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Insider June 9, 2022 — Spotify comes for audiobooks

Plus, audio’s Peabody winners.

We have lots of juicy Spotify goods to dig into today, from audiobooks to revenue figures. Plus, the audio winners of this year’s Peabody Awards. Let’s get into it.

Spotify has big plans for audiobooks

Spotify wants to make audiobooks the next pillar of its business. On Wednesday, company executives pitched the audiobooks business to investors as their next target for industry domination. When they launch the audiobooks vertical (which is TBD), it could have huge ramifications not only for Spotify’s own business, but for the publishing industry as well. 

“We believe that audiobooks, in their many different forms, will be a massive opportunity,” Spotify CEO Daniel Ek said. “And just as we’ve done in podcasting, expect us to play to win.”

Spotify’s first big step into that business is its acquisition of Findaway, which was announced last year. The audiobook platform is in many ways like Anchor. It allows authors to create, distribute, and monetize their work, and with the acquisition, Spotify will snag a key part of the audiobook ecosystem. It’s fitting, then, that the executive overseeing audiobooks at Spotify is Nir Zicherman, co-founder of Anchor. 

One thing to note, though: the Findaway deal has not actually closed yet. It was first announced in November 2021, with an expected acquisition date before the end of 2021. However, the deal is still under review by the Department of Justice’s antitrust division.

How the model will work is not entirely clear, but it appears that at least some of the audiobooks will be free. Ek said the freemium model will be applied to audiobooks, and content and ad business chief Dawn Ostroff said, “We’re looking at bringing ad monetization into audiobooks.”

If that is the case, it would be a massive change for the industry. Audiobooks do not typically come cheap. Subscription services from Amazon’s Audible and are based on credits (1 credit per book). Both services cost $14.95 per month for access to top titles. Apple and Google offer audiobooks for purchase, with popular titles normally priced at $15 or more. But at the same time, most of Findaway’s creators are not exactly going to be the next Sally Rooney, and it is unclear how and at what price top-tier books will be made available on Spotify.

So what does that mean for the publishing industry? It’s complicated, according to Michele Cobb, executive director of the Audio Publishers Association (APA). Millions of new listeners around the globe will be exposed to audiobooks, which could greatly expand the market. 

Earlier this week, the APA released its 2021 stats on the size of the industry. Conducted by Edison Research, the study found that the audiobook market grew by 25 percent in 2021 to $1.6 billion, which would make it slightly larger than the $1.45 billion podcast market that same year. Spotify’s presentation posited that the market is even bigger, worth possibly more than $9 billion, based on a report by Grand View Research. (It is worth noting the figures are not exactly apples to apples: the APA report is based mostly on North America, and the Grand View number is global.) Ek took it a step further, projecting the market could actually be worth as much as $70 billion.

Even if Spotify helps expand the audiobook market with its creator content and ad-supported listening, there are potential downsides for publishers and authors. “I think the hope is that you would increase the revenue enough so that everyone gets more,” Cobb said. “But the concern is that you would get so much less per unit that it would ultimately depress revenues.” 

In its quest to expand beyond the clunky and expensive music industry, Spotify is not stopping at audiobooks. The presentation cryptically teased businesses “X,” “Y,” and “Z” for the future. Your guess is as good as mine as to what those could be.

Here’s how much Spotify made off podcasting last year

During earnings, Spotify usually touts “growth” in its podcast business without ever actually providing figures. At Wednesday’s investor presentation, it finally gave us the goods. Podcasting generated nearly EUR 200 million (close to $230 million) in 2021. With total annual revenue of $11 billion, that means podcasting made up 2 percent of the business. It’s also far from profitable, with losses of 57 percent, though Ek told investors the company expects profit margins of up to 35 percent in the next three to five years.

But the revenue figure does point to significant market share for Spotify. If the overall market was worth $1.45 billion in 2021, then Spotify took about one-seventh of that. It drives home how quickly the company has come to dominate the space. Investors have typically been skeptical about Spotify’s podcast M&A and massive licensing deals and whether or not all the spending will ever pay off. They seem to be reasonably satisfied with yesterday’s presentation — the stock is up 5 percent since market close on Tuesday.

Throughline: Afghanistan: The Center of the World, Finn and the Bell, and Southlake win Peabody Awards

The Peabody Awards, which recognize the most impactful programs in news, entertainment, and documentary, among other categories, announced the winners in the audio category. This year’s Peabody recipients are:

  • NPR for Throughline: Afghanistan: The Center of the World, a three-part miniseries that explores the history of Afghanistan as a civilization in a way that challenges the imperialist assumptions about the country Americans often take for granted.
  • NBC News for Southlake, a deep dive on how a mostly white, wealthy suburb in Texas attempted (and ultimately failed) to confront racism in its community after a viral video of high school students chanting a racial slur made it a national disgrace. 
  • Rumble Strip for Finn and the Bell, an innovative podcast that examines a Vermont community in the wake of a young man’s suicide. 

Congrats to all the winners! 

That’s all for today. I’ll be back tomorrow with industry moves, Apple Watch’s new podcast feature, and more.