Spotify Pilots New Audiobook Offering
By Harriet Cunningham
3 October 2023 saw a meeting of publishing executives, authors and journalists at Spotify’s New York City HQ, poised to discover more about the company’s future audiobook plans. The leading streaming service has announced its new audiobook arm as part of its broader development plan, offering Premium subscribers in the UK and Australia up to fifteen hours of audiobook listening per month. The Big Five publishers have all signed onto the service, and plans have thus far been cautiously embraced by the publishing industry.
Premium subscribers in the UK and Australia will now have access to more than 150,000 audiobooks up to the aforementioned fifteen-hour limit per month. The idea behind Spotify’s new audiobook offering is that this new subscription model replaces the current need to purchase audiobooks individually, although listeners can choose to either purchase additional ten-hour bundles on top of the fifteen hours offered or purchase the book in its entirety, should it be longer than fifteen hours in listening time.
Given that the audiobook market is worth roughly $5 billion today, it is not surprising that streaming services are looking to expand and develop their audiobook offering, with a focus on customer experience and retention remaining at the forefront of such decisions. In some markets, for example, Germany, audiobooks account for over 50% of the book market, and Spotify currently has over 500 million monthly active users. Evercore ISI analyst Mark Mahaney said the following in a recent report: “This is a very differentiating product offering, in our view, which should drive greater user engagement, retention, and payer conversion for Spotify, as it provides a compelling value proposition and flexible user experience (e.g. encourages trying new titles without committing to the whole book).” Mahaney also predicts that audiobooks will generate a higher gross margin than Spotify's current music business.
Spotify launched its audiobook business in September 2022, following the acquisition of audiobook production platform Findaway in November 2021. Following heavy investment in the podcast space in recent years, Spotify has been positioning its move into audiobooks as the next step in its business model, following improved user retention figures. “I’m so excited to bring some of the same tools that have helped the music industry and podcast industry as well now to the audiobook industry,” said Spotify CEO Daniel Elk.
Spotify’s model differs from that favoured by Audible, which relies on a credit system and offers one audiobook per month for $15. Premium users can, in theory, read various books using their fifteen hours or instead use all of that time on one text. The new model is also much different than that of Storytel and Scribd, which both offer unlimited listening each month. Storytel’s model led to leading publishers, such as Penguin Random House, pulling their titles from the platform.
The benefits of this platform are evident: the global reach of Spotify as a well-known, market-leading streaming service increases the potential exposure of authors and their books to keen readers, as well as reaching those who have not previously listened to any audiobooks, thus increasing readership. One must also consider the myriad of data that Spotify has about its listeners, perhaps leading to more effective book recommendations based on reading history. There is also potential for readers to be encouraged to read novellas and short stories due to the time-based nature of the subscription model.
However, the news raises concerns about how this approach may change the publishing industry. There has already been much speculation and debate around how Spotify plans to compensate publishers, as well as how much time a user must listen to a book for it to count as a “listen.” VP of Business Affairs and Audiobooks Business at Spotify, David Kaefer, said “it’s dependent on what the agreement is with each partner.”
Beyond Wall Street, Mark Mulligan, Analyst at MIDiA Research, said the following: “Spotify’s audiobooks move is another brick in the audio wall, […] the latest step in a journey that has seen streaming become the 21st century’s take on radio.” This has been achieved via “the steady addition of non-music content […] and a growing emphasis on programmatic lean-back consumption,” he explained. “Audiobooks are the completely natural and logical progression for Spotify (and other digital service providers), but they are also another waymarker in the journey away from being a pure-play music service.”
The National Literacy Trust shared that the COVID-19 pandemic boosted audiobook consumption, and with Spotify’s latest announcement, it doesn’t look like this will change anytime soon. Mark Mulligan said the following: “Audiobooks had been around for a long time already, with Audible leading the charge, but it was the sudden increase in non-allocated time that people found themselves with that triggered a coming of age for the format […] listening surged, including of podcasts, but as normal life slowly returned, audiobook consumption dipped again, though to a higher point than pre-pandemic levels.”
The functionality is planned to be rolled out to the US later this year, as impacts of the new audiobook offering await to be seen.