Spotify pushes into audiobooks in challenge to Amazon’s Audible

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Spotify has struck a deal with the world’s largest publishers to offer its subscribers free audiobook listening, as the music streaming company hopes to break Amazon’s monopoly on the books market.

Starting later Tuesday, paid Spotify users in the UK and Australia will be able to listen to 15 hours of audiobooks for free each month, according to the company. After that, subscribers can pay $11 – the equivalent of their current monthly subscription – to listen for an additional 10 hours. Spotify plans to launch the program in the U.S. this winter.

Subscribers will be able to choose from more than 150,000 titles, which Spotify estimates will contain more than 70% of the content on the New York Times bestseller list.

The move is part of Spotify’s commitment to becoming the home for all audio content, including music, podcasts and books. Despite its popularity, with more than 500 million users worldwide, Spotify has long struggled to make sustained profits. The company has been trying to expand beyond its financially troubled music streaming business, investing about $1 billion into podcasts, but has recently scaled back that effort as it seeks to tighten budgets.

The move into audiobooks is a direct challenge to Amazon, which dominates the category with its Audible service. Audible subscription costs $15 per month in the United States.

“(Amazon’s Audible) could easily become the dominant player in the space. If you are a book publisher, they will welcome any market competition that weakens Amazon’s control,” said Enders analyst Abi Watson.

Spotify has not disclosed how much money it plans to invest into audiobooks. The company will pay royalties based on listening on its platform to the largest publishers including Penguin Random House, Hachette, Simon & Schuster, HarperCollins and Macmillan.

One person familiar with the matter said Spotify’s premium rates will be similar to Amazon’s, with a certain listening time threshold required to qualify for payment. Spotify is in talks with independent publishers to add more books to the program, the person said.

Spotify executives expect audiobooks to help attract and retain subscribers. The service is raising prices for U.S. subscribers by $1 this year, the first price increase since the app launched in the U.S. more than a decade ago.

Audiobooks are a relatively small but growing industry, and tend to be more popular with younger people. Media consultancy Omdia estimates that audiobook revenue will be around $4.8 billion globally in 2021, and expects it to grow to more than $9 billion by 2026. In the United States, digital audio revenue grew 16.6% in the first seven months of this year, although overall industry revenue fell 0.7%, according to the Association of American Publishers.

Spotify Chief Executive Daniel Ek said last year that he expected audiobook profit margins to be “over 40%” and to be “highly value-added” to Spotify’s business. Its own gross profit margin has been hovering around 25%.

“Like we did in the podcast, hopefully we can win . . . With one major player dominating the space, we believe we will expand the market,” Ek said last year.

The New York-listed company entered the audiobook market in 2021, acquiring the Findaway platform for €117 million. Spotify started selling audiobooks on its app last year, but the process was clumsy and subscribers needed to purchase the books through a separate website.

Spotify had revenue of 6.2 billion euros and a loss of 527 million euros in the first half of this year. Its shares have doubled this year, although its market valuation remains well below the highs reached during the coronavirus pandemic.

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