Spotify has been a lot in the news lately as the company spent months reorganizing itself to better optimize itself for the future. It has been acquiring companies left and right, and it announced new ways for creators and publishers to diversify their income and introduce new ways for listeners to enjoy the content.
Today, Spotify announced that it wants to enter the audiobook market and make it the company’s next content pillar (via TheVerge). Spotify is already the most popular music streaming platform, and it’s increasingly becoming one of the most diverse podcast platforms. It was only a matter of time, and the most logical step for the streaming giant to enter the world of audiobooks. In November, we reported that Spotify was acquiring Findaway, the audiobook distribution company.
According to Daniel Ek, the CEO of Spotify, the global book market is estimated to be worth around $140 billion, offering Spotify a “massive opportunity” to grow. Ek expects the margins to be around 40% for audiobooks, helping the company reach steady growth over time.
“We believe that audiobooks, in their many different forms, will be a massive opportunity.
Today, the global size of the book market is estimated to be around $140 billion dollars. That’s inclusive of printed books, e-books and audiobooks, with audiobooks having only about a 6-7% market share.
But when you look at the most penetrated audiobook markets, it’s actually closer to 50% of the market. So call that an annual opportunity of $70 billion dollars for us to expand and eventually compete for. And just as we’ve done in podcasting, expect us to play to win. And, with one major player dominating the space, we believe we will expand the market, and create value for users and creators alike.
And this third vertical of audiobooks further builds on our ambitions to be the destination for creators. While it’s still early, we expect audiobooks to also have healthy margins, above 40% and be highly accretive to the business. And here again, we will apply the same differentiating foundations of ubiquity, personalization, and Freemium to attract both creators and users, and drive engagement. “
A more diverse portfolio of services
The audio streaming business is challenging and very competitive, and even though Spotify has more than 422 million active listeners and 182 million subscribers, it’s not exactly swimming in cash. Spotify has been struggling to turn a profit for many years, and it’s been operating at a loss. One of the main reasons why Spotify is continuing to acquire more companies is to diversify its portfolio.
Every company needs more than one product to survive and increase its profit. Spotify offers audio content for its free users and subscribers, such as an extensive catalog of music, exclusive and live podcasts, and soon, audiobooks. Spotify has more than 82 million tracks and more than 4 million podcasts on its platform. The company is continuing to slim down on its losses and slowly make a profit.
Boost subscriber count
To become a profitable and healthy business, you need as many paid subscribers as many you can get. Spotify has been steadily growing its subscriber base since it started, but it slowed down thanks to Apple Music and other companies launching their rivals. Launching an audiobook platform will help Spotify dominate the audio streaming market for many years to come, and it’s hoping that it will be able to gain even more paid subscribers.
It’s also worth pointing out that audiobooks aren’t cheap. Amazon’s Audible costs $14.95 a month, and both Apple and Google offer audiobooks for purchase, typically starting at around $15.
It’s unclear how Spotify will charge its users for audiobooks, but it’s unlikely to be included in the existing paid subscriber tiers. Spotify could announce a new paid tier, or introduce a credit-based system like Amazon to lure more users into signing up.
Increased ad revenue from free listeners
With more than 422 million active listeners, Spotify is one of the largest audio platforms. There are 182 million paid subscribers, meaning that at least 240 million users aren’t signed up for the service. These users listen to ads in exchange for_free_ music.
Offering a more extensive library of content will enable Spotify to increase its ad revenue for the increased number of users signing up to use the platform, some of which will eventually become paid subscribers. Audiobooks are usually behind a paywall, and while we don’t expect the company to make them available for free, a selection of audiobooks may be ad-supported.