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Spotify has struck deals with the world’s largest publishers to offer its subscribers free listens of audiobooks, as the music streamer looks to slice into Amazon’s chokehold on the books market.
Paying Spotify subscribers in the UK and Australia will be able to listen to 15 hours a month of audiobooks at no additional cost starting late on Tuesday, according to the company. After that, subscribers can pay $11 — a sum equal to the current monthly subscription — for another 10 hours of listening. Spotify plans to roll out the programme in the US this winter.
Subscribers will be able to choose from more than 150,000 titles, which Spotify estimates will include more than 70 per cent of The New York Times best-sellers list at any given moment.
The move is part of Spotify’s quest to become the home to all things audio, spanning music, podcasts and books. Despite its popularity — with more than half a billion users across the world — Spotify has long struggled to make a consistent profit. The company has been trying to expand beyond the financially punishing music streaming business, pouring some $1bn into podcasting, but has recently scaled this effort back as it looks to tighten its budgets.
The move into audiobooks is a direct challenge to Amazon, which dominates the category through its Audible service. Audible in the US costs $15 a month for one book credit.
“[Amazon’s Audible] is easily the dominant player in the space. If you’re a book publisher, they’ll welcome any competition into the market to weaken Amazon’s grasp”, said Abi Watson, analyst at Enders.
Spotify would not say how much it planned to spend on its push into audiobooks. The company will pay royalty fees to the biggest publishing houses — Penguin Random House, Hachette, Simon & Schuster, HarperCollins and Macmillan — based on listening on its platform.
Spotify’s payment rates will be similar to Amazon’s, requiring a certain threshold of listening time to qualify for payment, one person familiar with the matter said. Spotify is in negotiations with independent publishers to add more books to the programme, the person said.
Spotify executives expect audiobooks to help attract and retain subscribers. The service raised prices for US subscribers by $1 this year — the first such increase since the app launched there more than a decade ago.
Audiobooks are a relatively small but growing business, and tend to be more popular with young people. Media consultancy Omdia estimated that audiobooks made about $4.8bn in revenue globally in 2021, predicting this to rise to more than $9bn by 2026. In the US, digital audio revenues were up 16.6 per cent over the first seven months of this year even as total industry revenues slipped 0.7 per cent, according to the Association of American Publishers.
Spotify chief executive Daniel Ek last year said that he expected audiobooks to have profit margins of “above 40 per cent” and be “highly accretive” to Spotify’s business. Its own gross profit margins have hovered around 25 per cent.
“Just as we’ve done in podcasting, expect us to play to 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, buying the platform Findaway for €117mn. Spotify last year began selling audiobooks à la carte on its app, but the process has been clunky, with subscribers needing to buy the books through a separate website.
Spotify lost €527mn on €6.2bn in revenue in the first half of this year. Its stock has doubled this year, although its market valuation remains well below the highs it reached during the coronavirus pandemic.
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