Audible boasts that its customers and subscribers downloaded “nearly 4 billion
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`hours of content” in 2019 and that it has “millions” of listeners.
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`29.
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`30.
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`31.
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`Audible’s Audiobooks include both novels and non-fiction Works.
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`Audible sells Audiobooks singly – “à la carte” – at list prices of $15 to $35.
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`Audible determines the à la carte price for each book. Authors have no control over
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`the price. Audible also allows discounts from the à la carte price to Audible subscribers, members
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`of Amazon’s “Prime” program, and certain other buyers. Authors have no control over these
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`discounts.
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`32.
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`Via e-mails and via messages that appear in the course of online purchases via its
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`website, Audible aggressively encourages à la carte buyers and visitors to its website to become
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`members, subscribers whose credit cards are charged monthly. Through most of the time period
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`described in this Complaint, Audible has offered two monthly plans: a “gold” plan and a
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`“platinum” plan.2 Audible’s “gold” plan costs $14.95 per month and affords a subscriber one
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`“Credit” per month that can be redeemed for permanent access to one Audiobook. Audible’s
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`“platinum” plan costs $22.95 monthly and allows permanent access to two Audiobooks using two
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`credits. Both plans have been and remain available at comparable per-Credit prices on an annual
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`basis.
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`II.
`33.
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`Authors And Their Roles In The Audiobook Business.
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`Audible was founded in 1995. Until approximately 2011, Audible worked
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`exclusively with publishing houses that owned the underlying rights to the books whose recordings
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`it distributed.
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`34.
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`Class members are Authors who sell their self-published Works in written form
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`through a variety of channels or, in some instances including those of Plaintiffs Golden Unicorn
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`and Big Dog Books, closely held business entities controlled by those authors which registered the
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`copyrights or to which those authors assigned or licensed the copyrights. In exchange for
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`percentage-based royalty payments, these Authors license audio distribution rights in the Works
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`to Audible, allowing Audible and its affiliated companies to sell and distribute the recordings of
`
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`2 Audible now refers to each of these two plans as “premium plus” plans. The terms of the plans are
`unchanged. This Complaint refers to the “gold” and “platinum” plans for the sake of readability and
`consistency. Separately, Audible now offers a lower-priced “plus” plan that includes access to recordings
`of authors’ writings only as long as a subscriber continues to subscribe; the rights to such writings are
`purchased from the authors by Audible and are not subject to the Contract (defined below).
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 8 of 25
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`the Works, which are voiced by narrators. Both in Audible’s sales and marketing materials and in
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`in contractual documents, Audible refers to these recordings as “Audiobooks”.
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`35.
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`36.
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`Audible began to work with self-publishing Authors in this way in or around 2011.
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`Audible pitches to Authors of self-published books its “unique and robust royalty
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`model. Depending on the distribution rights granted to Audible, authors, publishers, and other
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`Rights Holders, as well as narrators, studio professionals, and other Producers can earn royalties
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`of up to 40%.”3
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`37.
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`At their own expense, Authors hire narrators and have Audiobooks produced from
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`the original manuscripts.
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`38.
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`In some instances, Authors do this through ACX to facilitate narration and
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`production of an Audiobook. An Author and producer and/or narrator may agree to a single up-
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`front payment or payment in the form of a share, typically one-half, of the Author’s royalties.
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`39.
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`In other instances, Authors arrange their own narrators and produce the Audiobooks
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`by other means according to Audible’s standards. In such an instance, the Author must pay any
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`fees charged by the narrator and/or producer under separate contractual arrangements with the
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`narrator and/or producer.
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`40.
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`Choosing one of these modes of producing the Audiobook over the other modes,
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`however, does not alter the percentage share of royalties that Audible is obligated to pay under a
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`contractual document that Audible titles “Audiobook License and Distribution Agreement”
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`(“Contract”) (Ex. A). Nor does this choice alter the basis on which that percentage share is
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`calculated under the Contract. See Exs. A, B, C, and D.
`
`
`3 ACX | EARN MONEY WITH AUDIOBOOKS, https://www.acx.com/help/earn-money-with-
`audiobooks/200487100 (last viewed Aug. 17, 2021).
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`41.
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`The contractual terms governing Audible’s royalty payments are embodied in the
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`Contract, which incorporates one of two royalty schedules, one for “exclusive” distribution” and
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`one for “non-exclusive” distribution. Aside from this variation and other minor variations
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`described below, the terms are substantially the same in the Contract with each Author: all are
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`calculated on the basis of a sales figure that Audible misrepresents to every Author, obscuring the
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`extent to which it nets out returns and exchanges by its customers and subscribers.
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`42.
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`An individual Author is not able to negotiate the terms and definitions that apply to
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`royalty payments nor any other terms of the Contract. The Contract is a contract of adhesion
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`drafted by Audible and presented to potential Author counterparties on a take-it-or-leave-it basis.
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`43.
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`Audible’s Contract with each Author provides that royalty payments are to be
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`calculated after “returns” and certain other items are netted out.
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`44.
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`The Contract and other contractual documents incorporated into it by reference do
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`not explicitly define the term “returns”, but the term “return” in the context of consumer goods is
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`typically understood to mean that a product is returned for a refund because the product was
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`defective or the buyer was otherwise dissatisfied. The term does not encompass an exchange and
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`is especially inappropriate where a customer exchanges a product after receiving any appreciable
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`benefit from it.
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`45.
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`Authors reasonably believed that the Contract’s use of the term “returns” was in the
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`sense described above, and Audible knew that the Authors held this reasonable belief.
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`46.
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`Audible’s regular presentation of sales numbers to authors appeared to be consistent
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`with this understanding of the term “return”.
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`47.
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`Importantly, the Contract did not and do not provide for royalties to be calculated
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`as percentages of sales net of “exchanges”.
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`48.
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`The Contract varies in only four points, none of which affect the uniform
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`misrepresentation to each Author of Audible’s sales figures:
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`a) First, as noted above, some Audiobooks include the input of a narrator and/or
`producer who was arranged through ACX and whose compensation is a
`contractually agreed share, typically 50%, of the Author’s royalties.
`b) Second, an Author who grants Audible “exclusive” rights to distribute
`Audiobooks of a Work is due 40% of the revenue attributable to the
`Audiobooks Audible distributes. Audible defines this “exclusive” distribution
`as referring to distribution directly from Audible, through other platforms
`operated by Amazon, and through comparable services run by the tech giant
`Apple, Inc. (“Apple”) under an agreement or agreements between Apple and
`Audible and/or Amazon. See Ex. B. In contrast, an Author who grants Audible
`“non-exclusive” rights to distribute an Audiobook of a Work is due only 25%
`of the revenue attributable to Audible’s revenue attributable to that Audiobook.
`See Ex. C. In this instance, the Author is free to make and distribute recordings
`of the Work through other channels. Despite the differing rates, the Contract
`provides for each of the two rates to be calculated on the same sales figure.
`c) Third, the sales figure to which the royalty percentage applied varied slightly,
`according to whether an Audiobook was distributed to a customer as an à la
`carte sale or to a subscriber in exchange for a Credit. For Audiobooks
`distributed in exchange for a Credit, Audible determined the sales figure
`according to its calculation of a metric that it called the Audible Listener
`Allocation Factor by the à la carte price of the Audiobook.
`d) Fourth, the version of the Contract for Audiobooks that Audible began to
`distribute in the first few years of its program for self-published Authors
`provided that an Author’s percentage of royalties on a given Audiobook began
`at 50% and escalated with the number of copies of that Audiobook that Audible
`distributed. See Ex. D.
`Importantly, the royalty percentages and other variations were applied to the à la
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`49.
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`carte price or a figure that was based on the à la carte price. Thus, the amount contractually owed
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`to each Author can be calculated based on the à la carte price at the time of the distribution,
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`whether it was distributed in exchange for an à la carte payment or in exchange for a Credit,
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`depending on the book’s exclusive or non-exclusive distribution arrangement, and depending on
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`whether the Audiobook distribution was made subject to the escalating set of percentages. These
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`factors can be determined from Audible’s internal records.
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`50.
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`Under one typical arrangement, the Author of an Audiobook licensed non-
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`exclusively to Audible received a 25% royalty payment for each sale or distribution of the
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`associated Audiobook. Where the distribution of an Audiobook was made to an Audible subscriber
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`in exchange for a credit, and not as an à la carte sale, the 25% was calculated in relation to the
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`monthly subscriber fee rather than on a gross sales price.
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`51.
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`For example, where an Audible subscriber paid $14.99 a month in membership fees
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`and used her one monthly credit to obtain an Audiobook of “Dax (Arizona Vengeance Book #4)”
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`by Elizabeth Leone Noble a.k.a. Sawyer Bennett, Plaintiff Big Dog Books was due to be paid
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`approximately $3.75.
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`52.
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`Each Author with one or more Audiobooks distributed by Defendant Audible
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`received a monthly report showing the number of each Audiobook sold, Audible’s revenue from
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`those sales, and the royalty being paid to the Author based on the applicable percentage and the
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`stated revenue figure.
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`53.
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`These reports did not provide the Authors with the number of Audiobooks of a
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`given Work that were distributed to Audible’s customers and subscribers before exchanges were
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`subtracted, nor the revenue associated with that number. That number was the proper number to
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`which the 25% or 40% royalty rate should have been applied.
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`54.
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`Authors were also able to access an online dashboard through the ACX portal. This
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`portal typically provided the net sales number for the month-to-date for any given Audiobook
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`based on a Work by that Author. However, the dashboard did not track cumulative numbers or
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`dollar values of gross sales or royalties, nor the numbers or values of either the exchanges or the
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`contractually allowable deductions; it tracked only tracked the difference between the gross
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`distributions and the gross deductions; in other words, the net numbers of sales and corresponding
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`royalties. If it was theoretically possible for an Author to monitor this dashboard twenty-four hours
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`a day for thirty days straight in order to determine these figures more precisely, no Author appears
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`to have done so before October 2020, and Audible gave Authors no notice that they should be
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`doing so in order to determine whether it was improperly withholding royalty payments.
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`III.
`
`Audible Underpays Its Authors Based On Numbers Of Net Audiobooks Sold
`That It Undercounted And Falsely Reported To Authors
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`55.
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`In or around 2016, Audible created a policy that allowed customers and subscribers
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`to exchange an Audiobook as long as 365 days after obtaining access to it. Given the primarily
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`digital nature of the Audiobook business, this exchange in practical terms meant that the customer
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`or subscriber lost access to the Audiobook. The customer or subscriber then received access to a
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`different Audiobook. Audible called this policy its “Easy Exchange Policy” and its “Great Listen
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`Guarantee”.
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`56.
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`Audible knew that its “Great Listen Guarantee” encouraged customers and
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`subscribers to treat the service as a public library, with practically unlimited access to Audiobooks
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`regardless of the putatively finite number of monthly Credits available on a given subscription
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`plan. All of Audible’s subscribers and customers are able to listen to the entirety of an Audiobook
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`within 365 days and obtain a different Audiobook at no cost. A typical “gold” plan member can
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`complete a single Audiobook within half a month, exchange it, and obtain a second Audiobook to
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`consume within the second half of the month.
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`57.
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`In such a situation, only the Author of the second Audiobook received the benefit
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`of a royalty payment. If a customer wanted an exchange, they simply exchanged the book from
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`the first Author with Audible and got their credit back, which meant that the credit payment given
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 13 of 25
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`to the first Author when the customer downloaded the second Audiobook was raked back from the
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`first Author’s royalties and sales.
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`58. Moreover, many Audible members churned through up to ten times the Audiobooks
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`to which they were putatively entitled, without making any additional payment that would have
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`translated into royalty payments to Authors.
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`59.
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`At no time nor in any manner did Audible inform its Authors that it was actively
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`inviting customers and subscribers to consume and exchange unlimited numbers of Audiobooks.
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`60.
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`Authors who have attempted rough calculations now believe that most of them
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`received between 50% and 85% of the royalty payments they would have received if not for
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`Audible’s calculated concealment. No Author can know the exact number without the benefit of
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`discovery, though, because Audible never informed any Author of the gross number of her
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`Audiobooks it distributed in any period, nor of Audible’s revenue on which that Author’s royalties
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`should have been calculated.
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`61.
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`In this regard, Audible has been standing in a position of trust and confidence vis-
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`à-vis the Authors and should therefore be considered a fiduciary with respect to the funds it held
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`and was obligated to calculate per the terms of the Contract and then distribute to each Author.
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`62.
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`Audible almost certainly has already calculated these gross numbers for each
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`Audiobook, however. Even if Audible has not done so, it could easily do so.
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`63.
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`Either way, only Audible has been keenly aware of the dynamic, the persistent
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`discrepancy between gross sales and sales net of these exchanges, for approximately six years.
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`64.
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`Indeed, Defendant Audible has long considered this dynamic to be economically
`
`advantageous. The practically unlimited availability of Audiobooks allowed Audible to register
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`more subscribers and charge greater subscription fees than it otherwise might have been able to
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 14 of 25
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`do. This is especially important to Defendant Audible because the bulk of its revenue comes from
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`monthly subscription fees rather than from à la carte sales. Audible’s policy of unlimited
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`exchanges creates a benefit both for itself and its subscribers and customers; yet Audible has been
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`compensating the source of this bounty – Plaintiffs and the proposed Class – as if Audible’s
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`subscribers were accessing finite numbers of Audiobooks, ostensibly one or two per month in most
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`instances.
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`65.
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`Audible’s senior managers discussed whether to provide Authors with the numbers
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`of gross distributions and the numbers of gross returns and exchanges but decided against doing
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`so because they knew that full disclosure would result in less profit for Audible.
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`66. While Audible and its subscribers and customers share this bonanza of free
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`intellectual property, Authors have been systemically shorted, by 15% to 50% in most instances.
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`67.
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`Audible actively encouraged its subscribers to exchange Audiobooks via private
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`messages without making this fact known to Authors. In a variety of situations, including situations
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`where a subscriber had completed an Audiobook, Audible sent the subscriber an e-mail or other
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`message to suggest that the subscriber exchange it for a different Audiobook.
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`68.
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`Audible was able to target messages in this manner because of the digital nature of
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`the service and its delivery by “streaming” over the Internet.
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`69.
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`This same ability allowed Audible to monitor when a subscriber completed an
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`Audiobook, yet Audible did not use this knowledge to prevent the exchange or charge the
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`subscriber for the second or subsequent Audiobook. Nor did Audible use this knowledge to bar
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`itself from reversing royalty payments it initially made to the Author of the first or prior
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`Audiobook.
`
`
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`14
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 15 of 25
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`IV.
`
`The Authors Discover The Massive Breach Of Contract And Audible’s Bad
`Faith.
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`70.
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`Authors began to suspect Audible’s scheme in fall 2020 as some among them,
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`doubts about the (net) numbers of Audiobook sales they had been receiving in monthly reports.
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`71.
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`The dam burst on or around October 19, 2020. From September 25, 2020, to
`
`October 18, 2020, a glitch in the software that powered the ACX Author dashboards failed to
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`subtract returns and exchanges from the net sales figures that Authors were seeing when reviewing
`
`their dashboards. Another way of saying this is that there was no “failure,” but rather a twenty-
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`three day period when Audible was inadvertently telling its Authors the truth—giving them the
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`true, gross numbers of Audiobooks that it was distributing to its subscribers and customers and
`
`allowing them to finally calculate the royalty payments for which they had contracted. At the end
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`of this twenty-three-day slip-of-the-tongue, though, Audible suddenly subtracted twenty-three
`
`days of returns and exchanges from the Authors’ net numbers. The scheme that had not been
`
`apparent when perpetrated in hours-long or day-long increments, periods during which returns and
`
`exchanges could not be estimated in relation to concurrent gross sales, was suddenly obvious to
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`thousands of Authors checking their dashboards.
`
`72. More than 12,000 other Authors expressed their concerns in writing to Audible’s
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`management in November 2020. Their communications to Audible outlined the scheme above in
`
`much the same manner as this Complaint has outlined it. The Authors demanded (1) a full
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`accounting of the gross number of each Audiobook distributed, that is, not net of the exchanges,
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`(2) reconciliations of the amounts paid and the amounts that were contractually due, (3) payment
`
`of the royalties that were contractually due to be paid based on the gross numbers, net of amounts
`
`already paid, and (4) reduction of the 365-day window to two days, or some other time that would
`
`
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`15
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 16 of 25
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`allow a subscriber to sample an Audiobook rather than consume it in a manner that would deprive
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`the Author of the royalty payment for which she had contracted.
`
`73.
`
`Audible responded by way of a blog post on its website on November 24, 2020.
`
`Audible pledged to begin paying royalties on Audiobooks returned after seven days, as Authors
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`had believed until recently that it had been doing all along. In the blog post, Audible also agreed
`
`to begin including gross sales numbers and numbers of exchanges in its reports to Authors, as well
`
`as the net numbers that it had been providing without making fully clear that they had been net
`
`numbers. To date, upon information and belief, Audible has not fulfilled these promises.
`
`74.
`
`Plaintiff Bonthu contacted Otto Leinsdorf, the director of content for ACX, on or
`
`around February 16, 2021, and demanded the gross numbers of sales, returns, and exchanges of
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`Audiobooks for each of her Works. No representative of Audible has responded by providing the
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`numbers to Plaintiff Bonthu.
`
`75.
`
`Other Authors have made similar demands of the Audible agents with whom they
`
`were in regular contact.
`
`76.
`
`Audible has not provided historical numbers for gross sales or gross exchanges to
`
`any of the Authors.
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`77.
`
`Audible has provided Authors with token bonuses, putatively as expressions of its
`
`appreciation for their work, but these amount to miniscule fractions of the improperly withheld
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`royalty payments that correspond to the exchanged Audiobooks.
`
`78.
`
`Finally, Audible has introduced the concept of “qualified returns” into its
`
`calculations of Authors’ royalties. A “qualified return” occurs when an Audible customer or
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`subscriber exchanges an Audiobook within seven days of its initial distribution to that customer
`
`or subscriber. Audible continues to deduct such so-called “qualified returns” from the basis on
`
`
`
`16
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`Case 1:21-cv-07059 Document 1 Filed 08/20/21 Page 17 of 25
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`which Authors’ royalties are calculated. Audible has told Authors that it no longer deducts sales
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`figures from corresponding to Audiobooks that were exchanged between the eighth day and the
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`three-hundred and sixty-fifth day after purchase, but Audible has no